Q3 2023 CSG Systems International Inc Earnings Call

Thank you for standing by.

My name is Bailey and I Hope your conference operator today at this time I would like to welcome everyone to the Q3 2023 C. S. G Systems International Inc Earnings Conference call.

All lines had been placed on mute to prevent any background noise.

After the speaker's remarks that will be a question and answer session.

Please limit your question to one initial and one follow up question.

If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.

If you would like to withdraw your question again press Star and one.

And I will now turn the call over to 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.

Discussion will contain a number of forward looking statements.

Clued, but are not limited to statements regarding our projected financial results our ability to meet our clients needs through our products services and performance.

Ability to successfully integrate and manage required businesses in order to achieve their expected strategic operating and financial goals.

While these risks reflect our best current judgments 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 released 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 web sites also we will discuss certain financial information that is not prepared in accordance with gas.

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 earn.

<unk> 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 try out as 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.

T M C. S. G delivered fantastic results in both Q3 and the first nine months of the year, we posted 9% year over year revenue growth through the first nine months of 2023, all coming from organic growth.

Performance through the first nine months was the best results, we posted in nearly two decades.

To date non-GAAP adjusted operating margin was 17.5%, which is a significant improvement over the 16.6% we reported through the first nine months of 2022, proving our ability and our commitment to consistently expand C. S. G as operating leverage with disciplined execution.

During the quarter, we took a big step in Optimising, our balance sheet in September we completed the successful 425 million dollar convertible that race. This transaction has many benefits, including lowering our interest rate to 3.875% on the majority of our dead.

[noise] up a revolver for future M&A and giving our capital structure are more balanced mix it fixed and floating right dead.

Plus shareholders will experienced no equity dilution until our share price exceeds approximately $96.50 as a result of the derivative we simultaneously put in place with the convert.

On the share buybacks last quarter, we announced a 100 million dollar repurchase plan. We are excited to announce that this program is complete as we have repurchased $170 million worth of stock. During Q3, four historical context. This was our largest quarterly share repurchase quarter.

Q3 of 2007 looking.

Looking for and we will continue to Opportunistically repurchase shares through the end of 2024 with the expert expectation that we will buy back shares to offset employee stock compensation at a minimum with the opportunity and goodbye back more than desk. When we believe it will create greater shareholder value.

From a guidance perspective, we are pleased to raise our non-GAAP EPS guidance and reiterate all other financial guidance target ranges for fiscal year 2023.

At the end of the day are faster revenue growth is fueled by strong ongoing market demand for C. S jeeze industry, leading SAS products and good sales performance.

Turning to slide five I will reiterate the four strategic objectives that will help C. S. J create more shareholder value and allow followers of our story to track our progress as I just shared CSP 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 midpoint of our 20th twenty-three revenue guidance sitting above the top end of this range and approximately 6.7%.

We aimed at operating scale of expand our operating leverage by growing revenue to $1.5 billion by year end 2025 with bottom line growing it's faster faster than top line revenue growth. This scale will come from a combination of good organic revenue in sales growth combined with disciplined in our game make moves.

Further we strive to be the number one <unk> provider of choice for global Communications service providers by providing the most value added 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 in faster growth into.

By 2025, we aspire to James scale in the markets, where we compete and generated 1.5 billion in annual revenue, which implies the C. S. G will have added over half a billion and profitable recurring revenue from 2022 2025.

Over the medium to long term, we aspire to expand C. S. G as operating leverage and use our strong balance sheet to deliver non-GAAP EPS growth that meets or exceeds the revenue growth.

On this last point I want to reinforce a key principle for the CSP 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 calories revenue, we will maintain a disciplined high return on invested cat.

Spittle mindset as we explore a wide range of strategic moves to create greater shareholder value moving.

2016 through 2020 C. S. G averaged about 1.8% you over your gaming revenue growth growing organic revenue by $14 million on average over that period of time around three years ago, We introduced our new organic revenue growth targets stay.

