Q1 2024 CSG Systems International Inc Earnings Call

Operator: Good morning, my name is Dee, and I will be your conference operator today. At this time, I would like to welcome everyone to the CSG First Quarter 2024 Earnings Call. All lines have been placed on mute to prevent any background noise.

Good morning, My name is D and I will be a conference operator today at this time I would like to welcome everyone to the C. S. G. First quarter 2024 earnings call. All lines have been placed on mute to prevent any background mice. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number 1 on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. I would now like to turn the call over to John Rea, Treasurer and Head of Investor Relations. Please go ahead.

During this time simply press Star then the number one on your telephone keypad. If you would like to withdraw your question press. The pound key. Thank you I would now like to turn the call over to John <unk> Treasurer and head of Investor Relations. Please go ahead.

John: 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.

John Rea: 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 in 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 financial results, our ability to meet our clients' needs through our products, services, and performance, and 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.

John: Today's discussion will contain a number of forward looking statements. These 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 and our.

John: Our ability to successfully integrate and manage acquired businesses in order to achieve their expected strategic operating and financial goals.

John: 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.

John Rea: 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 10K and 10Q, which are all available in the investor relations section of our website.

John: In light of new or future events in.

John: 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.

John Rea: 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 8K. With me today on the phone are Brian Shepherd, Chief Executive Officer, and Hai Tran, Chief Financial Officer. With that said, I'd now like to turn the call over to Brian.

John: 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.

John: 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.

Brian A. Shepherd: With that I'd like to now turn the call over to Brian.

Brian A. Shepherd: Thanks, John. Hi everyone.

Brian A. Shepherd: Thanks, John Hi, everyone. We're glad you joined today's call as we begin on slide four <unk> got off to a good start in the first quarter of 2024 broadly in line with our expectations for the quarter for the first time in <unk> history, 30% of our revenue came from industry verticals outside the communication service.

Brian A. Shepherd: We are glad you joined today's call as we begin on slide four. Team CSG got off to a good start in the first quarter of 2024, broadly in line with our expectations for the quarter. For the first time in CSG's history, 30% of our revenue came from industry verticals outside the communication service provider space. This is a testament to our multi-year revenue diversification strategy of selling our SaaS suite of solutions into exciting industry verticals. like financial services, health care, retail, technology, and insurance.

Brian A. Shepherd: Wider space. This is a testament to our multiyear revenue diversification strategy of selling our SaaS suite of solutions into exciting industry verticals like financial services healthcare retail technology and insurance as we continued to deliver double digit organic revenue growth in our smaller but faster.

Brian A. Shepherd: As we continue to deliver double-digit organic revenue growth in our smaller but faster-growing solutions, we fully expect that our revenue diversification will expand well above this level in the quarters and years ahead. As for shareholder returns, we continue to reward shareholders in the form of dividends and buybacks. In February, we announced a 7% annual increase in our dividend and returned $9 million in dividends to shareholders in March. Additionally, we repurchased $10 million worth of stock during the quarter.

Brian A. Shepherd: <unk> solutions, we fully expect that our revenue diversification will expand well above this level in the quarters and years ahead.

Brian A. Shepherd: With respect to shareholder returns, we continue to reward shareholders in the form of dividends and buybacks in February we announced a 7% annual increase in our dividend and returned $9 million in dividends to shareholders. In March. Additionally, we repurchased $10 million worth of stock during the quarter.

Brian A. Shepherd: Over the last 12 months, we've returned over $160 million to shareholders. Looking forward, we will continue to opportunistically repurchase shares through the end of 2024 with the expectation that, at a minimum, we will buy back enough shares to offset employee stock compensation. With the opportunity to buy back more than this when we believe it will create greater shareholder value. From a financial perspective, in Q1, we delivered $295 million in revenue, generated a 16.6% non-GAAP-adjusted operating margin, and reported $1.01 in non-GAAP EPS.

Brian A. Shepherd: Over the last 12 months, we have returned over $160 million to shareholders. Looking forward. We will continue to opportunistically repurchase shares through the end of 2024 with the expectation that at a minimum we will buy back enough shares to offset employee stock compensation with the opportunity to buyback more than this.

Brian A. Shepherd: And we believe it will create greater shareholder value.

Brian A. Shepherd: From a financial perspective in Q1, we delivered $295 million in revenue generated a 16, 6% non-GAAP adjusted operating margin and reported $1 <unk> and non-GAAP EPS as we have mentioned on previous earnings calls our Q1 2023 financial.

Brian A. Shepherd: As we have mentioned on previous earnings calls, our Q1 2023 financial results included approximately $10 million in highly profitable one-time license revenue, which distorts the Q1 year-over-year growth comparison. We knew this would be the case when we issued 2024 guidance. If you normalize out the impact of this one-time license revenue from last year, our Q1 2024 organic revenue would have grown year-over-year. Also, free cash flow in Q1 was slightly softer than anticipated due to several timing-related items that I will discuss momentarily.

Brian A. Shepherd: <unk> included approximately $10 million and highly profitable onetime license revenue, which distorts the Q1 year over year growth comparison, we knew this would be the case when we issue 2024 guidance. If you normalize out the impact of this onetime license revenue from last year, our Q1 2020.

Brian A. Shepherd: For organic revenue would have grown year over year.

Brian A. Shepherd: Also free cash flow in Q1 was slightly softer than anticipated due to several timing related items by high will discuss momentarily. We continue to place a big focus on generating good free cash flow and believe the Q1 timing related items will not impact our ability to meet our original free cash flow guidance for 2020.

Brian A. Shepherd: We continue to place a big focus on generating good free cash flow and believe the Q1 timing-related items will not impact our ability to meet our original free cash flow guidance for 2024. Just as we saw in 2022 and 2023, the majority of our free cash flow was generated in the second half of the year, we expect a similar trend this year. With Q1 results broadly in line with our expectations, we are pleased to confirm all full-year 2024 guidance targets.

Brian A. Shepherd: For just as we saw in 2022 and 2023, the majority of our free cash flow being generated in the second half of the year, we expect a similar trend this year.

Brian A. Shepherd: With Q1 results broadly in line with our expectations. We are pleased to confirm all full year 2024 guidance targets our confidence in reaffirming guidance comes from the strong ongoing market demand for <unk> industry, leading SaaS products and good sales performance across all areas of our business.

Brian A. Shepherd: Our confidence in reaffirming guidance comes from the strong ongoing market demand for CSG's industry-leading SAS products and good sales performance across all areas of our business. CSG's sales pipeline is as large and healthy as ever, and we continue to win and deliver exciting new deals all around the world, thanks to our over 6,000 talented and dedicated employees. We also wanted to share two meaningful updates on our corporate responsibility journey. We were proud to issue our second annual Global Impact Report in March, which highlights what Team CSG is doing around the world to create a more sustainable future by reducing our environmental impact, supporting our communities, and fostering a culture of inclusion and belonging. Additionally, we issued our latest Carbon Footprint Greenhouse Gas Emissions Report, and we are proud to have already achieved a nearly 40% reduction in our Scope 1 and 2 emissions since 2019.

Brian A. Shepherd: <unk> sales pipeline is as large and healthy as ever and we continue to win and deliver exciting new deals all around the world. Thanks to our over 6000 talented and dedicated <unk> employees.

Brian A. Shepherd: We also wanted to share two meaningful updates on our corporate responsibility journey, we were proud to issue our second annual global impact report in March which highlights what <unk> is doing around the world to create a more sustainable future by reducing our environmental impact supporting our communities and fostering a culture of <unk>.

Brian A. Shepherd: <unk> and belong. Additionally, we issued our latest carbon footprint greenhouse gas emissions report and we are proud to have already achieved a nearly 40% reduction in our scope one and two emissions. Since 2019. This shows the excellent progress <unk> is making with the goal of reaching carbon neutrality in scope.

Brian A. Shepherd: This shows the excellent progress CSG is making with the goal of reaching carbon neutrality and Scope 1 and 2 emissions by 2035. Turning to slide five, we want to reiterate the four strategic objectives that will help CSG create greater shareholder value and allow followers of our story to track our progress. CSG 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.

Brian A. Shepherd: One and two emissions by 2035.

Brian A. Shepherd: Turning to slide five we want to reiterate the four strategic objectives. It will help CLG create greater shareholder value and allow followers of our story to track our progress.

Brian A. Shepherd: <unk> 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. The midpoint of our 2020 for revenue guidance implies an approximately 4% year over year organic growth rate, even as we faced some slight headwind.

Brian A. Shepherd: The midpoint of our 2024 revenue guidance implies an approximately 4% year-over-year organic growth rate, even as we face some slight headwinds at several of our North American cable broadband customers. We aim to add operating scale and expand our operating leverage by growing revenue to $1.5 billion by year-end 2025, with the bottom line growing as fast or faster than top-line growth. This scale will come from a combination of good organic growth combined with disciplined and organic moves.

Brian A. Shepherd: At several of our North American cable broadband customers.

Brian A. Shepherd: We aimed at operating scale and expand our operating leverage by growing revenue to $1 $5 billion by year end 2025 with bottom line growing as fast or faster than top line growth. The scale will come from a combination of good organic growth combined with disciplined inorganic moves.

