Q2 2023 CSG Systems International Inc Earnings Call
[music].
Please stand by we're about to begin.
Good afternoon, ladies and gentlemen, welcome to D. C. S. T systems Q2, 2023 earnings conference call at this time all participants are in.
Listen only mode and please be advised that this call is being recorded.
The speakers prepared remarks, there will be a question and answer session. If you would like to ask a question. During this time.
ER one on your telephone keypad. If you find your question has already been addressed you can withdraw all your questions by pressing <unk> once again and this time I would like to turn things over to Mister John <unk> head of Investor Relations.
Thank you operator, and thanks to everyone for joining us like last quarter, we will be working from a 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.
Include but are not limited to statements regarding our projected financial 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 on the Investor Relations section of our website.
Also we will discuss certain financial information that is not prepared in accordance with gaps. 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 your management team and 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 <unk> Chief Financial Officer.
With that I'd like to now turn the call over to Brian .
Thanks, John Hi, everyone. We appreciate you joining the call as we begin on slide four so yesterday he had a fantastic start to 20 twenty-three with excellent results in both Q2 and the first task, we posted 9.2% year over year revenue growth in the second quarter and 11.1% double digit.
Revenue growth for the first half of 2023 boats coming from 100% organic growth or performance over two quarters, where the best first half results. We have posted in nearly two decades, our queue to non-GAAP adjusted operating margin was 16.2% a nice step up from the 15.1 per.
<unk>, we reported in Q2 2022, combining Q1 and Q2 it means team C. S. G delivered 17.8% non-GAAP adjusted operating margin and the first half of 2023, which reinforces our commitment to maintain good operating discipline and expanding our operating <unk>.
Average overtime so.
Yes. She also grew bottom line non-GAAP EPS in the first half to one dollar and 84 cents per share, which represents 7.6% year over year EPS growth, even as we had to offset much higher interest costs. So far in 2023.
Based on our strong first half we are pleased to raise our full year 2000 twenty-three guidance, we're raising our revenue guidance to range from $1.15 billion to 1.175 billion, which means we raised the bottom end of our revenue guidance by $20 million and the top end by $5 million.
The mid point of the new guidance now reflects a 6.7% year over year organic growth in revenue.
We are raising our four year 20, twenty-three non-GAAP adjusted operating margin percentage to range from 16.75% to 17 dot 1% up from the prior 16.5% to 17% range Hi will share more details on all our revised guidance momentarily.
In addition to reporting fantastic growth in raising our full year 2000 twenty-three guidance. We're also announcing a new 100 million dollar share repurchase program, which will run through year and 2024 at.
At the end of the day are faster revenue growth is fueled by strong ongoing market demand for <unk> industry, leading SAS products and good sales performance C. S. Jeeze sales pipeline as large and healthy as we went in while big new customers in a wide variety of faster growth industry verticals I will share more details.
On several exciting queue to customer wins in a few minutes one.
One question I, often get from investors is whether we see any softening and market demand globally, given higher interest rates and the risk of global economic slowdown in later of 2023 or the first half of next year, while we continue to see good demand signals and customer buying behavior globally I would share that almost.
All our customers are preparing for possible rainy day scenarios over the next four to six quarters based on what we see today. We continue to believe the C. S. G can grow organic revenue consistent with our longterm, 2% to 6% range as we strive to be at the mid point or higher of this range and.
Most quarters in years, so a C. S. J continues to focus on delivering sustained mid single digit organic revenue growth or higher like we posted in both Q1 and Q2 2023 were also are continuing to take timely discipline steps to keep our operating margin healthy and growing faster than revenue.
Regardless of how global economic conditions unfold in the coming years.
I would like to give a giant shout out for our fantastic Q2 results to <unk> nearly 6000 global employees of which over 50 per cent now live and work outside of the U S. Having the majority of our employees residing outside the U S is not a coincidence when I was announced <unk> next C O N.
232021 thing was crystal clear to our board of directors and to our executive leadership team for us to elevate into a faster growth more profitable more relevant and more diversified sash technology later C. S. G needed to become more talent rich globally diverse company a fantastic example of how.
Your global team is executing on this is C. S G India being named one of the top 100 best companies to work for in India in 2023, which we publicly announced in June the.