Being that we wanted to take our historical 1% to 3% organic revenue growth range and double it to 2% to 6% and we are proud to share that teams D. S. G has deliver on this commitment averaging over 5% organic revenue growth from 2021, two year and 2023 as in.

Plied by our current your revenue guidance targets.

Focusing on the bar chart on the far right. The low end of our current revenue guidance, which C. S. Achieving approximately 5.5% year over your debit revenue growth in 2023, while the high end of our 2000 twenty-three guidance, which says deliver approximately 7.8% year over year organic.

Groat. This means that teams C. S. G is on track to add $60 million to $85 million in new organic revenue growth and this year alone almost a six X increase at the high end compared to our 2016 to 2020th historical performance at the end of the day, we are laser focused.

On maintaining this momentum in the coming years.

Turning to slide eight we had good success is through the first nine months of the year on our goal to be the number one technology provider choice for communications service providers globally, and our continued success with both North American and global Csp's proved that we're executing well against this strategic priority.

This year, we completed our conversion of 14 million customers from our competitors platform at charter, we have longterm contracts with boat charter, an Comcast that run through Q1, 2028 and year and 2025, respectively.

A reminder, <unk> relationship with Comcast and charter is on a per customer basis, while video subscribe or losses have gotten a lot of headlines over the past week, Comcast and charters residential and S. M. B customer base stay broadly flat. During Q3. This may seem like a minor nuance, but it is a very <unk>.

<unk> Ah.

A new logo wins, we extended and expanded our 10 plus your relationship with one of the leading cable broadband providers in the U S. G. S. G was selected the digitally transform their b S. S stack to simplify their business processes with our agile and cutting edge solutions.

And we continue to win more business in the wireless telecom market, we want a great new logo with EM, one one of the leading mobile carriers in Singapore C. S. G was selected to modernize their beta B B S. S stack and importantly, this deal highlights the strength of <unk> solutions as we are replacing our main competitor.

<unk>.

Turning to slide nine since 2017, we have diversified our revenue coming from exciting new industry verticals from 7% a total of 2017 CSC revenue to 27% of our 232023 revenue a fantastic accomplishment in a relatively short amount of time we are.

Partner of choice for Big brands at higher growth industry verticals, when we help our customers digitize and modernise their customer experience and provide them with cutting edge integrate payment solutions and during the first nine months of 2023 boats solutions delivered good double digit organic revenue growth and continue to.

Be game changers for C S G and our customers.

During the quarter, we expanded our customer experience business with one of the world's leading technology firms, we're deploying our a I power digital C X solution to provide their customer self service capabilities and the voice channels. You may remember that we announced a similar U S focus when with this customer earlier this year.

We are delighted to share that we've expanded our solutions to every country, where this company operates globally. The solutions will help reduce the number of contact center calls lower the number of agent to agent phone transfers and limit the number of repeat customer call center contacts.

This is an excellent example of how C. S cheese, AI driven digital T access platforms, how big exciting brands improved customer experience and save operating costs.

And in a moment, we will share slide it provides more details into a house ESPN integrating AI into every aspect of our business.

And the payments market. Our continued double digit revenue growth is a testament to our industry, leading <unk> integrated payments platform. We now provide award winning payment solutions to 110000 active merchants and ISP partners, who need a C H credit card payment gateway and <unk>.

Ament processing capabilities, serving a wide range of recurring revenue industry verticals in September we launched CSC Forte gauge, which is a multichannel no code payments solution that puts the power of our suite of payment solutions into the hands of our customers were C. S. G Forte engage.

<unk> can leverage nano site technology to create customized secure statements and send them to customers for payment via SMS email two way interactive voice response, or the contact center by making it easy for organizations to send branded and personalized statements. They can securely except <unk>.

Payment in real time remove their exposure to sensitive data and modernize the customer experience of notes C. S. G. Forte Gage helped one of our customers reduce uncollected payments by 85% and another merchant to increase customer engagement by 660% leading to eight.

Million dollars in incremental revenue.

Turning to slide 10, we wanted to explain how C. S G as integrating AI into a fabric of our business S.