Brian A. Shepherd: Our third strategic imperative is to be the number one unified communications service provider of choice for global communication service providers by providing the most value-adding technology platforms and by helping our customers make more money in the digital world. And finally, we plan to significantly diversify our revenue even more as CSG wins big in high-growth industry verticals like retail, government, financial services, health care, technology, and more. Moving to slide six, you can see that we are delivering on all four objectives.

Brian A. Shepherd: Our third strategic imperative is to be the number one SaaS provider of choice for global communication service providers by providing the most value, adding technology platforms and by helping our customers make more money in the digital world and finally, we plan to significantly diversify our revenue even more SSG wins big.

Brian A. Shepherd: And high growth industry verticals like retail government financial services healthcare technology and more moves.

Brian A. Shepherd: Moving to slide six you can see that we are delivering against all four objectives on strategic revenue growth in 2023, we reported a record setting one $1 $69 billion of revenue, resulting in seven 3% year over year growth our best full year results in nearly 20 years, taking the midpoint of.

Brian A. Shepherd: On strategic revenue growth, in 2023, we reported a record-setting $1.169 billion in revenue, resulting in 7.3% year-over-year growth, our best full-year result in nearly 20 years. Taking the midpoint of our 2024 revenue guidance implies that CSG will have consistently delivered approximately 5% annual revenue growth between 2021 and 2024, with the vast majority of this being pure organic revenue growth. On the right-hand side of slide 6, we believe that CSG's high-recurring revenue SAS business model and our strong, healthy balance sheet make us an attractive investor.

Brian A. Shepherd: 2020 for revenue guidance implies that <unk> consistently delivered approximately 5% annual revenue growth between 2021 and 2024 with the vast majority of this being pure organic revenue growth on.

Brian A. Shepherd: On the right hand side of slide six we believe the CFC is high recurring revenue SaaS business model and our strong healthy balance sheet make us an attractive investment by 2025, we aspire to gain scale in the markets, where we compete and generate $1 5 billion in annual revenue, which implies that <unk> added over $500 million.

Brian A. Shepherd: By 2025, we aspire to gain scale in the markets where we compete and generate $1.5 billion in annual revenue, which implies that CSG will have added over $500 million in profitable recurring revenue from 2020 to 2025. Over the medium to long term, we aspire to expand CSG's operating leverage and use our strong balance sheet to deliver non-gap EPS growth that meets or exceeds revenue growth. As it relates to capital deployment, Team CSG will add strategic scale with disciplined M&A that puts a premium on accelerating our organic growth, expanding our operating margins and cash generation, and creating greater shareholder value by paying the right price and extracting the expected M&A synergies inherent in the investment thesis for each acquisition that we close.

Brian A. Shepherd: <unk> recurring revenue from 2000 22025 over the medium to long term, we aspire to expand <unk> operating leverage and use our strong balance sheet to deliver non-GAAP EPS growth that meets or exceeds revenue growth.

Brian A. Shepherd: As it relates to capital deployment team <unk> will add strategic scale with disciplined M&A that puts a premium on accelerating our organic growth.

Brian A. Shepherd: Expanding our operating margins and cash generation and creating greater shareholder value by paying the right price and extracting the expected M&A synergies inherent in the investment thesis for each acquisition that we closed.

Brian A. Shepherd: On the M&A front, we're happy to share that we closed our first transaction in two years in April as we acquired a small customer engagement company that serves multiple industry verticals, including insurance. While small, this accretive deal will expand CSG's offering and customer base in the insurance sector, which is a high-priority vertical for us going forward. We believe that this M&A deal will be the first of several good accretive M&A transactions that will close in 2024.

Brian A. Shepherd: On the M&A front, we're happy to share that we closed our first transaction in two years and April as we acquired a small customer engagement company that serves multiple industry verticals, including insurance, while small this accretive deal will expand <unk> offering and customer base in the insurance sector, which is a high.

Brian A. Shepherd: High priority vertical for us going forward.

Brian A. Shepherd: We believe that this M&A deal will be the first of several good accretive M&A transactions that will close in 2024.

Brian A. Shepherd: Turning to slide seven, we had good success in our goal to be the number one technology provider of choice for communications service providers globally. We have long-term contracts with both Charter and Comcast that run through Q1 2028 and year-end 2025, respectively. And as a reminder, CSG's contractual relationship with Comcast and Charter is on a per-customer basis, which is an important distinction for us because this pricing model, combined with the tiered pricing inherent in our big customer contracts, means that any subscriber losses at our big customers have a relatively small impact on CSG's overall revenue.

Brian A. Shepherd: Turning to slide seven we had good success in our goal to be the number one technology provider of choice for communication service providers globally.

Brian A. Shepherd: We have long term contracts with both charter and Comcast the run through Q1, 2028 and year end 2025, respectively, and as a reminder, <unk> contractual relationship with Comcast and charter is on a per customer basis, which is an important distinction for us because this pricing model combined with <unk>.

Brian A. Shepherd: The tiered pricing inherent in our big customer contracts means that any subscriber losses at our big customers have a relatively small impact on <unk> overall revenue.

Brian A. Shepherd: Given the concerns about broadband subscriber losses in the cable industry, it is worth reiterating that we serve nearly 64 million combined subscribers at Comcast and Charter and nearly 80 million subscribers across all of North America's cable broadband customers. So small changes in subscriber counts do not have a meaningful impact on our business results and growth.

Brian A. Shepherd: Given the concerns about broadband subscriber losses in the cable industry. It is worth reiterating that we served nearly $64 million combined subscribers and Comcast and charter and nearly 80 million subscribers across all of North America cable broadband customers. So small changes in subscriber counts do not.

Brian A. Shepherd: <unk> have a meaningful impact on our business results and growth.

Brian A. Shepherd: It should also be noted that our two largest customers recently dropped to less than 40% of our total revenue for the first time. CSG's improving revenue diversification and 5% consistent annual revenue growth since 2021 is a testament to our success in consistently winning big, exciting new sales deals. Also, during the first quarter, we completed a successful digital CX implementation with one of the largest North American broadband providers. Specifically, we helped this customer capture significant cost savings by redesigning their monthly bill, improving their digital customer payment capabilities, and reducing billing and payment-related calls into their contact center.

Brian A. Shepherd: It should also be noted that our two largest customers recently dropped to less than 40% of our total revenue for the first time cft's improving revenue diversification and 5% consistent annual revenue growth. Since 2021 is a testament to our success and consistently winning big exciting new sales deal.

Brian A. Shepherd: Yes.

Brian A. Shepherd: Also during the first quarter, we completed a good digital CX implementation with one of the largest north American broadband providers, specifically, we helped this customer capture significant cost savings by redesigning their monthly bill improving their digital customer payment capabilities, and reducing billing and payment related calls.

Brian A. Shepherd: Into their contact center. This good cross sell win with an exciting broadband customer reinforces the benefit of our strategic product expansion beyond billing and monetization, which positions <unk> well to help thousands of enterprise customers in many industry verticals make more money with extraordinary data driven.

Brian A. Shepherd: This good cross-sell win with an exciting broadband customer reinforces the benefit of our strategic product expansion beyond billing and monetization, which positions CSG well to help thousands of enterprise customers in many industry verticals make more money with extraordinary data-driven customer experiences and integrated real-time payment solutions. Outside of North America, we continue to win more business with leading telecom companies.

Brian A. Shepherd: Customer experience and integrated real time payment solutions.

Brian A. Shepherd: Outside of North America, we continue to win more business with leading telecom companies a great highlight of the quarter with CFT closing a fantastic new sales win in Latin America with one of the largest telecommunication operators in Brazil, specifically DSG will enable their digital evolution to better serve the wireless <unk> market.

Brian A. Shepherd: A great highlight of the quarter was CSG closing a fantastic new sales win in Latin America with one of the largest telecommunication operators in Brazil. Specifically, CSG will enable their digital evolution to better serve the wireless MVNO market in the largest country in South America with our highly scalable cloud-native Ascendant platform. We also signed a good business expansion agreement with MTN, Africa's largest mobile network operator. Specifically, CSG will provide managed services support in selected divisions within MTN South Africa, including their Indian business. This project will enable MTN to speed time to market for new products and services.

Brian A. Shepherd: And the largest country in South America, with our highly scalable cloud native ascendant platform.

Brian A. Shepherd: We also signed a good business expansion with MTN Africa's largest mobile network, operator, specifically CFT will provide managed services support and selective divisions within MTN, South Africa, including the <unk> business. This project will enable MTN to speed time to.

Brian A. Shepherd: Market for new products and services.

Brian A. Shepherd: CSG also won a good new contract with BanglaLink, a leading telecom operator in Bangladesh. Team CSG was selected to help this customer optimize its wireless business by providing our modular wholesale billing and settlement solution. Drawing on previous wins in 2023 in Airtel Africa, M1, and PLDT, the BanglaLink deal also underlies CSG's increasing leadership in Asia-Pacific as telecom and wireless leaders continue to embrace customer-first digital transformation. Finally, we signed a nice new deal with one of the leading global MVNO enablers.

Brian A. Shepherd: <unk> also won a good new contract with Bangalore link and leading telecom operator in Bangladesh <unk> was selected to help this customer optimize its wireless business by providing our modular wholesale billing and settlement solutions.