The success of momentum were saying in the first half results for 100 per cent attributable to the dedication talent and innovation obsess cheers all around the globe. We will continue investing in our people our products and our customers to grow revenue faster, while we simultaneously expand our operating margins as we add meaningful.
Size and scale in the years ahead with excellent operating discipline.
Turning to slide five hour reiterate for strategic objectives that will help C. S. G create more shareholder value and allow followers of our story to track our progress.
Cause I just shared C. S G aspires to deliver longterm organic revenue growth in the 2% to 6% range striving to consistently be at or above the mid point of this range that is why we're so pleased to see the mid point of our revised 2023 revenue guidance sitting above the top end of this range at approximately.
6.7%.
We aimed at operating scale and expand our operating leverage by growing revenue to $1.5 billion by year in 2025 with bottom line growing as fast or faster than top line growth. This scale will come from a combination of good organic revenue and sales growth combined with disciplined inorganic move.
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Further we strive to be the number one <unk> provider of choice for global Communications service providers by providing the most value, adding technology platforms and by being easier to do business with and our competitors and finally, we plan to diversify revenue even more as we win big and faster growth industry verticals like.
Retail government financial services health care technology and more moving.
Moving to slide six you can see we deliver it against all four objectives with our excellent start in the first half of 2023.
On strategic revenue growth, we reported $585 million of revenue for the first half of 2023, resulting in 11.1% year over year growth. Our best first half results in nearly 20 years on the right hand side of slide six we believe the C. S. G as high recurring revenue <unk> business model.
And our strong healthy balance sheet make us an attractive investment.
By 2025, we aspire to gain scale of the markets, where recompete and generate 1.5 billion in annual revenue, which implies the C. S. G. While I've added over half a billion dollars and profitable recurring revenue from 2022 2025 over.
Over the medium to long term, we aspire to expand C. S T as operating leverage and use our strong balance sheet to deliver a non-GAAP EPS growth that meets or exceeds revenue growth on.
This last point I will continually reinforce a key principle for the C. S. G Board of directors and management team investors can be assured that team C. S. G as laser focused on creating shareholder value and earning the right to grow profitable revenue faster not adding empty revenue calories, we will maintain a disciplined high return on invested.
Capital mindset as we explore a wide range of strategic moves to create more shareholder value.
Turning to slide seven we had good success as in the first half of the year on our goal to be the number one technology provider of choice for communications service providers globally, and our continued success with both North American and Global C. S. P's proved that we are executing well against this strategic priority.
It is great to see the see history grew revenue at our two largest north American broadband cable customers by approximately 7% year over year. In Q2 2023. This resolved was partially driven by the migration of subscribers at charter from our competitors billing system over the last 12 months, but we also.
All good growth coming from business expansion in other areas with our two largest customers as we help them solve many of their most important business objectives.
With respect to new logo words, we recently announced a great new deal with a T N international a leading provider of digital infrastructure and communication services team C. S. T will modernise their networks with our mediation roaming settlement products. This will enable a T N to automate mediation and wholesale.
Settlement workflows and access real time performance data to better align resources into more quickly react to changing business needs.
And we continue to win more business in the wireless telecom market during the quarter, we announced a fantastic new deal with P. L. D T. The Philippines largest fully integrated wireless operator P. L. D. T is expanding it's two decade partnership with C. S. G. As he embraces the power of the cloud to bring its wireless.
Business into the future and transform its customer experience, particularly <unk> enterprise unit. This large scale revenue management and B S. S transformation empowers P. L. D T enterprise with a cloud based unified billing and revenue management solution that enables streamlined processes occur.
Crossed his business segments, minimises costs, and shorten it's time to market.
Plus this is the latest example of US serving our customers and environment of their choice. This one and Amazon Web services cloud based solution.
Also a few weeks ago, we announced the completion of our digital B S. S transformation project with Air Tell Africa, Ah, leading telecommunications and mobile money service provider with almost 140 million wireless subscribers across 14 countries in Africa with C. S. G as unified revenue management solution.
<unk> Airtel Africa as prime to streamline processes across its business minimize cost insured in time to market, while delivering digital experience of the drive customer loyalty and sustainable business growth.
Turning to slide eight since 2017, we have diversified our revenue coming from exciting new industry verticals from 7% of total of 2017 D. S. G revenue to 28% of our first half 20 twenty-three revenue a fantastic accomplishment in a relatively short amount of time we are.