S. C. S. G. A I start with embracing the technology encouraging experimentation in building that foundation and framework to set our employees and customers out for success and proud of the work that the team has done to build the foundational elements that allow C. S. G to realize the big benefits of generative AI, while protecting our employees.

<unk> customers, we have established <unk> corporate day I policy created an AI community practiced the shares community learnings across to our approximately 6000 employees and implemented a reusable framework tool sets an infrastructure that are shaping and guiding our ethical you survey I globally.

One of the main value creation drivers is how C. S. G is beginning to use AI to drive internal efficiencies and productivity by encouraging the use an adoption inside our four walls C. S. G teams in almost every functional units, including sales customer service R&D compliance legal cyber security.

Charity H, our financial planning accounting and more are innovating to help <unk> grow revenue and profit even faster and to be easier to do business with for our customers and our employees a.

A second major value creation lovers, how we build generative AI <unk> products and solutions to bring more valued customers and to help C. S. G grow even faster as a reminder, leveraging embedding data driven capabilities into our products is not new for us <unk> products or industry.

Leading in part because we have used advanced machine learning and predictive analytics for well over a decade and now we are expanding these capabilities to take advantage of a new capability offered regenerative models.

A recent example of this is the exciting launch two weeks ago, a C. S. Jeeze Bill Explainer Dot E I, new product one of the biggest drivers of calls into contact centers and many industry verticals is when customers see something on their build that surprises that bill shock as one of the single biggest drivers of cost.

And customer dissatisfaction leveraging the power of a I C. S. G is now taking the value we bring to customers globally to the next level. We have partnered with Microsoft <unk> open a I framework, we're allowing consumers to interact with our new AI models to a personalized interaction with their bills to drive down.

Cause and further increase customer satisfaction.

I'm excited about how the team has embraced day I the progress team C. S. G is making to quickly launched tangible new use cases, while big customers all around the world.

I'll wrap up on slide 11, before turning it over time.

G S. G as delivered excellent results through the first nine months of 2023, we are raising our full year non-GAAP EPS guidance and reiterating all other financial guidance targets, we continue to win fantastic new customer logos quarter and quarter out we continue to diversify our business with over 27% of revenue <unk>.

Coming from big faster growing industry verticals like health care financial services retail Tech in government and we continue to demonstrate our commitment to run our business more efficiently with non-GAAP adjusted operating margins in the mid 17% range through the first nine months of the year, So our messages two or three key.

Stakeholders are clear to our employees <unk> best days and 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 have dedicated to being eased.

Here to do business with than any of our competitors, while serving your toughest business and technology related challenges. We thank you for your continued trust in us to our shareholders. CSP transformation is just getting started faster recurring revenue growth improved operating leverage and exciting industry vertical diversity.

Vacation 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 that you've always come to expect from C. S. G with that I will turn it over to high.

Thank you, Brian let's walk through our T. Three N nine months your day financial results and then I'll wrap up with some conclusions.

Starting on slide 13, we generated $872 million revenue for the first nine months of 2023, which represent 9.0% year over year growth all of which was organic. Additionally.

Additionally, we reported 5.0% year over year organic revenue growth in Q3.

A strong first nine month revenue increase was primarily attributed to the continued growth of C. As soon as revenue management solutions, including the conversions of customer accounts M. C. S. G solution strong year over year growth in a digital C X solutions and increased payment volumes.

Over the last 12 months.

Even when excluding both of these items first nine months of that new growth rate would have been at the top end of a long term organic revenue growth range of two to six per cent.

First nine month 20, twenty-three non-GAAP operating income was $142 million or non-GAAP adjusted operating margin of 17.5 per cent.

<unk> to $124 million or 16.6% in the prior year.

239 gap adjusted operating margin of 17.0% contributed to the excellent year to date yourself.

The good growth and non-GAAP operating income and non-GAAP adjusted operating income margin percentage.

Your date period were driven by a combination of the margin improvement and efficiency, we have implemented over the last four quarters and the faster revenue growth, which is enabling us to further expand operating leverage.