Brian A. Shepherd: <unk> on previous wins in 2023, and Airtel Africa, and one in PLD T. The Bangalore linked deal also underlying <unk>, increasing leadership in Asia Pacific as Telecom and wireless leaders continue to embrace customer first digital transformation.

Brian A. Shepherd: Finally, we signed a nice new deal with one of the leading global <unk> enablers, specifically <unk> is implementing our cloud native ascend and products to enable this customer to on and off board New MVA No partners quickly and seamlessly.

Brian A. Shepherd: Specifically, CSG is implementing our cloud-native Ascendant product to enable this customer to on- and off-board new MVNO partners quickly and seamlessly. We are confident that our strong sales pipeline in the global telecom market will position CSG well to announce more exciting new logo sales wins in 2024. Turning to slide eight, since 2017, we have diversified revenue coming from exciting new industry verticals from 7% of total 2017 CSG revenue to 30% of our Q1 2024 revenue, a fantastic accomplishment in a relatively short period of time.

Brian A. Shepherd: We are confident that our strong sales pipeline and the global telecom market will position <unk> well to announce more exciting new logo sales wins in 2024.

Brian A. Shepherd: Turning to slide eight since 2017, we have diversified revenue coming from exciting new industry verticals from 7% of total 2017, <unk> revenue to 30% of our Q1 2020 for revenue.

Brian A. Shepherd: Fantastic accomplishment in a relatively short period of time as mentioned Q1 marks the first quarter were over 30% of our revenue came from industry verticals outside of CSP.

Brian A. Shepherd: As mentioned, Q1 marks the first quarter where over 30% of our revenue came from industry verticals outside of CSPs. Additionally, during the quarter, we announced a fantastic deal extension and expansion with JPMorgan Chase. Specifically, we're deploying our CSG Exponent suite of data-driven CX solutions to create a better fraud alert notification experience. Our enhanced solution eliminates the need for expensive contact center calls and creates an improved digital customer experience during an often stressful time as cardholders try to identify and recover from fraud, including digitally requesting a replacement credit or debit card.

Brian A. Shepherd: During the quarter, we announced a fantastic deal extension and expansion with J P. Morgan Chase specifically, we are deploying our <unk> exponent suite of data driven CX solutions to create a better fraud alert notification experience our enhanced solution eliminates the need for expensive contact center calls and creates.

Brian A. Shepherd: Improved digital customer experience during an often stressful time as cardholders try to identify and recover from fraud, including digitally requesting a replacement credit or debit card.

Brian A. Shepherd: Another highlight of Q1 was the excellent multi-year contract extension with Formula 1, the world's most prestigious motor racing series. Since 2018, our cloud-native, multi-channel ascendant solution has enabled Formula 1 to quickly launch new live and on-demand OTT subscription services for racing fans who want to connect with its content.

Brian A. Shepherd: Another highlight of Q1, whereas the excellent multiyear contract extension with Formula one the world's most prestigious motor racing series since 2018, our cloud native multichannel Ascendant solution has enabled formula one to quickly launch new live and on demand OTT subscription service.

Brian A. Shepherd: <unk> for racing fans, who want to connect with Formula one's content. This is another great example of how <unk> can help grow and retain our customers digital subscriber base and.

Brian A. Shepherd: This is another great example of how CSG Ascendant can help grow and retain a customer's digital subscriber base. In the payments market, we now provide award-winning payment solutions to 119,000 active merchants and ISV partners, which represents a 17,000 increase, or 17% year-over-year growth, from the 102,000 active merchants we served in Q1 2023. Our solutions are critical to customers who need ACH, credit card, payment gateway, and payment processing capabilities, serving a wide range of recurring revenue industry verticals.

Brian A. Shepherd: In the payments market, we now provide award winning payment solutions to 119000 active merchants and ISP partners, which represents a 17000 increase or 17% year over year growth from the 102000 active merchants. We served in Q1 2023.

Brian A. Shepherd: Our solutions are critical to customers who need.

Brian A. Shepherd: H credit card payment gateway and payment processing capabilities, serving a wide range of recurring revenue industry verticals. We continue to see a big growth runway for <unk> payments business, and we like our chances to accelerate our organic and inorganic revenue growth even faster.

Brian A. Shepherd: We continue to see a big growth runway for CSG's payments business, and we like our chances to accelerate our organic and inorganic revenue growth even faster through 2024 and beyond. Wrapping up on slide nine, simply put, CSG continues to execute well in our strategic vision, even as we help several of our biggest customers overcome some near-term headwinds. We continue to win fantastic new customer logos, quarter in, quarter out. We continue to innovate with industry-leading, AI-driven SaaS solutions that big brands all around the world are buying to solve some of their most pressing business challenges.

Brian A. Shepherd: Through 2024 and beyond.

Brian A. Shepherd: Wrapping up on slide nine simply put CST continues to execute well on our strategic vision, even as we held several of our biggest customers overcome some near term headwinds we continue to win fantastic new customer logos quarter end quarter out we continue to innovate with industry, leading AI driven SaaS.

Brian A. Shepherd: Solutions that big brands all around the world are buying to solve some of their most pressing business challenges. We continued to progress our revenue diversification strategy and we continue to demonstrate our determination and commitment to run our business more efficiently with consistently expanding profitability and free cash flow generation.

Brian A. Shepherd: We continue to progress our revenue diversification strategy, and we continue to demonstrate our determination and commitment to run our business more efficiently with consistently expanding profitability and free cash flow generation. We hope you see why we absolutely believe that CSG's best days and biggest breakthroughs are still ahead of us. This is also why CSGers all around the world stay hungry and customer-obsessed every single day because we know this relentless focus is what is required to create significant shareholder value in the quarters and years ahead, regardless of any near-term challenge standing in the way of Team CSG. With that said, Hai will provide more detail on our financial highlights.

Brian A. Shepherd: So we hope you see why we absolutely believe that <unk> best days and biggest breakthroughs are still ahead of US. This is also why <unk> all around the world stay Hungary and customer obsessed every single day, because we know this relentless focus is what is required to create significant shareholder value.

Brian A. Shepherd: In the quarters and years ahead, regardless of any near term challenge standing in the way of <unk> with that I will provide more detail on our financial highlights.

Hai V. Tran: Thanks, Brian. Let's walk through our Q1 2024 financial results, and then I'll wrap it up with some key conclusions. Starting on slide 11, we generated $295 million of revenue versus the $299 million we generated last year. The decrease in revenue was primarily related to the timing of approximately $10 million in high-margin revenue licensing deals signed in Q1 of 2020, which was highlighted throughout last year and temporarily distorts our revenue and profitability comparisons for the first quarter on a year-over-year basis.

Speaker Change: Thanks, Brian Let's walk through our Q1 2024 financial results and then I'll wrap it up with some key conclusions.

Brian A. Shepherd: On slide 11, we generated $295 million of revenue versus the $299 million, we generated last year.

Brian A. Shepherd: The decrease in revenue was primarily related to the timing of approximately $10 million in high margin revenue licensing deals signed in Q1 of 2023, which was highlighted throughout last year and temporarily distorts our revenue and profitability comparison for the first quarter on a year over year.

Brian A. Shepherd: Year basis.

Hai V. Tran: Our Q1 2024 non-GAAP operating income was $45 million, or a non-GAAP adjusted operating margin of 16.6%, as compared to $54 million, or 19.3%, in the prior year. Similarly, our non-gap-adjusted EBITDA was $58 million for Q1 of 2024, or 21.5% of revenue, excluding transaction fees, as compared to $67 million, or 24.3% As was the case with our year-over-year revenue performance, our Q1 2023 non-GAAP operating income, non-GAAP adjusted operating margin, and non-GAAP adjusted EBITDA were all positively impacted by the high-margin licensing revenue deals we closed, thus distorting the Q1 2024 comparison.

Brian A. Shepherd: Our Q1 2024, non-GAAP operating income was $45 million or non-GAAP adjusted operating margin of 16, 6% as compared to $54 million.

Brian A. Shepherd: Or 19, 3% in the prior year.

Brian A. Shepherd: Similarly, our non-GAAP adjusted EBITDA was 58 million for Q1 of 2024 or 21, 5% of revenue excluding transaction fees as compared to $67 million or 24, 3% in Q1 of 2023.

Brian A. Shepherd: As was the case with our year over year revenue performance. Our Q1 2023, non-GAAP operating income non-GAAP adjusted operating margin and non-GAAP. Adjusted EBITDA were all positively impacted by the high margin licensing revenue deals we closed this.

Brian A. Shepherd: Sorting the Q1 2020 for comparison.

Hai V. Tran: Excluding the impact of the $10 million in licensing deals, our non-GAAP adjusted operating income and adjusted EBITDA margin percentages would have been broadly similar to Q1 of 2020. Lastly, our Q1 2024 non-GAAP EPS was $1.01, as compared to $1.04 in the prior Q1. The decrease in non-gas EPS is mainly due to lower operating income, partially offset by positive foreign currency and share repurchases over the last 12. Turning to slide 12, I'll go through the balance sheet, our cash flow performance, and shareholder return.

Brian A. Shepherd: Excluding the impact of the $10 million in licensing deals or non-GAAP adjusted operating income and adjusted EBITDA margin percentages would have been broadly similar to Q1 of 2023.

Brian A. Shepherd: Lastly, our Q1 2024, non-GAAP EPS was $1 <unk>.