Partner of choice for Big brands, and higher growth industry verticals, where we will help our customers digitize and modernise their customer experience and provide them with cutting edge integrated payments solutions and during the first half of 2023 boats solutions delivered good double digit organic revenue growth.
And continue to be game changers per C S G and our customers.
During the second quarter, we expanded our customer experience business with N. R. C health one of the nation's largest health care performance improvement firms supporting more than 7000 organizations. We are enabling N. R. C to execute a digital multichannel communication strategy and a streamlined effective and scale.
Mobile manner.
Another nice cute too when was a contract expansion, which one of the world's leading technology firms. We are deploying our AI power digital C X solutions to provide their customers self service capabilities and the voice channel. These solutions will help reduce the number of contact center calls lowered the number of agent too.
Agent phone transfers and limit the number of repeat customer call Center contacts. This is an excellent example of how C. S. Jeeze AI driven digital C access platforms, how big exciting brands improve customer experience and save operating costs <unk>.
Also in queue to we landed a good contract with a bundled utility service provider for municipal and private utilities to support various customer engagement initiatives. This deal expands our footprint in the utility industry and is another example of how our customer experience suite of products is finding use cases across <unk>.
Multiple industry verticals.
The payments market. Our continued double digit revenue growth is a testament to our industry, leading fast integrated payments platform. We now provide award winning payment solutions to approximately 106000 active merchants and I asked the partners, who need a C H credit card payment gateway and payment processing Cape.
Abilities, serving a wide range of recurring revenue industry verticals in July we were recognized by the straw Hecker group is having the best payment API set in their annual best of breed Award showcase as a leader and a C. H processing, we continue to add scale by signing ISP partners in faster growing industry vertical.
<unk> like property management.
I will wrap up on slide nine before turning it over to high <unk>.
Fiscal year 2023 is off to a fantastic start we grew first half organic revenue double digits on year over year basis, we continued to win fantastic new customer logos quarter and quarter out in addition to growing revenue nicely at our two largest customers. We continue to diversify our business with over 28 per cent.
Revenue coming from big faster growing industry verticals like health care financial services retail Tech and government.
And we continue to demonstrate our commitment to run our business more efficiently with first have non-GAAP adjusted operating margins and the high 17% range. So our message two or three key stakeholders are clear.
To our employees C. S. Jeeze best days biggest breakthroughs are still ahead of US we will keep dreaming big and demanding even more from our collective global talent as we do whatever it takes to turn our giant dreams into reality.
To our customers C. S. G is here for you we are dedicated to being easier to do business with in any of our competitors, while solving your toughest business and technology related challenges. We thank you for your continued trust M. C. S. G. Two.
To our shareholders C. S. T. As transformation is just getting started faster recurring revenue growth improved operating leverage exciting industry vertical diversification or what this management team and our board of directors will hold ourselves accountable too and we will do it with a high integrity focused execution and good governance.
<unk> that you've always come to expect from C. S. G with that I will turn it over to high to provide more detail when our queue too and first half results as well as our revised guidance targets for 2023.
Brian Let's walk through two two first half 2023 financial results and then I'll wrap up with some conclusions.
Starting a slag 11th we've generated thyroid and $85 million of revenue in the first half of the year, which represents 11.1 per cent your your growth alright with organic.
Strong first half revenue increase was primarily attributed to the continued growth <unk> revenue management solutions, including the conversion of customer accounts onto C. A C solution other ancillary services and increase payments lines.
As the medicine on two one earnings cool some of the revenue uplifted recognizing two one was related to the timing of certain licence oriented deal moving from two four of 2022.
Q1, or 2023 and the growth we get in 2023 from converting millions of subscribers also as a competitor at charter over the last 12 months.
Even when excluding both of these items first half revenue growth rate was still had been higher than the top end of a long term organic revenue growth rate, 2% to 6%.
First half 20th 23, non-GAAP operating income with $96 million or non-GAAP adjusted operating margin of 17.8%.
Compared to $77 million or 15.7% in the prior year <unk>.
The increases and non-GAAP operating income and non-GAAP adjusted operating income margin per cent can be mainly attributed to the higher revenue and improved operating leverage we get as we go with that.