Moving on non-GAAP adjusted EBITDA was $183 million for the first nine months of 2023 or 22.7% of revenue excluding transaction thing as compared to $166 million or 22.3 per cent in the first nine months of 2022.

Lastly, your date 20 twenty-three non-GAAP E. P S is $2.76 and.

An identical result from the prior year period.

Increases in revenue and operating margin offset by higher interest expense and foreign currency headwinds.

Turning to fly 14th I'll go through the balance sheet castle generation and shareholder returns.

Uhm nine month, 2020th free cash flow from operations with $52 million as compared to $10 million in the prior year period.

Further when we had nine get free cash flow of $29 million in the first nine months of 2023 compared to a negative $22 million in the same period in 2022.

The primary driver of this increase castle performance with favorable working capital changes driven by a crude employee compensation and deferred revenue.

With respect balance sheet during the quarter, we executed very successful convertible that deal.

<unk> delivered multiple benefits, including lowering our interest rate.

A revolver for future M&A, and giving a balance sheet I'd better mix, a fixed and floating rate that.

Plus equity shareholders will experience no equity dilution until share price, which is approximately $96.50.

As a reminder, we raised $425 million a convertible desk with a 3.8 75 per cent coupon.

And we paid $275 million on a resolve.

Moving on we ended the third quarter with $147 million of cash and cash equivalents.

<unk> along with that outstanding debt at September 30th 2023 results in $428 million of net debt and a net get leverage ratios fifth at 1.8 times of adjusted EBITDA.

In addition repurchase the hundred and $17 and <unk> <unk>.

<unk>, which was tied to re purchasing the delta head chairs associated with our convertible that race.

Turning the page will touch on guidance and buying mentioned <unk>.

<unk> Uhm nine gap E T S range to $3.50.

$3.70 as a result about good operating performance and I share repurchase activity in Q3 of 2023.

We are reiterating all other financial guidance for inches.

And with respect to <unk> Castle guidance now expect to come in towards the lower end of our original 80 to 120 million dollar target.

The timing of certain working capital movements.

<unk> include the timing of collection for certain trade receivables around quarter and including those related to the department of certain large global telecommunications projects.

Wrapping up C. S. T will continue to relentlessly prioritize every investment we make if they discipline in the allocation of resources and the use of capital.

A nation, including how we leverage the transformative power puff CSP and adherence to a risk reward framework with continuous learning R. T cornerstones of how we manage the business.

C C well positioned with a straw sales pipeline.

High quality recurring revenue customer base.

Committed to accelerating and diversifying our revenue growth, which may include closing and integrating discipline value added acquisition.

We believe this approach combined with a consistent castle distribution will serve our shareholders well.

With that I'll turn it over to that Burger to facilitate the question and answer session.

Thank you at this time I would like to remind everyone in order to ask a question press star and a number one on your telephone keypad. Please submit your questions on one initial and one follow up question.

Your first question comes from the line is 99 was William Blair. Your line is open.

Hi, Thank you and congrats on the results Uhm.

Uhm thinking about some of the the commentary about the revenue growth rate and even when you back out and that's that is kind of non repeatable items you still have the high end of your grass range. So I'm wondering if you can kind of tell for us what really drove this and what sort of factors, we should be looking for to determine you know what at this level.

Of grouse is on the table for next year or or years ahead.

Yeah, Hi, Thanks, a lot for joining the question the call and appreciate your question, we absolutely do <unk> celebrated organic growth as <unk> 226 percentage of our range. We fully expect with good performance debate, the mood pointing or higher sweet absolutely do do believe.

That accelerated faster growth is sustainable there's a couple of things that's going on first the diversification and new industry verticals.

And the visuals.

Visuals.

We're adding new wins, our pipeline a strong we continue to deliver <unk> as we know in this environment. If you can deliver a cost savings <unk> and do it using the data and SaaS model than that space involved <unk> in terms of the tough environment Saint payments Ashburton platforms.