Brian A. Shepherd: Compared to $1 <unk> in the prior Q1.

Brian A. Shepherd: The decrease in non-GAAP EPS is mainly due to lower operating income, partially offset by positive foreign currency movements and share repurchases over the last 12 months.

Brian A. Shepherd: Turning to slide 12.

Brian A. Shepherd: Through the balance sheet, our cash flow performance and shareholder returns.

Hai V. Tran: Our Q1 2024 cash used in operations was $29 million, as compared to cash flow from operations of $15 million in Q1 of the prior year. And importantly, cash was generated from operations before changes in working capital in Q1 of 2024 was $52 million compared to $50 million in Q1 of 2023. Further, we had non-GAAP-free cash flow of $34 million in Q1 of 2024 as compared to $7 million of non-GAAP-free cash flow generated in Q1 of 2024.

Brian A. Shepherd: Our Q1 2020 forecast used in operation was $29 million as compared to cash flow from operations of $15 million in Q1 of the prior year.

Brian A. Shepherd: Importantly, cash flow generated from operations before changes in working capital in Q1 of 2024 with $52 million.

Brian A. Shepherd: Compared to $50 million in Q1 of 2023.

Brian A. Shepherd: Further we had non-GAAP free cash flow of $34 million in Q1 of 2024 as compared to $7 million.

Brian A. Shepherd: A non-GAAP free cash flow generated in Q1 of 2023.

Hai V. Tran: The primary drivers of the year-over-year decrease in non-CAP-free cash flow are primarily timing-related working capital movements and include, one, unfavorable changes from the Q1 2023 bonus accrual being significantly higher than the bonus accrual in both Q1 2022 and Q1 2023, and two, the timing of converting certain trade receivables into cash. As a reminder, historically, our non-GAAP Q1 free cash flow performance tends to be the low point for the year.

Brian A. Shepherd: The primary drivers of the year over year decrease in non-GAAP free cash flow are primarily timing related working capital movements and include one unfavorable changes from the Q1 2023 bonus accrual being significantly higher than the bonus accrual in both Q1 2022 and Q1 2024.

Brian A. Shepherd: And to the timing of converting certain trade receivables into cash.

Brian A. Shepherd: As a reminder, historically, our non-GAAP Q1 free cash flow performance tends to be the low point for the year.

Hai V. Tran: Furthermore, over the last five years, the vast majority of our annual non-GAP-free cash flow has been generated in the second half of the year. Moving on, we ended the first quarter of 2024 with $121 million in cash and cash equivalents. That, along with our outstanding debt at March 31st, 2024, results in $435 million of net debt, and our net debt leverage ratio sits at 1.9 times adjusted EBITDA. Further, we have approximately $570 million of liquidity as of the end of the year. Moving to the bottom right of the slide, we declared $9 million in dividends during Q1 of 2024. In addition, we repurchased $10 million in stock during Q1 under our stock repurchase program. Turning the page, we see our 2024 guidance chart. In summary, we are reiterating all 2024 targets.

Brian A. Shepherd: Further over the last five years, the vast majority of our annual non-GAAP free cash flow generated in the second half of the year.

Brian A. Shepherd: Moving on we ended the first quarter of 2024 with $121 million of cash and cash equivalents.

Brian A. Shepherd: That along with our outstanding debt at March 31, 2020 for itself and $435 million of net debt.

Brian A. Shepherd: Our net debt leverage ratio sits at one nine times of adjusted EBITDA.

Brian A. Shepherd: Further we have approximately $570 million of liquidity as of the end of the quarter.

Brian A. Shepherd: Moving to the bottom right of the slide we declared $9 million in dividends. During Q1 of 2024. In addition, we repurchased $10 million in stock during Q1 under our stock repurchase program.

Brian A. Shepherd: Turning the page a revisit our 2024 guidance targets.

Brian A. Shepherd: Summary, we are reiterating all of 2024 targets. Further we are currently forecasting our first half 2020 for revenue to make up approximately 48% of our full year revenue.

Hai V. Tran: Further, we are currently forecasting our first half 2024 revenue to make up approximately 48% of our full year revenue. Furthermore, we expect 52% of our revenue to be generated in the second half. As has been the case for the past two years, we currently anticipate our Q2 revenue being the low point of the year from a quarterly phasing perspective.

Brian A. Shepherd: While we expect 52% of our revenue to be generated in the second half.

Brian A. Shepherd: As has been the case for the past two years. We currently anticipate our Q2 revenue being the low point of the year from a quarterly phasing perspective.

Hai V. Tran: We continue to see strong demand for our solutions, and we intend to capitalize on those opportunities to realize both near-term and longer-term growth, with timing being our biggest challenge and not underlying demand. Additionally, we remain focused on generating improved profitability and actively pursuing opportunities to deliver enhanced efficiencies and operating levels. Wrapping up, CSG will continue to relentlessly prioritize every investment we make and stay disciplined in the allocation of resources and the use of capital.

Brian A. Shepherd: We continue to see strong demand for our solutions and we intend to capitalize on those opportunities to realize both near term and longer term growth with timing being our biggest challenge and not underlying demand.

Brian A. Shepherd: Additionally, we remain focused on generating improved profitability and actively pursuing opportunities to deliver enhanced efficiencies and operating leverage.

Brian A. Shepherd: Wrapping up PFG will continue to relentlessly prioritize every investment we make and stay disciplined in the allocation of resources and the use of capital.

Hai V. Tran: Innovation, including how we leverage the transformative power of AI across CSG and an adherence to a risk-reward framework with continuous learning, are key cornerstones of how we manage the business. CSG is well positioned with a strong sales pipeline and a high-quality recurring revenue customer. We remain committed to accelerating and diversifying our revenue, which may include closing and integrating value-adding acquisitions. We believe this approach, combined with our consistent capital distribution, will serve our shareholders well. With that information, I'll turn it over to the operator to facilitate the question and answer.

Brian A. Shepherd: Innovation, including how we leverage the transformative power of AI across ESG and in adherence to a risk reward framework with continuous learning our key cornerstones of how we manage the business.

Brian A. Shepherd: PSP is well positioned with a strong sales pipeline and our high quality recurring revenue customer base, we remain committed to accelerating and diversifying our revenue growth, which may include closing and integrating discipline value adding acquisitions.

Brian A. Shepherd: This approach combined with our consistent capital distribution will serve our shareholders well.

Speaker Change: With that I'll turn it over to the operator to facilitate the question and answer session.

Speaker Change: Thank you we will now begin the question and answer session. If you have dialed in and we'd like to ask a question. Please press star one on your telephone keypad duration behind and trying to queue. If you would like to join a question simply press Star. One again is that called upon to ask question and listening via loud speaker in your device.

Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask a question or are listening via the loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.

Operator: We do request for today's session that you please limit to one question and one follow-up. Again, please press star 1 to join the queue. And your first question comes from the line of Maggie Nolan from William Berg. Please go ahead.

Speaker Change: Please speak apprehend Seth illustrated your phone just not been yet when asking your question, we do request for today's session.

Speaker Change: We met the one question and one follow up again, please press star one to join the queue and your first question comes from the line of Maggie Nolan from William Blair. Please go ahead.

Margaret Marie Niesen Nolan: Thank you and congratulations nice quarter I'm wondering if you can elaborate a little more on the acquisition last month offerings. The size of that business and then expand on where you are in the process and what you're targeting with respect to the comment Brian that you made about <unk>.

Margaret Marie Niesen Nolan: Thank you and congratulations. Nice quarter. I'm wondering if you could elaborate a little more on the acquisition last month, the offerings, the size of the business, and then expand on where you are in the process and what you're targeting with respect to the comment, Brian, that you made about likely closing several more deals in 2024.

Margaret Marie Niesen Nolan: Likely closing several more deals in 2024.

Brian A. Shepherd: No, thanks, Maggie. I hope you're doing well. I appreciate you joining us. On the acquisition, it is in the customer engagement space. It serves several customers in multiple verticals, with insurance being the largest.

Speaker Change: No. Thanks, Maggie I hope Youre doing well I appreciate you joining.

Speaker Change: On the acquisition it is in the customer engagement space.

Speaker Change: Serves several customers in multiple verticals insurance is the largest this as a company we've worked with.

Speaker Change: For many years, we got to know the technology, we got to know the customer base that they serve we got to know the talent that they had and we had an opportunity to just add to our customer engagement business and offering and really build some dedicated expertise in insurance, which is a high target vertical for us.

Brian A. Shepherd: This is a company we've worked with for many years. We got to know the technology. We got to know the customer base that they serve. We got to know the talent that they had. And we had an opportunity to just add to our customer engagement business and offering and really build some dedicated expertise in insurance, which is a high-target vertical for us. So we love the team.

Speaker Change: So we love the team we loved the product expansion that we got that brings in and we love the vertical focus and as we've talked about being a disciplined acquirer. We also love. The fact that we purchased this business for a very low multiples of EBITDA relative to what we traded and so we think that there is a lot of share.

Brian A. Shepherd: We love the product expansion that we got that brings in, and we love the vertical focus. And as we've talked about being a disciplined acquirer, we also love the fact that we purchased this business for a very low multiple of EBITDA relative to what we trade at. So we think that there's a lot of shareholder value, and that's more specifically on that acquisition. So the comment we made is what we talked about on previous calls; we just saw, you know, a couple of years ago, pricing was out of whack with a lot of the sellers.