Moving on non-GAAP adjusted EBITDA was $124 million for the first half the 2023 or 22.9% of revenue excluding transaction fee as compared to $106 million or 21.7 per cent in the first half of 2022.
Lastly, first half 20, twenty-three non-GAAP E P S with $1.84 as compared to $1.71 and the first half of the prior year, which represents 7.6% year over year growth.
The increase in non-GAAP E. P. S is mainly due to the higher operating income in the quarter upset by higher interest expense and foreign currency headwinds.
Turning to slide 12, I'll go through the balance sheet a castle.
<unk> generation and shareholder return.
First half 2023 cash flow from operations with $28 million as compared to a negative $13 million in the first half of the prior year. Further we had non-GAAP free cash flow of $11 million in the first half of 2023 as compared to a negative $33 million.
In the first half of 2022.
Primary driver this increased castle performance with favorable working capital changes driven by a crude employed compensation and deferred revenue.
We continue to pay full year 2023 free tax Lou cheering from $80 million to $120 million as we can.
This week strong operating performance and working capital of benefits in the second half of the year.
Moving on the end of the second quarter with $146 million with cash and short term investments that.
Along with our outstanding debt at June 30th 2023, 3280, $1 million of net debt and I'm <unk> <unk> <unk> <unk> 1.2 time cause the <unk>.
As a reminder, a capital structure is currently 100 per cent floating right.
Continuing to explore principal ways to balance can optimize their exposure to interest rate volatility.
Moving to the bottom right of the slide we'd be cleared $18 million in dividend during the first half of 2023.
The first half of 2023, we did not read purchase any stock under repurchase program.
But as Brian mentioned in his comments were excited to announce a new 100 million dollar share repurchase program.
Run through ear and 2024.
Turning the page provide my insight on the race, we are making to our 2023 financial guidance targets.
T highlight sir.
One we are raising revenue guidance from 1.15 billion to $1.175 billion, which means we raise the bottom end of our revenue guidance by $20 million and the top N five $5 million. The mid point of the new guidance now reflects a 6.7% year over year organic growth.
Revenue.
Secondly, with a racing full year 2023, non-GAAP adjusted operating margin percentage.
2.75% to 17.1% up from the prior 16.5% to 17 per cent rings.
And we're also tightening our non-GAAP etf's screams.
$3.42 to $3.58 would still result in the mid point of our nine <unk> E. P a guidance.
$3.50 the same as before.
Wrapping up C. O T will continue to relentlessly prioritize every investment we make it a discipline and the allocation of resources and we use the capital.
<unk> and an adherence to risk reward framework with continuous learning R. T cornerstones of how we manage the <unk>.
Business as well positioned with a strong sales pipeline and a high quality customer base. We are also heavily focused on cross sell off the cities within our existing customer base.
Day, approximately half of our top 20 revenue customers take either digital customer experience or payment solutions come by.
We remain committed to accelerating and diversifying our revenue growth.
They include closing and integrating discipline value added acquisitions we've.
We believe this approach combined with a consistent capital distributions will serve shareholder wealth.
That I'll turn it over to the operator to facilitate the question and answer session.
Thank you Mr. Tran, ladies and gentlemen at this time did you have any questions simply press star one and again if you do find that your question has already been addressed you can remove yourself from the queue by pressing the star one again.
Take our first question this afternoon from Maggie none of William Blair.
Hi, Thank you congrats.
Congrats on the great resolved.
I wanted to ask about and that.
Payments offering last quarter, you talked about potentially accelerating payments grouse.
And that was from very strong performance last corner. So can you give us an update on the momentum.
Yeah, Hi, Maggie thanks for joining and hope you're doing well I would say we continue to see the the same similar strong double digit organic growth in terms of the business and it's really coming from a combination of increased volume from existing customers continuing to win more new merchants onto.
Our platform. So we just continued to execute hi, you're you're you have kind of direct oversight of that business unit as well you want to give some additional color dance for Maggie's question.
Yeah, Hi, Maggie thanks for joining and thanks for the question, yes, the as Brian building about what Brian said low additional colors that you know I think we we can that's a lot of of the of time energy in terms of.
Enhancing the collaboration we go to market side within the payments organization are much more focused in terms of our approach.
In terms of the target customers that we are pursuing and it's <unk>, some early and and positive results and that is kind of a a playbook that we're looking to effectively rinse and repeat as we move forward and then build upon with the additional investments gonna go to market side.