Growing up with the number of merchants mystery transaction volume growing and both those two one diversification are big contributors kind of come back to us for that'd be an assassin revenue management Global Telecom, we continue to win big deals and consistently asked you both arms sales and the delivery side and.

What would you say with global Telecom Commoditization of voice and data the need for less configure <unk> last customized solutions lower cost more agile beverage of products business model is resonating all around the world and so we <unk> did you say it a global telecom business.

We come all the way back into our.

Cable business, there's been questions about slowing abroad.

As in that space first we see significant.

Special even in our basic cable customers opportunities your spam biomass opportunity to take onboard new areas. If we just continue to serve as well and notwithstanding some of it maybe provide short term challenges when we look at who's position, where consolidated one play U S market.

We think are big to customers and the longer Charles Ave, a lot of potential and floating past them, what they're doing to the best of their networks. So we do absolutely expect to continue this this accelerated <unk>.

Thanks for that Brian and then you know you.

He gave the example that.

Mm okay.

And the different outcomes, you were able to achieve through C. S. T for Tango H and you talked it out in a reduced uncollected payments and increased customer engagement, Tennessee leather matrix.

Yeah, I'm going to take your first and how you can talk to about the outcome.

We do expect in our digital C X business and in our payments.

Be able to <unk>, a strong double digit for game.

And potentially to later on discipline value, creating acquisition as we just add to our product portfolio is friend. So one of the spring southern payment Si is our ability to have our our SaaS platform to be able to quickly onboard <unk>.

Not just credit card transactions, which is a bigger percentage, but also one of the best in the industry at an a C H, which is a more efficient.

And we can do S M b or large enterprise and so kind of bad modular approach, where we can sell direct or through channels parkers nine species, who can onboard and solid and all the app is beyond for phone purchase or two of our bigger initiatives. This business model I think you'll see us <unk> more with are the model was using.

Goodbye have you been doing any thoughts on every five years different approaches in the space.

Generally speaking this type of economic environment fill out a financial specialist.

On our customers if possible.

<unk> Oh.

Like base selling approaches <unk> hyper focused on it.

Very much.

Revised quantifiably that differentiates us.

To really speak directly to the customer so some of their real challenges and <unk>.

Thank you.

Thanks for <unk>.

Your next question comes from the line of Matthew Harrigan with.

Your line is open.

Thank you congratulations on the results clearly I was curious if you could elaborate what you're seeing on the emanated side is cause you targets at 1.5.

<unk> top line, particularly given the latitude you now have with your your balance for you to make you think pricing is getting sooner than the south market and are are you seeing opportunities are really fit like a glove with what you're trying to do particularly given your capacity to leverage <unk>. Thank you.

Okay, I hope you're doing well.

Absolutely M&A as part of our strategy two questions, we probably get the <unk>. One can you still get up to 1.5 billion by 2025, and two are you going to do that with discipline.

Capital of the answer that we hopefully demonstrated with the results of the <unk>.

<unk> is Jess off road. So first what we see on the the acquisition. We should continue to look for strategic product capability that can be added to what we do and bring more value to our customers and if we do that we're doing integration culture and people that's how we've been.

Able to unlock value with the acquisition of <unk>.

Our track record and and as we do that the second <unk>, we see valuations on various <unk> the best certain assets.

Somebody who would sell the whole company.

Come down closer to what we would see as a good value, creating stripes out because we think the best way to get messed up a good acquisition is don't Wanna pay and so we do get valuation continues to say that will be good actionable deals in the coming period of time now specifically on this disappointment and.

Hopefully we're seeing.

We all there was an AI driven data driven platform I became a centerpiece of our exponent marches digital <unk> received the results on double digit organic growth and profit contribution.

Let me see Tango telecom, we added capability in to our global Tucker Laufer really strong performance same thing on digit adding CPG you an order management.

In all the areas. We expected are constantly looking at dozens of <unk> and being very disappointed venture comes in to the stripes on what it goes you almost like the one area that I think we are seeing valuations come in is more of the AI space and so what we see right now is a we'd have strong AI.