Speaker Change: Holder value that's more specifically on that acquisition. So the comment we made as we've talked about on previous calls we've just seen a couple of years ago pricing was out of whack with a lot of the sellers. We saw a lot of good deals, but not necessarily at the price point that we thought would create shareholder value and we're seeing that change and so.

Brian A. Shepherd: We saw a lot of good deals, but not necessarily at the price point that we thought would create shareholder value. And we're seeing that change. And so we do have a very active pipeline on the inorganic move side, and we're going to stay very disciplined. We've had to go back to both looking at small, mid, and larger deals. And we would anticipate that there is a reasonable likelihood that we could announce and close more deals in the coming quarters in 2024.

Speaker Change: We do have a very active pipeline on the inorganic move side and we're going to stay very disciplined.

Speaker Change: We've had to go back to both looking at small mid and larger deals.

Speaker Change: And we would anticipate that there is a.

Speaker Change: A reasonable likelihood that we could announce and close more deals in the coming quarters.

Speaker Change: 2024.

Speaker Change: Okay.

Speaker Change: Okay. Thank you and then.

Hai V. Tran: Okay, thank you. And then I have a couple of questions on the other segment. As that continues to grow, which you sounded confident that it would as a percentage of revenue, any variations in margin across the different verticals? And then do you feel like you have the structure in place to continue growing that? Or are there changes that you need to make, investments you need to make in the sales force and the way you go-to-market, et cetera?

Speaker Change: Couple of questions on that the other segments and that continues to grow which you sounded confident that it would as a percentage of revenue any variations and margin across the different verticals and then do you feel like you have the structure in place to continue growing that or are there changes that you need to.

Speaker Change: Make.

Speaker Change: Our investments you need to make in the sales force and the go to market et cetera.

Hai V. Tran: Yeah, hey Maggie, it's Hai. Thanks for the question. The margin differences are less about industry verticals but more dependent on the solutions that we go to market with. So, you know, obviously, our more SaaS-like solutions have very high margins. We're talking 70, 80%, like a traditional SaaS model would have. Services type, you know, more services-heavy solutions would be lower on a relative basis. So, with that said, you know, those customers whereby we're providing some of our CX solutions, journey orchestration solutions, or our payment solutions, they're going to tend to have much higher margins than some of our other solutions that are in the marketplace. Maybe one add-on around the margin expansion potential.

Speaker Change: Yeah, Hey, Maggie a tie.

Speaker Change: Got it thanks for the question.

Margaret Marie Niesen Nolan: The margin differences, there are less about industry verticals, but more.

Margaret Marie Niesen Nolan: Depends on the our solutions that we go to market with so obviously.

Margaret Marie Niesen Nolan: More SaaS like solutions had very high margins.

Margaret Marie Niesen Nolan: 70, 80% traditional SaaS model we have.

Margaret Marie Niesen Nolan: Services type more services <unk> solutions would be lower.

Margaret Marie Niesen Nolan: On a relative basis so.

Margaret Marie Niesen Nolan: So with that said.

Margaret Marie Niesen Nolan: Those customers, whereby we will be providing some of our CX solution journey orchestration solutions of our payment solution.

Margaret Marie Niesen Nolan: Going to tend to have much higher margins than some of our other solutions.

Margaret Marie Niesen Nolan: In the market.

Hai V. Tran: Maybe one add-on around the margin expansion potential in these businesses; we do have the scale of both digital CX and payments to significantly expand organically, drive operating leverage, and keep strong double-digit organic growth going. We do have the scale and the infrastructure to be able to handle that as we also add on acquisitions. The area that we are, and have invested in, is taking a more channel-specific approach, as we've talked about on a couple of recent earnings calls.

Speaker Change: Maybe one add on around the margin expansion potential of these businesses. We do have the scale of both digital CX and payments to significantly expand organically drive operating leverage and keep strong double digit organic growth going we do have the scale and the infrastructure to be able to.

Speaker Change: To handle that as we also add on acquisitions.

Speaker Change: Yeah that we are we have invested in us taking a more channel specific approach as we've talked about on a couple over the last several earnings calls we do a nice job with our direct sales teams, we do a nice job of cross selling upselling and land and expand but we realized that in these multi industry verticals. There is a big part.

Hai V. Tran: We do a nice job with our direct sales teams. We do a nice job of cross-selling, up-selling, and landing and expanding, but we realized that in these multi-industry verticals, there are big partners that have existing offerings, strong sales teams, big marketing budgets, so if we invest more in a channel-driven approach, it can generate and accelerate organic growth in this business. So that's one that we've done over the last several years. That is not a new investment we are going to make. That's something we've already done, and we expect it to yield dividends for the business in the coming quarter.

Speaker Change: <unk> that have existing offerings strong sales teams big marketing budget. So we invest more in a channel driven approach.

Speaker Change: Generate and accelerate organic growth in this business. So that's one that we've done over the last several years that is not a new investment we're going to make us something we've already done we expect that to.

Speaker Change: Youll.

Speaker Change: <unk> for the business in the coming quarters.

Speaker Change: Thank you.

Speaker Change: Thanks Maggie.

Speaker Change: Our next question comes from the line of charge naphtha from Jefferies. Please go ahead.

George Charles Notter: Our next question comes from the line of George Notter from Jeffries. Please go ahead.

George Charles Notter: Thank you. Thanks, Maggie. Our next question comes from the line of George Notter from Jeffries. Please go ahead. Hi guys.

Charge Naphtha: Hi, guys. Thanks, a lot I just have a few.

Charge Naphtha: Financial questions.

Charge Naphtha: The.

Charge Naphtha: I noticed that the Unbilled receivables were up a little bit sequentially I know that they are elevated relative to where they've been historically is there.

Charge Naphtha: Is there something driving that trend can you kind of talk about what that looks like and when that might step down going forward and then also I saw another hubs I guess, a step function up in stock comp expense sequentially I'm just wondering if.

Speaker Change: $18 million is kind of the right level going forward or if thats something that will step down in the future. Thanks.

Speaker Change: Yes, I think on the.

Hai V. Tran: Yeah, I think with regard to the unbuild, one of the things that we talked about was some of the larger wins that we've had on the global telco side with some large CSPs. And as we're undergoing the implementation related to those CSPs, a lot of times, the way that the contract works is that the unbuild is tied to milestones. So as we reach those milestones, we'll convert the unbuild into a kind of invoices and account receivables.

Speaker Change: With regards to the Unbilled.

Speaker Change: One of the things that we talked about is some of the larger wins, we've had on the global telco side.

Speaker Change: With large CSP and as we're undergoing the implementation related to.

Speaker Change: The CSP.

Speaker Change: A lot of times the.

Speaker Change: The way the contract works is.

Speaker Change: Unbilled is tied to milestones so as we reach those milestones will convert the unbuilt into kind.

Hai V. Tran: So that's just a timing thing. And so we're in the midst of a couple of large deployments right now, and that's what's driving up the near-term trend. Our expectation is, as we get to that back half this year into next year, it'll start to moderate. And on the question around executive...

Speaker Change: Invoices and account receivables. So that's just a timing thing.

Speaker Change: And so we're in the midst of a couple of large deployments right now and that's what's driving up the near term trend and our expectation is we get to the back half of this year into next year it will start to moderate.

Hai V. Tran: And on the question around executive-based comp, maybe we'll take that one offline. Our executive-based compensation as it relates to equity has always averaged, on a dilution basis, around $35 million in terms of where it is. We fully expect to offset that dilution in terms of where it is. So maybe we'll, you may be seeing something specifically that's different than what we expected because we haven't seen a big step up in the compensation. We paid out a little higher bonuses last year because we had a record-setting year and outperformed on all of our financial metrics, but there's not been a big step change.

Speaker Change: And other question around executive based comp maybe will take that one offline our executive based compensation as it relates to equity has always average on a dilution basis around $35 million in terms of where it is we fully expect to offset that dilution in terms of where it is so valuable.

Speaker Change: You may be seeing something specifically that's different than what because we haven't seen a big step up in the compensation, we paid out a little higher.

Speaker Change: Bonuses last year, because we had a record setting year and outperformed on all of our financial metrics, but theres not a big step change. So maybe we can dig into that in the post call.

Hai V. Tran: So maybe we can dig into that in the post-call. Got it. That works. Thanks very much. Appreciate it. Thanks, George. Now, our next question.

Speaker Change: Got it thanks very much I appreciate it.

Speaker Change: Thanks George.

Nehal Sushil Chokshi: Our next question comes from Nehal Chokshi from Northland Capital Markets. Please go ahead. Yeah, thank you, and I probably have a couple questions for you. First,

Speaker Change: Our next question comes from the line of now Chelsea from Northland Capital markets. Please go ahead.

Chelsea: Yes, Thank you and probably a couple of questions for me first.

Chelsea: Sure.

Chelsea: Can you give more detail on the headwinds that you're seeing at your North American cable operators.

Chelsea: Yes, happy to I hope you're doing well.

Brian A. Shepherd: Yeah, happy to. Hi Nehal, I hope you're doing well.