Great. Thank you and then as we think about somebody gross drivers.
For 2023, Uhm, it's obviously going to be some some changing dynamics in 2024 with you our largest customers can you give us an idea of what you think so many opportunities are for grass or expansion richer two largest customer accounts and the following year.
Sure happy to do that Maggie.
The way the way, we think about it in this environment because we could ask a lot about both what about you know rainy day scenarios and others first anything that what we see going on in all of our customers, including our top to anything that can help them drive revenue growth faster or be easier to do business with for their customers.
<unk> actually drives improved improved resolved you know it gets get funding and so with C. S. G. We tend to be mission critical and we help drive revenue growth and we help drive good improved customer experienced it in some cases can drive operating leverage on their side, that's true of our big too that's true.
<unk> almost every customer we serve and that's part of what's driving just good sustained revenue growth kind of across all of our business specifically in our big too I mean, we were proud of Q2 showing 7%.
You know court year over year and in our top two customers and we see increased homes past, we see them kind of weathering. The storm on some of their decline in broadband or the competition. They face from fixed wireless in the U S market, we see them continuing to kind of work through that so as they pick up.
More broadband subscribers have more homes past that obviously drives more business for C. S. G. And then we constantly are trying to work with them, having you know multi decade relationships to just help them figure out how they could grow faster on the consumer of the enterprise side of their businesses and how we can help them just perform better.
All around our core applications and it's a combination of both their growth and we like what we received from both of <unk> too and the additional value we can bring to them. So obviously, that's a big focus force.
Alright, thanks for the update.
Thanks, so much Megan.
Thank you your next now to <unk> at Northland capital markets.
Oh yeah.
Question.
Hi, what's the result of that you saw in the second quarter of <unk> E above where does sounds like consensus to you it was and therefore.
Does the full year guidance revenue raised nearly represented <unk> cheese in the second quarter.
Yeah, Hi, there Hello, thanks, so much for joining us we we liked what we saw a lot in Q2, we had high expectations for ourself and we we over achieved against what we thought it was gonna be had the potential to shape up and be a really nice Q too. So I I would say at this.
Stage, you know we've tried to reflect full your guidance in terms of what we think that most likely the we can deliver based on what we see at this point in time in the business, which boats reflects the strong Q2. It reflects the sales momentum we've continued to have in the business and what we see in the outlook for.
Q3, and Q4, so I would say it takes into account a combination of both the strong performance in Q2, and what we think we couldn't deliver kind of going forward and with that said that's that's really our focus at this stage. We say Q2 is now we celebrated for about 15 minutes and we're now one month to do.
<unk> two three it's all about the execution in Q3 and Q4 for Us.
Great and then shifting gears a little bit slide six you said that you expect to drive operating leverage should talk about what is the driver operating leverage perhaps in the context of thinking about your business in terms of the you know cash cow versus your.
<unk> <unk> yeah, yeah.
I'll I'll I'll start and then I'll have high kind of add some more color from his vantage 0.1st we see operating leverage in a couple of different dimensions first.
What we've tried to do over the last 12 months and do even more in the coming several years is redirect every dollar we spend into what can deliver faster revenue growth or deliver better on a customer or the value we bring big customers all around the world and if we can continually do that and get more efficient.
Inside our four walls and put towards investments that will actually deliver a faster return that should drive ongoing acceleration of both top line revenue growth and bought them. Secondly, we we have a commitment where we want to grow bottom line, whether that's a dime GAAP operating margin and EBITDA.
And EPS faster, then revenue growth, which means we've got a great operating leverage across both the investments we make an R&D and SG&A and third you know this whole point, we talk a lot about of getting to 1.5 billion is drive scale. So that we could also drive operating leverage is we just add <unk>.
Size and helps us do that kind of across the board. So there is a strong focus across all those dimensions on both the organic and the inorganic side to make sure that we're delivering but <unk> provided any more color on that.
Yeah, I mean, I I think <unk> that's.
That's right and I think I internal monitor is a commitment to go on expenses more slowly than a revenue right and that is something that that we think about you know every day every week every month here <unk> and and in order to do that and get you. The the growth of the business. We also spend a lot of time thinking about <unk>.
<unk> through the lens of impact where are we going to allocate resources.