Capabilities inside our four walls, and we're leveraging that furniture, all efficiencies as well as improved and expanded you're offering a valued customers. But you are seeing is take a more partner driven approach Triple partnership with Microsoft is there's there's big players in the space and there's a lot of the smaller players that have what we might consider.

Over inflated valuation waiting for giving me a lot of shake out at the low in advance. So we don't get gas a a great highly disciplined approach on the AI, specifically, but we're not really like any of those out again, just stick to our discipline strategic focus on the internet.

Beautiful <unk>.

Extra mustard.

Your next question comes from the lineup Timothy ran with Oppenheimer. Your line is open.

Congratulations I'm moving so rapidly on on a I just wanted to focus on that if you don't mind do you own the label data to train the models and can you give US you know a little bit more color on you know what model you you're using.

And how long do you think it will take to have a material impact on your financial so you know either to reduce expenses or drive new revenue growth.

And do you have a lot of you know new products in mind that can <unk>. Thanks.

<unk>, Yeah, Yeah, really your questions and and timely questions first.

You know the way we describe it is we don't think we're bleeding yet, but we do <unk> in terms of how we're deploying using all the data side, specifically I would say the majority of the data is actually not.

There is some data to some of our solutions with some of our businesses, where we actually have access to and can leverage more directly but I would say the bigger is it would actually be customers data and they would be needing to opt in and work with a song that as as many of them offer and working with different opportunities. So.

[laughter] physically on kind of a balance between revenue growth is accelerating and contributing to the bill at the upper end or a separate of our our long range targets is it is you've seen us launch three products and there's more in the works around that and we just think it's kind of course in the case.

The bill.

And it's an extension of what we've already been doing on a machine.

So.

All excited by the Bill expires March to address Bill shot that's a huge opportunity in the big driver and cable telecom, but it also has lots of other industries would that'd be insurance utilities other enterprise businesses.

<unk> on that side. So we do expect to be doing more launches around it and on the model size and you'll see us.

Have data scientists inside our four walls will also elaborate some of our bedroom.

And some of our smaller partners that have targeted a large language models around that I'm, maybe you want to talk about the efficiency side of the ZIP longterm range of 16% to 18%. We've shown we can solve the operated company to 17%, we'd love to get into the upper hand.

<unk> <unk> <unk> <unk> yeah.

It increases the tastes of <unk>, which we can get to this design.

I'm sorry.

We are clearly trying to take full advantage.

The new at a grocery technology democratizing that across the organization.

As you can see the charge that Brian shared right. Just every department is across the organization are now starting to explore unique and interesting opportunity.

And that's where I think the <unk> the efficiencies in the month.

And then just maybe to connect your questions broadband has been a revenue has been relatively stable now the last three or four quarters.

What did you expect that to accelerating what's it gonna take care of it sounds like you have some you know basically new products, maybe it's related to AI to kind of get that going again.

Yeah I'll be on the cable side of I think there's a couple of things one I think one of the biggest baby misunderstood aspects of our story in our company is video of court.

For cable customers does not hurt.

The customer relationships and what are we to focus on is even though we have all the market share in North American table.

A huge headroom for growth they do a lot on internal Y T development, there's still a meaningful part. So we don't serve today that we could displays vendors. They also we think will grow through some of the current challenges. The app. So we absolutely expect his bank.

Two and North American table in general can grow your and your health at or above the rate of the company at any given for may not be that way exactly that's on us. So what are we doing that we go to bring them more value. We've gotta constantly have the best operational.

<unk>, because usually with bigger customers feel pressure they tend to trying to get for to those partners and vendors that are serving the best. So ours is we we don't take it for granted we tried to go on that respect and value everyday we absolutely think we can continue to nicely with some short term headwinds or even intermediate.

Headboard that any of our customers Memphis.

Thank you.

Excellent.

Your next question comes from that Gregory <unk> Company. Your line is open.

Good afternoon.

Why are margins projected to be down sequentially in the fourth quarter and then looking.