Chelsea: As we talked in some of the comments, obviously, others are seeing what some of the cable broadband are announcing and we are facing as we've talked and planned for in the first part of this year. Some smallish headwinds we've seen some tens of thousands of subscribers that have gotten that had been lost on the broadband.

Brian A. Shepherd: As we talked about in some of the comments, you know, obviously others are seeing what some of the cable broadband companies are announcing, and we are facing, as we've talked about and planned for in the first part of this year, some smallish headwinds. We've seen some tens of thousands of subscribers that have gone, that have been lost on the broadband side and on the total customer side as a result, and we're feeling some smallish impact of that, as anticipated.

Chelsea: And on the total customer side in that and we're feeling some smallish.

Brian A. Shepherd: It's kind of as we thought it would be, and we anticipate, as I think a lot of people might have heard from some of the cable broadband customers, that that's likely to continue into Q2 and Q3.

Chelsea: That as anticipated, it's kind of as as we thought it would be and we anticipate as I think a lot of people might have heard from some of the cable broadband customers, but that's likely to continue into Q2 and Q3.

Chelsea: On a longer term basis.

Brian A. Shepherd: On a longer-term basis, we do anticipate, having worked with these customers for a long time, that there's likely to be a longer-term competitive response. We like where they're positioned with their networks. We like where they're positioned with their customer base. We're mission critical.

Chelsea: We do anticipate having work with these customers for a long time that there's likely to be a longer term competitive response, we like where they're positioned with their networks, we like where we're positioned with their customer base, where mission critical we're doing a lot to try to help them in some of those areas where they can continue to perform well we also see that that boat.

Brian A. Shepherd: We're doing a lot to try to help them in some of those areas where they can continue to perform well. We also see that both Comcast and Charter are adding two to three percent more homes every year. We think that could actually help reverse some of these trends, but we are seeing smallish headwinds, as has been reported. Great. And then there's a different question here.

Brian A. Shepherd: Comcast and charter are passing 2% to 3% more homes every year, we think that could actually help reverse some of these trends, but we are seeing smallish headwinds as as has been reported.

Brian A. Shepherd: Great and then different question here.

Nehal Sushil Chokshi: Did the CF and payments business and aggregate grow at least double digits for the March quarter? Yes, the combined of those two did have a strong double-digit growth rate in Q1 that continued from last year. We like what we're seeing in the sales pipeline. We like what we're seeing in the close and win rate. We like the conversion and adoption as we bring that revenue on board, and we really like what we're seeing in those combined solution units. And just to be clear, is that

Nehal Sushil Chokshi: Did the CF some payments business in aggregate grow at least double digits for the March quarter.

Nehal Sushil Chokshi: Yes, the combined of those two did have a strong double digit growth business in Q1 that continued from last year, we like what we're seeing in the sales pipeline, we like what we're seeing on the close in win rate, we like the conversion and the adoption as we bring that revenue on board and we really like what we're seeing.

Nehal Sushil Chokshi: And those those combined solution units.

Nehal Sushil Chokshi: And just to be clear does that.

Nehal Sushil Chokshi: Including or excluding the year ago 10 million software.

Nehal Sushil Chokshi: Onetime revenue recognition.

Brian A. Shepherd: So the 10 million non-recurring software licenses were not in the CX or payments business, so the double-digit organic growth would exclude that.

Chelsea: So the $10 million.

Chelsea: Nonrecurring.

Brian A. Shepherd: Software licenses were not in the CX or payments business, so double digit organic growth with exclusive.

Speaker Change: Excellent. Thank you very much.

Speaker Change: Thanks Dale.

Brian A. Shepherd: Okay.

Matthew Joseph Harrigan: Our next question comes from the line of Matthew Harrigan from Benchmark. Please ask your question.

Brian A. Shepherd: Our next question comes from the line of Matthew Harrigan from benchmark. Please ask your question.

Matthew Joseph Harrigan: Thank you I was curious when you look at this.

Matthew Joseph Harrigan: Thank you. I was curious when you look at the CX business and companies like JP Morgan, you know, financial supermarkets, I mean, there's vast room, I'm sure, for an expansion of your relationship, and you've got, you know, logos across quite a number of verticals. Could you say roughly what's the breakout on the growth there between existing customers and Novo customers? And when you look at, obviously, fraud engagement is top of mind everywhere, you know, these days with AI, you know, working on both sides.

Matthew Joseph Harrigan: Business, new companies like Jpmorgan financial supermarkets, I mean is that the room I'm sure an expansion of your relationship and you've got new logos across quite a number of verticals.

Matthew Joseph Harrigan: You say roughly what's the breakout on the grow there between existing customers and Lenovo customers and when you look at obviously broad engagement with top of mind everywhere. These days with.

Matthew Joseph Harrigan: How readily could you take, you know, JP Morgan, I mean, obviously, HSBC just pulling a name because they've been in the news? How hard is it to just port that over to a new financial company? And are there any restraints in terms of kind of applying the same, the learnings you have at JP Morgan, at another bank? Because it does seem like there's a big opportunity there. And maybe if you could hone in specifically on how AI is particularly benefiting the fraud business? Because clearly, that's kind of a spy versus spy thing to go back to, I guess, last reference to Mad Magazine, probably in Wall Street Yeah, quite a bit.

Matthew Joseph Harrigan: They are working on on both sides.

Matthew Joseph Harrigan: Readily could you take Jpmorgan, obviously HSBC the pooling.

Brian A. Shepherd: Quite a few there. Let me unbundle those, Matt.

Brian A. Shepherd: And a new.

Brian A. Shepherd: How hard is it to port that over to a new financial.

Brian A. Shepherd: And are there any.

Brian A. Shepherd: Restraints insurance accounting apply machine learning you have at JP Morgan.

Brian A. Shepherd: At another because of that.

Brian A. Shepherd: It does seem like there's a big opportunity there and maybe if you could hone in specifically on how AI is particularly benefiting the fraud business because clearly that's kind of the fibers in supply.

Brian A. Shepherd: They go back to.

Brian A. Shepherd: Last reference to.

Brian A. Shepherd: Mad magazine, probably in Wall Street history on the conference call.

Speaker Change: You go.

Brian A. Shepherd: I really appreciate it and love some of the questions and appreciate you joining us. So in CX, first, we're having a lot of success once we've penetrated accounts on the land expand and all the bids. And that is generating the vast majority of the growth, which is fantastic to see. The nice thing on the sales logo side is that we've had good penetration and good success. But what we realized going back to about Q2 of last year was that we just don't have the same brand awareness in all these other verticals.

Brian A. Shepherd: Quite a few there let me unbundle those bad but it really appreciated love some of the questions and appreciate you joining so in CX first we're having a lot of success.

Brian A. Shepherd: Once we penetrated accounts on the land and expand it all the bits and that has generated the vast majority of the growth which is fantastic to see the nice thing on the sales logo side. We've had good penetration a good success, but what we realized going back to about Q2 of last year was we.

Brian A. Shepherd: Had a big we just don't have all the same brand awareness and all these other verticals and so by switching to a more of a channel partner led new logo sales on <unk>, we could average actually leverage the sales force the marketing relationships and do more so we're now about three quarters into that investment in channel and it.

Brian A. Shepherd: And so by switching to more of a channel partner-led new logo sales hunting, we could actually leverage the sales force, the marketing relationships, and do more. So we're now about three quarters into that investment in the channel, and it's starting to bear fruit.

Brian A. Shepherd: We've got dozens of channel partners in different verticals that have both consulting systems integration and, in some cases, products that they can attach our platform to and pull us into. And we think that's going to contribute extremely nicely to adding and accelerating the new logo growth. But today, it's been more on the expansion side, because once we can get in for $200,000 to $500,000 price points with either as an infrastructure platform play or just solving one, two use cases that are high priority for these different verticals, and then expand to dozens of use cases over time. So the expansion is really exciting.

Brian A. Shepherd: Going to bear fruit, we've got dozens of channel partners in different verticals that have both consulting systems integration in some cases products that they can attach our platform two and pull us into and we think that's going to contribute extremely nicely to adding in accelerating the new logo growth, but today, it's been more on.

Brian A. Shepherd: The expansion sites because once we can get in for 200 to $500000 price points with either as an infrastructure platform play or just solving one two use cases that are high priority for these different pulse and then expand to dozens of use cases over time. So the expansion is really.

Brian A. Shepherd: Getting specifically on the fraud Youre right.

Brian A. Shepherd: Specifically on fraud, you're right. And it's in financial services, but not just. One of the first AI products we brought to market was an AI fraud detector in our payment space. And that's helping merchants reduce the risk of fraud, identify it sooner, and actually find ways to continue to make more money on that side. We see fraud detection on the network side of telecom operators, where we can use AI with some of our network monitoring capabilities to identify when there might be fraud in the wholesale or roaming side of the global telecom market.

Brian A. Shepherd: In financial services, but not just one of the.

Brian A. Shepherd: First AI products, we brought to market was an AI fraud detect in our payment space and thats, helping merchants reduce the risk of fraud identify it sooner and actually find ways to continue to make more money on that side, we see broad detect in the network side of telecom operators, where we can use AI with some of our network.

Brian A. Shepherd: Monitoring capabilities to identify when there might be fraud in the wholesale or roaming side of the global Telecom market and then obviously, we said just like you said with the great use case.