Where we're gonna spend those what would make those investments is gonna yoga largest impact.
On the on the business itself is fine said, so that's <unk> that is something that we do think about quite a bit and we talked about quite a bit <unk>.
Okay. Thank you.
It's actually <unk>.
Thank you we go next nap too Shlomo Rosenthal is stifled.
Hi, Thank you very much for taking my questions, Brian <unk> the revenue and EBITDA was it was very strong operationally and you guys are seemed to be starting to hit it really astride over here is is the tightening of the E. P. S range as opposed to raising <unk>.
Due to higher interest expense versus last quarter, and then if that really is it can you just tell us what you have embedded this quarter for interest expense for the year versus what you had last quarter.
Yeah. Thanks, Thanks for joining Schlobohm really appreciate it and the the question Hi, I'll provide a couple of little more of the detail, but E. P. S is the area, even though we saw good growth in the first half over last year, we'd like to do better on and that's you know we are constantly look at how we can improve E E. P. S.
The drag is really coming from two things in full year 2023, one is the 100 per cent floating dead with a higher interest rate north of 32 million and interest costs for the year, but high I'll provide the specifics on that and the second one is the foreign exchange is the U S dollar.
You know kind of also credited ahead. So overall from an E. P. S. We're seeing that we could between interest expense and for <unk> combined we could take a hit of about 14 15 cents per share on the P. S that does create some headwinds so what we've gotta do is we we've gotta grow fast.
Throw on the top line, we've got to continue to put out strong operating profitability and then obviously.
Work on getting the interest costs down, which I think would be what it's actually almost approaching just shy of 35 million now, but you want to provide a little more color.
I mean that that's right <unk> specifically, our current expectations is that in suspense of the year is about 34.8 million you can see that on page 17 is there any bleeding.
Okay, and then could you talk about the seasonality of the cash flows the business like we look back historically a lot of times there is Ah back and waited free cash flow year, you certainly saw that last year, but it seems to move around you know sometimes you have it more even can you talk about what's gonna change.
In the second half of the year in terms of working capital are there specific like milestones in projects are there certain clients that tend to pay more in the second half of the year, just give us a little bit of a bridge from you know <unk> <unk> from basically 11 million of free cash flow to let's say the 80 to 100 million.
Like <unk>, where is that gonna you know, what's gonna change right now.
Yeah, I think Shlomo you hit the nail on the head. It is a couple of of those those things see we do have an <unk> announced in the last couple of quarters. Some large global telco projects that were in the midst of and those projects are fantastic should teach it up.
<unk> to garner very robust and healthy long term customers provide a tailwind touch <unk> business for many years to come but in the interim as we are getting those projects off the ground. There are milestones that are tied to the cash flow and does nothing will begin to hit in the second half.
This year and then on top of that just some timing around capex and some timing associated with the with working capital and that and so tissue. <unk>. Obviously are are cast physician is much better than it was last year, but we see a similar dynamic in terms of back half waiting on a free cash flow.
[noise], Okay, great. Thank you.
Excellent.
Well, that's not too Matthew <unk> company.
Oh, thank you.
Can you talk about the adaptability of the extra component prob product across so many industry verticals. It it feels like you're nicely of celebrating activity you know really outside of the financial services space as well as with that and are you do you have any better really kind of assessing the attribute.
<unk> consumer behavior, or any purchasing decisions and retention decisions too.
As you go as you go through the process and include them incorporation of AI, which you talked about in a in a white paper earlier. This year I think can quatre of some consultancies.
No. Thanks, but I appreciate you joining us today I hope you're doing great. Yeah. The the core of our C. S. G exponent, which really has a lot of applicability across the industry verticals is is it at its core a decisioning engine that really takes the data that our customers has.
It helps them harnessed that in real time to gear next best action capability for Onboarding, new customers Cross sell upsell deflecting customer engagement call. So can boat drive revenue and offset operating costs and just improve their overall customer N. P. S scores. So that's the core of.
What it does and and wrapped around that band is just targeted use cases vertical by vertical that makes it easier to implement and get it faster or wise and so even in a I'd say more bumpy economic environment. It has such a good returned it it kind of pays for itself quickly so what what we're <unk>.
Trying to do more of is constantly <unk>.