Beyond the fourth quarter, obviously, you're driving steady consistent organic growth driving that's scale D C.

<unk> to your your operating margin targets I know in the past historically, you've kind of operated.

At certain points it at higher levels of profitability is that is that.

Is there a potential therefore for margins to expand from here.

Yeah. Thanks, Greg first yeah, we thought about that in terms of the guidance for the remainder of the year and so first.

We always come into every corner expected and bleeding weird and she has to be at the upper it not the lower it that is absolutely our expectation to be able to drive that from a revenue growth that we've got a few well and too boring.

The end of the quarter. So so we don't.

Don't expect.

To have any step down, but let's see helped you for coming to in and we got some work to do with two months left M. A year now specifically on the <unk> side of the <unk>. We it was great to see where we actually last order increased or non-GAAP adjusted <unk> range up to 16.

475 to 17 Dot Y U C S now through three border.

This is 17, an app, which is just shy of 100 basis points improvement over last year, it's well within our 16% to 18% and what would you like to say is we like 17 better than 16 that were operating solid eight to 17 were not getting guidance yet for next year. We would expect we don't expect to take a step back Brian.

And when you talk a lot about just operational discipline and that's more small charges of the ranch constantly looking at how do we redirect our opex to better sale better value and performance for customers and accelerated growth and that's what we do we expect to continue and expand operator.

Glen <unk> bottom line grows faster faster than top line, you're in you're out there might be something better.

Better or a little lower than the others <unk> our business, we thank our leaders for finding a way to do that.

Topics Si Martin.

Okay and what is the.

The share count now I guess, where where do you expect to share count me in the fourth quarter.

In the fourth quarter.

Mhm.

Let me get back to you is that great I'll give you a very specific number.

Okay, great. Thanks.

What what what you said now just as I start pulling that up.

On the share buyback, yes first after the big three will revive back $170 million worth of stock.

<unk> <unk> it.

It is the third leg your bar capital allocation stool first his hands off blasts on David is secondly focus on strategic value trading acquisitions, and then third have buybacks and at a.

Minimum offset shared allusion I think you'll see at least at this stage share buybacks focus more on a a steady approach. It is more along the lines of offsetting delusion. After the big two three and the big prior you'll you'll get a bypass and.

Greg.

<unk> is about 30.

Okay, Alright, great. Thank you.

Right.

Your next question comes from Shillong Rosenbalm was stifling your line is okay.

Hi, Thank you for taking my questions I was hoping you just just the first question just a little bit of just kind of the sequential gyrations. This big step up in telecom revenue in that scenario focus for Ya, Brian maybe you could talk about that and then and compare that with you know.

<unk> two large clients had a little bit of a step down and they're just like projects that are rolling in and off on there maybe just a little bit more color on that and then I have a follow up.

Oh, that's great. Thanks, so much for the questions. Yeah. So I'm telecom I mean, I guess, what I would say is we've been talking awhile about the giant wins, we've added global telecom and we're getting a lot of traction and that that's part of that business and so when we deploy a big win in telecom.

<unk> <unk> you guys, referring license other fees that we get and then there's also implementation that would come on so the big deployments in the middle in Saudi with violate the second largest we've got big global customers in South Africa, and South Pacific in Australia, and then we talked about the big one.

The Caribbean. So that's just part of the growth and the momentum building that's going on in global Telecom and then you'll see that evolves uhm, including would be helpful. Mentation revenue that gets recognized in a given quarter. So just a lot of traction in that part of the business in the in our big choose you've actually seen quite strong.

Prior to this quarter strong growth over the last couple of years in the combined too and this.

<unk> more flattish and I would say, we get evolution of some of our services. The majority of it is recurring revenue should go just get some fluctuations around that in a given quarter kind of our overall message like commented on a couple of other questions. We absolutely do believe there are big.

Cable customers can grow consistently at in the 2% to 6% range and in some quarters can be at the mid point your higher and you'll see something deviation on that.

Order out.