Brian A. Shepherd: And then obviously, we see it, just like you said, with the great use case. We have had and expanded our relationship with JPMorgan Chase, and financial services is one of our top four or five verticals. So obviously, we've got quite a few customers. We announced an exciting win with one of the largest banks and financial services companies in Australia, where we deployed or sold Ascendant last quarter. We think that there are a lot of opportunities across both monetization and in the digital CX space related to fraud and other use cases they have. So we think that'll continue. That is a high priority, as you rightfully point out.

Brian A. Shepherd: Have had and expanded our relationship with JP Morgan Chase and financial services is one of our top four or five vertical. So obviously, we've got quite a few customers, we announced an exciting win with one of the largest <unk>.

Brian A. Shepherd: Banks and financial services companies in Australia, we'll redeploy the ascendant or sold ascended last quarter, we think that theres a lot of opportunities across both monetization and in the digital CX space related to fraud and other use cases. They have so we think that will continue that as a high priority as you rightfully called out.

Speaker Change: Great. Thank you.

Speaker Change: Thanks Pat.

Brian A. Shepherd: Our next question comes from the line of Dan Bergstrom from RBC capital markets. Please go ahead.

Michael H. Berg: Our next question comes from the line of Don Bergstrom from RBC Capital Markets. Please go ahead.

Brian A. Shepherd: Hey, thanks for taking our questions. See, on the international opportunity, you called out deals in Bangladesh, Brazil, and South Africa this quarter in the prepared remarks, impressive reach and in disparate geographic areas. I guess, what are some keys to driving this wide reach? Are they partners like you've referenced a few times in Q&A here, reference customers, just simply your solutions really responding with customers no matter what the location?

Michael H. Berg: Hey, Thanks for taking our question say on the international opportunity you called out deals in Bangladesh, Brazil, South Africa this quarter in the prepared remarks.

Brian A. Shepherd: Crescive reach and in disparate geographic areas I guess, what are some keys to driving this wide reach as a partners like you've referenced a few times in Q&A here reference customers just simply your solutions really resonating with customers.

Brian A. Shepherd: Matter what the location.

Speaker Change: Yes, Hi, Dan appreciate your joining thanks for the question. We have first we serve hundreds of global telecom operators all around the world. We have a global footprint of sales account management teams that have worked with a large a lot of these large operators. So a lot of that is a direct sales model and we have teams.

Brian A. Shepherd: Yeah, no, hi again, I appreciate you joining us. Thanks for the question. We have, first, we serve hundreds of global telecom operators all around the world. We have a global footprint of sales and account management teams that have worked with a lot of these large operators. So a lot of that is a direct sales model, and we have teams co-located in many cases all around the world, in South Africa, in India, in Southeast Asia, in Europe, in the US.

Brian A. Shepherd: Co located in many cases, all around the world in South Africa, and India, Southeast Asia, and Europe, and the U S and part of that to be honest is a trend we've seen and we bet on going back five or six years ago, where we felt like the cost and complexity that the global telecom operators have always had.

Brian A. Shepherd: And part of that, to be honest, is a trend we've seen and bet on going back five or six years ago, where we felt like the cost and complexity that the global telecom operators always had were not sustainable. We saw price commoditization for consumer and enterprise. We saw the big investments they had to make in their networks and moving to 5G, soon to be 6G, and it wasn't sustainable.

Brian A. Shepherd: That was not sustainable we saw that price commoditization on consumer and enterprise, we saw the big investments they had to make in their networks and five moving to five Jamie soon to be <unk> and it wasn't sustainable and so we what we lead with was a product based approach often SaaS, where we could actually help them.

Brian A. Shepherd: And so what we led with was a product-based approach, often SaaS, where we could actually help them simplify their business processes, simplify their tech stack, become more digital, and take costs out of their business. And the reality is, we had success in markets outside the US and Western Europe, where they were feeling the most economic pressure. And now, what are we seeing happen five or six years later? We're seeing Western Europe and the Nordics have the same economic pressure.

Brian A. Shepherd: <unk> their business process simplify their tech stack become more digital take cost out of their business and the reality is we had success in the markets outside the U S and Western Europe, where they were feeling the most economic pressure and now what are we seeing happened five or six years later, we're seeing western Europe and Nordics have the same.

Brian A. Shepherd: Economic pressure, we're seeing the middle east to have that pressure, we're seeing that pressure in the north American market as charter and Comcast take wireless subs from the U S players and vice versa on the broadband side, so that competitive dynamic we think actually plays to our long term strength of not being a service based business model, but SaaS.

Brian A. Shepherd: We're seeing the Middle East have that pressure. We're seeing that pressure in the North American market as Charter and Comcast take wireless subs from US players and vice versa on the broadband side. So that competitive dynamic, we think, actually plays to our long-term strength of not being a service-based business model but a SaaS and a product. And we expect to continue to win business and drive economic value for those large operators all around the world and in the US and Western Europe.

Brian A. Shepherd: At a product and we expect to continue to win business and drive economic value for those large operators all around the world and in the U S and Western Europe.

Brian A. Shepherd: That's very helpful. Thank you and then you mentioned AI in the Q&A here on the previous question.

Michael H. Berg: That's very helpful. Thank you. And then you mentioned AI and the Q&A here on the pre-disc question. Obviously, a focus for everybody. Could you build out or talk a little bit more about some of the reception or thoughts around the pipeline build for some of those AI infused products you introduced over the back half of last year? Yeah, I mean, I think

Michael H. Berg: Obviously, a focus for everybody just could you build out the.

Michael H. Berg: Talk a little bit more about some of the reception or thoughts around the pipeline build for some of those.

Michael H. Berg: AI infused products introduced over the back half of last year.

Brian A. Shepherd: We've actually won and closed several deals. Like a lot of our digital CX, though, these are use cases that can deploy $200,000 to $400,000 to $500,000 annual ACV kinds of sales deals. So they're not for big ticket items.

Brian A. Shepherd: Yeah. I mean, I think everybody's doing a ton with their strategy. So first, as it relates to selling more, building it into our offerings, we have taken our digital CX has always been a data-driven solution. Journey analytics, journey orchestration, started more with machine learning and using conversational AI in the early days, and now building in where it makes sense, generative AI. We launched the BillExplainer.ai solution. We've got dozens of sales candidates.

Michael H. Berg: Yes.

Brian A. Shepherd: I think everybody is doing a ton in their strategy. So first as it relates to selling more building it into our offerings. We have taken our digital CX has always been a data driven solutions journey analytics journey orchestration started more with machine learning and using conversational AI.

Brian A. Shepherd: In the early days and now building and where it makes sense.

Brian A. Shepherd: Degenerative AI, we launched Ed Bill Explainer data AI solution, we've got dozens of sales candidates. We've actually won and closed several deals like a lot of our digital CX. Though these are use cases that can deploy 200 to 400 to $500000 annual ACB.

Brian A. Shepherd: Of sales deals so they're not for big ticket items, you can get and bring the cash register reduce cost helped drive revenue and offset some of the pressure. They are feeling and then you can expand off of that so we're seeing nice adoption there in the payment side I would say, it's not quite double digit, but we are seeing good take up.

Brian A. Shepherd: You can get in, ring up the cash register, reduce cost, help drive revenue, and offset some of the pressure they're feeling, and then you can expand off of that. So we're seeing nice adoption there. On the payment side, I would say it's not quite double digit, but we are seeing good take-up and interest in the AI fraud detection solution. And it's also getting bundled into a broader sale of improved AI-driven fraud detection, which can just improve your merchant experience and reduce the risk to their financial side.

Brian A. Shepherd: And interest in the AI fraud intact solution and it's also getting bundled into a broader sale.

Brian A. Shepherd: Improved AI driven fraud detection and just improve your merchant experience and reduce the risk to their financial side and so I think we're seeing good adoption, but it's less a specific buy decision more of a core capability that we need to have in the telecom side I'd say, it's there, but it's still early.

Brian A. Shepherd: And so we're seeing good adoption, but it's less a specific buy decision and more of a core capability that we need to have. On the telecom side, I'd say it's there, but still early. Our approach is not to build large language models.

Brian A. Shepherd: Our approach is not to build large language models, we want to leverage the hyperscale or infrastructure around AI, which we've done in many cases, we want to leverage the capability of our platform and in many cases, we let our customers leverage their own large language models or ones they partner with.

Brian A. Shepherd: We want to leverage the hyperscalers infrastructure around AI, which we've done in many cases. We want to leverage the capability of our platform. And in many cases, we let our customers leverage their own large language models or ones they partner with so that we can actually speed the adoption.

Michael H. Berg: So we like what we're seeing in the early days, but I would say we're still in the early days of having a bigger impact on our overall revenue. That's great. Thank you. Thanks, Dan. Our next question comes from the line...

Brian A. Shepherd: We can actually see the adoption so we like what we're seeing.

Speaker Change: In the early days, but I would say we're still in the early days of having a bigger impact on our overall revenue.

Speaker Change: That's great. Thank you.

Speaker Change: Thanks, Dan.

Brett Knoblauch: Our next question comes from the line of Brett Knoblauch from Cantor Fitzgerald. Please answer your question.

Michael H. Berg: Our next question comes from the line of Brett Knoblauch from Cantor Fitzgerald. Please ask your question.