Improve the that decision and your engine indeed analytics capability that we provide to our customers wrapped with targeted use cases, so in financial services, we see that with digitizing different types of loans and payments and notifications in retail we see that improve.
<unk> kind of experience that were driving on on pharmacy retailers around prescription notifications prescription abandonment or improving how they notify the customer and some of the areas like Big Tech, where you're just talk about the when we're we're really helping on <unk> contact center routing that can really take a lot.
Costs out of their business and get the customers issue solved more quickly. So at the core it's a decisioning an AI driven platform that is providing value on a dairy targeted use case. So what we're trying to do expand out that use cases and be more even more specific in those verticals and sell direct but also get our.
Channel sales because there's a lot of great partners, we have that could actually sell with the relationships. They have pulled us in because what we do is the decisioning in the <unk> platform after making rapid with a bunch of additional capabilities and services. So that that is a big focus and we've just got to continually turbocharged that part of our business.
So given that and given the resilience predictability billing.
Billing business, where would you expect to get down to it if we did have a mild recession in the U S and maybe a little worse in in Europe .
Yeah, it's it's hard to predict I mean, exactly kind of where it is I mean, that's that balance we tried to talk about it in the earnings called one we do see every customer looking at asking questions about how they can take costs no different than C. S. G is out of their business, but so far what.
Has held up well in terms of our accelerated revenue growth.
If they spend they make with C. S. G helps some accelerate revenue or cut their operating costs or while their customers better than those costs are what get left on the cutting floor. It was they tried to squeeze opex improvements out of their own business, because we become part of the solution. So.
You know I don't I think it could create risks in any one of these verticals, where we see some pullback, but so far we've been in the on the side of the ledger that actually says we we help solve those challenges and improve their business resolved. So therefore, we stay it and continue to windows programs. So.
I actually don't think if there's one industry vertical or one region of the world.
I think it's something that we've just got to continue to sell the value and the are wide proven R. Y business case, So we can drive and if we do I think you'll continue to see good good organic growth.
That said, we're also trying to make sure that word disciplined and we don't get our forecasting wrong. So that we constantly grow our opex slower than what our revenues growing as high talked about earlier.
How high anything else for Ya.
Now <unk> I appreciate it Matt Hi, anything else you would share on just how we think about kind of that balance of the growth part of the business and then if we if we did get see a slowdown in coming quarters, what else how else we would respond.
No I mean, I think I think he coveted Brian I think that you know for us.
We're always trying to D. Two things one develop tools and capabilities that are very data driven that enables us to peer around the corner looking at both financial and nonfinancial trends in the data and so that we have a bit of a generic Nicole mind. It helps us rapid Luis.
<unk>, two where we identify those risks and and then rapidly flex our cost base for a possible right, but but you know that is an ongoing battle is Brian mentioned, you know to to be able to have more visibility in the business.
So you'll get a decent economics, you just fill out the data that you have in house as well as just for your clients are telling you.
Yeah, I mean, that's correct yeah, we do we we you know, but you know so if you can imagine it particularly.
You know I can see X business, we have that slot of access the data and the payments business. We have lots of access to data right. So you know that that large data that enables us to to perform some interesting analyses now. It says the question around getting more sophisticated you know trying to figure out, which one of those metrics or more crude.
<unk>.
That's great. Thanks Hon.
Yep.
And we'll take our next question now from Breton AD block at Cantor Fitzgerald.
Hi, guys. Thanks for taking my question I guess, the first thing on the new share repurchase program. How does this change maybe your near term acquisition strategy. As we are approaching cloud coin 25 soon in your goal to reach for a half billion shall we think of this as.
You guys being read more favorable to share buybacks over the near term over M&A or is there another way to think about it.
Hey, Brian I hope, you're doing well thanks for joining the call <unk> Great question no. It doesn't change at all our our three main priorities that we try to be pretty consistent on every call an interaction one hands-off glass on dividend, we've pretty much historically ray six per cent like clockwork for over a decade now.
As an aristocrat dividend provider. So we're gonna continue that secondly scale with great value, adding acquisitions to create scale and operating leverage in our business and third at a minimum offset executive base comp dilution on the on the.
Sure by backside and if we see an opportunity where we think our stock is is undervalued and we can deploy capital that way. We will just like we had a big bunch of share buy back in 2022, and so that doesn't change any of that and we see opportunities <unk> continued to execute that across the board.