Okay, great. Thank you and then just according to the lower end of the free casual guidance range are you seeing your customers kind of extending the payment I don't know if I'd called terms. So maybe just paying late in the current environment or does that really just kind of a timing of milestone.

<unk> for various implementations and things like that.

Yeah. It is primarily time of your master <unk>, our customers is stupid.

Good about.

H a R that kind of it has an age you know.

The final question will come from <unk> and have lunch with Cantor Fitzgerald. Your line is at me.

Alright, Thanks for taking my question and congrats on the quarter, maybe just one gross margin I think it's kind of sit down you know.

A couple of hundred basis points year over year. All this you're kind of sequentially declined what's driving that and what should we expect on gross margin on the go forward range.

<unk> <unk>.

Basis.

The the majority of any <unk>.

Alright today right.

And in our business we have obviously.

Combination of services rather do.

<unk> <unk> <unk>, all of which have a very different profile cause. It makes a business will will drive some that that was that said you know, particularly if we look at our non telco business right out faster payments.

Payments and <unk>, they're totally.

Does ramp up yeah, that's good.

<unk> three drive greater efficiency, you know across the board is.

Lines of business, that's gonna drive up Facebook monitored expansion.

It goes much of that is also our expectation.

<unk> you know sort of the ranch does that will continue to kind of have a steady barge tours Martin.

<unk> <unk>.

Perfect understood and then just the AI front.

Talk about a lot of using it internally to make your employees more productive do you think this could be a potential driver for maybe you guys to reduce head count as this becomes more intertwined in your organization.

I think there's there's a lot of things that I think a lot of companies are looking at to be more efficient absolutely and the question is though as you continue up we can continue like we expect to do to continuously accelerate organic revenue growth that means it's gonna potentially lead to the.

<unk> account over.

So what you may see as more of a head count avoidance as opposed to a specific headcount cut because of the amount of growth where at.

<unk> do we expect it to drive improved customer service more efficient customer service more efficient sales and G&A more efficiency in our our D capabilities, absolutely across the board and we're already seeing that <unk> <unk>.

That are unleashing in all parts of the business will at least specifically the head count cats, I'd say more headcount avoidance at this stage, that's something that we can watch an update on 224.

Perfect. Thanks, guys really appreciate it.

Extra brush breath.

And the next question comes <unk> with my friends.

Capital markets. Your line is open.

Oh, yeah. Thank you and nice strong quarter here given those are nice <unk> why not race calendar twenty-three guidance.

Hello, Hope you're doing well yeah no. That's a good question like we said we talked about the guidance we loved the performance of the momentum that we're building in business and we decided to keep the guidance the same and focus on just see how we can perform to get to the top in <unk> <unk> born so we.

Do you expect to happen I think when we share some maybe color or at the end of one we said this was going to be a little different shades year. We said Q1 with a giant would look a lot cheaper would look a lot like T. One we said two three would look a lot like two two so once you saw just announced which Q3 actually came at a billion dollars.

Ahead of you to be delivered a giant Q4 last year at Q1 now what we're gonna do is is rented repeat and have two four beef those last few boards and materially and be strong to you on behalf. So I would say, we just decided we wanted to have our results.

Be better than our predictions and we just wanted to make sure that we're over cheated with what we see.

Okay, great. Thanks for the explanation.

Thanks now.

And there are no further questions at this time I will get back to Brian Sheppard C E L for closing remarks.

Alright, thanks, everyone for joining I guess, what we were saying clothes and yes, hopefully the results we've been putting out a quarter on quarter out so far this year.

Two main things we absolutely.

To execute again.

Mid single digit organic growth like clock work, that's up to us to prove was resolved not words that absolutely is what we believe we can and will continue to deliver.

There's no reason why you shouldn't go as fast or faster the top line with Greg disciplined execution and we look forward to just continue to create more value more super grateful to ever see a cheer everywhere all around the world that continues to just drink vinegar and deliver bigger and better results.

More to come in to for thanks for the time.

This concludes today's conference call you may now disconnect.

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