<unk> and then maintenance on that that you guys got it you guys raise call it <unk>.
<unk> margin guidance for across the board what kind of left the mid point of EPS in pre Castro unchanged can we just think about that as maybe any EPS imprudent network is being offset by may be higher end. This call. Sir is there anything else going on that would have led today is not raised in the mid point there.
Good question, how you Wanna Yeah.
That's correct.
We are C improve performance and the underlying business. The <unk> those improvements are thinking the headwinds are both higher interest costs as well as currency fluctuations.
You know taking away some of those benefits as Brian mentioned earlier, it's about a 14 cent headwind this year for us.
Perfect understood and then maybe if I could squeeze kind of one last one in there I guess on the payment side. It seems like that's so growing quite robust, but I guess as we break out you know first half revenue growth 11 per cent in the second half supplies.
Closer to three 3.5% could you maybe just helped horse.
The differences between what's driving such as dispersion grocery to in the first half of this year, the second half and what maybe their payments is contributing to that.
Yeah, we don't we don't break out the specifics, but maybe I can help a little bit breath. If you look at our first task you know just a little bit over 11% a year over year organic growth. If you theirs too you know contributors they kind of really took it to that double digit level.
If you take or the the the conversions, we did at charter and converting 14 million sobs off of one of our bigger competitors and then we talked about the kind of <unk>. The big one time license those two things combined even if you neutralize those out or about 4%. So it says the core busy.
<unk> is still growing above the 6% you know range around that but that gives you a kind of baby you take those two out it kind of just says we're still in that 226, but slightly above and so what <unk>. What we've seen in the business is all of our units are contributing to that good grow so we fully expect.
Checked our payments and digital <unk> to consistently be strong double digit organic growth businesses, and we see really good growth potential in both north American cable and definitely the global telecom space on the consumer and enterprise side as we win more big wireless deals. So obviously.
We tried to do then and digital <unk> payments is both through organic growth and you know smart acquisitions that can add value, you'll get the size and scale of those faster growing you and it's even bigger as we continued also grow nicely and decor cable and telecom.
Understood Alright, thanks, guys really appreciate it.
Thanks Brent.
And we'll go next now too damn Mcdermott Oppenheimer.
Hi, everyone then on for 10 her and thank you for taking my question.
I don't believe you're currently support Comcast and charters mobile business, the mobile businesses, obviously going extremely fast bedding around 1 million subs this corner combined.
Well, then that makes sense for Comcast and charter to consolidate onto one plot form.
Our customers currently getting two bills, one for broadband and video services and the other for a mobile thank you.
Yeah, Hey, Dan Thanks for the question. Thanks for joining I hope you're doing great. We loved the question, yes that is something that we tried to raise two are good argued customers <unk>, both Comcast and charter we do not served with a b S asked platforms. The wireless today, we were.
<unk> you know our customers often more use different vendors for different parts of their business, we respect that and at the same time, we don't love It and we've tried to give them a lot of business cases and reasons why it could make sense to consolidate so today. It is separate platforms, there's not 100% convert.
<unk> Bill, although we work with Comcast and charter as does one of our competitors to try to deliver still a great experience for their customers I I for one of our Quadplay customer of one of those given where I live in Denver, and we think it could make sense over time, but so far we we respect that that's not the disk.
Vision that they've salt makes sense today, and we just try to serve him well with what they give us and give them reasons to consider how they could expand with us if they wanted to at some point in time completely their choice.
Got it thank you so much.
No. Thanks, Thanks again.
Thank you and I currently don't see anyone else in queue I'd like to turn it back to disturb Shepherd foreclosing calm.
No. Thanks, Thanks, everyone for joining the call. We're extremely proud of Q2, but for US like we talked about earlier, where now a bump in two days into Q3. So as good as Q2 was we think we can still do better we can do better on a P. S. We can do better on our interest expanse, we can deploy more capital in a way that add shareholder value.
With with good acquisitions. So we're proud of what we're doing but we've got a lot of work to do to keep elevating the results. Thanks for the time and look forward to talking next quarter.
Thank you, ladies and gentlemen that will conclude the CSE systems Q2, 2023 earnings conference call I'd like to thank you all so much for joining us and wish you all a great remainder of your day Goodbye.
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