Speaker Change: Hi, guys. This is <unk> on for Brett.

Tommy Shinski: Hi guys, this is Tommy Shinski on for Brett.

Tommy Shinski: I guess just on free cash flow I know it was talked about a bit in the call, but coming in a little light on the quarter can you just elaborate on what gives you the confidence in our full year target.

Tommy Shinski: Yes, certainly.

Hai V. Tran: Yeah, certainly. As I mentioned, what we expect this year, unlike last year because of the nature of those licenses in Q1, is we expect a year that builds fairly normally, where profitability and revenue kind of grow throughout the year. And as that happens, it will slow down to benefit our cash flow performance. On top of that, we'll also see some working capital elements that revert through the year as well.

Hai V. Tran: No.

Hai V. Tran: <unk>.

Hai V. Tran: As I mentioned, when we but we expect this year. Unlike last year because of the nature of those licenses in Q1, as we expect a year that builds fairly normally where profitability and revenue kind of grows throughout the year.

Hai V. Tran: And as that happens it will flow down to benefit our.

Hai V. Tran: Our cash flow performance on top of that we'll also see is some working capital element that reverse through the year as well so one of the things that.

Hai V. Tran: So one of the things that we saw in Q1 was because we had an extraordinarily strong year last year. Brian talked about the fact that we had, you know, and I highlighted in the fair remarks, we had an incentive comp payout that was fairly robust, and that impacts our Q1 more dramatically on a comparative basis. And then lastly, as you saw last year, we were able to generate a very strong fourth quarter of roughly $74 million in free cash flow.

Hai V. Tran: That we saw in Q1 was because we had an extraordinarily.

Hai V. Tran: Strong.

Hai V. Tran: Our year last year, Brian talked about the fact that we had.

Hai V. Tran: I highlighted in the prepared remarks.

Hai V. Tran: Incentive comp payout that was fairly robust and that impacts our Q1 more dramatically on a comparative basis.

Hai V. Tran: Then lastly, as you saw last year, we were able to generate a very strong fourth quarter of roughly $74 million of free cash flow.

Hai V. Tran: You know, I think that we've got, you know, we have a good idea of how to drive some of those improvements and working capital, as we learned throughout last year. And so our expectations are that Q1 is the low point here. We'll begin to build it kind of, little by little, in Q2. Q3 will show greater momentum, and then Q4 should be comparable to last year.

Hai V. Tran: I think that we've got we have a good idea of how to drive some of those improvements in working capital as we learned throughout last year.

Hai V. Tran: So our expectation is Q1 is a low point here, we'll begin to build it kind of little by little in Q2, Q3 will show greater momentum in Q4 should be comparable to last year.

Speaker Change: Awesome. Thanks, congrats on the solid quarter.

Speaker Change: Thank you.

Shlomo H. Rosenbaum: Our next question comes from the line of Slomo Rosenbaum from Stiefel. Please go ahead.

Hai V. Tran: Our next question comes from the line of Shlomo Rosenbaum from Stifel. Please go ahead.

Shlomo H. Rosenbaum: Hi, Thank you for taking my questions just wanted to dig a little bit more on the acquisition side that small acquisition noted in CX.

Shlomo H. Rosenbaum: Hi, thank you for taking my questions. Just want to dig a little bit more on the acquisition side. That small acquisition noted in CX with insurance, is it purchasing vertical expertise, or is there some CX capability that they have that's more foundational? If you could just expand a little bit on that.

Shlomo H. Rosenbaum: With insurance is it.

Shlomo H. Rosenbaum: Purchasing vertical expertise or is there some CX.

Shlomo H. Rosenbaum: Capability that they have that's more foundational.

Shlomo H. Rosenbaum: Could just expand a little bit on that.

Brian A. Shepherd: Yeah, hey Shlomo, I hope you're doing well. Thanks for joining us. This one, they have a great team, they have great industry expertise. This one was less about buying a strategic capability that could really move the ball forward, and we could do a lot of cross-sell on a platform. This one was an opportunity to bring a great customer base, a group that we had worked with and done a lot with in the past, at a great financial price.

Speaker Change: Yes, Shlomo hope you're doing well thanks for joining this one they have a great team. They have great industry expertise. This one was less about buying a strategic capability that could really move the board that we can do a lot of cross sell of the platform. This one was an opportunity to bring a gray.

Brian A. Shepherd: Customer base, a group that we had worked with and done.

Brian A. Shepherd: Along with in the past at a great financial price I wouldn't say that there was no benefit to the value we picked up but it was on the low side that wasn't the main driver I think there's other acquisitions that you might end up seeing us announce this year that would have a much more strategic product solution fit that would expand our <unk>.

Brian A. Shepherd: I wouldn't say that there was no benefit to the value we picked up, but it was on the low side. That wasn't the main driver. I think there are other acquisitions that you might end up seeing us announce this year that would have a much more strategic product solution fit that would expand our product portfolio or extend our platform and drive a lot more cross-sell or up-sell, but that one wasn't the main driver and the one we announced that we closed in the quarter.

Brian A. Shepherd: <unk> portfolio or extend our platform and drive a lot more cross sell or up sell but that one wasn't the main driver and the one we announced that we closed in the quarter.

Brian A. Shepherd: Okay, thank you. And then just continuing on the acquisition side, the language on slide five seems to have been tweaked a little bit, that getting to $1.5 billion is by the end of fiscal year 25. Could you just comment on, you talked a little bit about the M&A environment, the pricing seemed to be starting to go down. Can you talk about the potential and the willingness to use equity to consummate some of the, you know, potentially larger strategic deals?

Speaker Change: Okay. Thank you and then just continue on the acquisition side of the language on slide five seems tweaked a little bit that getting to one 5 billion is.

Brian A. Shepherd: By the end of fiscal year 'twenty five.

Brian A. Shepherd: Can you just comment on.

Brian A. Shepherd: You talked a little bit about the M&A environment.

Brian A. Shepherd: Things seem to go starting to go down can you talk about the potential and the willingness to.

Brian A. Shepherd: Use equity to consummate some of the potentially larger strategic deals.

Brian A. Shepherd: Yeah, no, it's an interesting question. I'll unbind and Hai, if you want to jump in. So by and large, first, as we've talked about in our liquidity, we've got a lot of firepower and a super healthy balance sheet. We do not need to use equity in deals, and we wouldn't expect to for small, mid, and other kinds of opportunities. If there was an obvious, if we felt like our equity was undervalued, and obviously, with our share buyback and what we're doing, you can see what we've done in terms of returning capital, we wouldn't necessarily want to do a deal if we felt like our equity was undervalued because we want to have a good return on that in terms of where it is.

Speaker Change: Yeah, No. It's an interesting question odd minded high if you want to add jump in so by and large first as we've talked about in our liquidity. We've got a lot of firepower to super healthy balance sheets, we do not need to use equity in deals and we wouldn't expect to for small mid other kinds of opportunities. If there was and obviously if we.

Brian A. Shepherd: Felt like our equity is undervalued and obviously with our share buyback and what we're doing you can see what we've done in terms of returning we wouldn't necessarily want to do a deal. If we felt like our equity was undervalued because we want to have.

Brian A. Shepherd: Good return on that in terms of where it is if there was a bigger deal and there was an opportunity to do something strategic where we could really transform structure of industry, where there was an opportunity to really made maybe change in and give us more competitive advantage that could really turbocharge EBITDA EBITDA expansion.

Brian A. Shepherd: If there was a bigger deal, and there was an opportunity to do something strategic, where we could really transform the structure of the industry, where there was an opportunity to really maybe change and give us more competitive advantage, that could really turbocharge EBITDA expansion.

Hai: Strategic scale would we say never no we would never take any option off the table, but that wouldn't be our first what we'd be looking at given kind of where we are today and the kinds of opportunities that are more near term actionable, but high what else would you add to that no I think that's right I think the key messages.

Hai V. Tran: I think the key message is we're not going to try to utilize our equity if we believe we're undervalued. And that is ultimately what we're going to have to assess, kind of like a game day decision when we look at the outcome.

Hai V. Tran: We're not going to try to utilize our equity if we believe we are undervalued and that is ultimately what we're going to have to assess kind of almost a game day decisions. When we look at the opportunities.

Speaker Change: Thank you.

Speaker Change: Thanks Shlomo.

Hai V. Tran: Our next question comes from the line of Tim Horan from Oppenheimer. Please go ahead.

Timothy Kelly Horan: Our next question comes from the line of Tim Horan from Oppenheimer. Please go ahead.

Timothy Kelly Horan: Thanks guys, just following up on that. Could you give us a sense of how much you plan on spending in cash on acquisitions over the next few years to kind of hit that target out there?

Timothy Kelly Horan: Thanks, guys just following up on that could you give us a sense of how much you plan on spending and cash on acquisitions. The next few years to kind of hit that target out there.

Speaker Change: I think I think that.

Hai V. Tran: I think, you know, I think that the answer that's unsatisfactory is that it just depends, right, depends on the type of assets that are available. And certain assets will yield or require a higher multiple than others. But we do, as Brian said, have quite a bit of liquidity as we sit here today, roughly $570 million in cash in our credit facility. So, you know, it just depends. But we are working hard to make sure we're finding opportunities that are truly accretive right out of the gate or shortly thereafter as we're able to realize some of the synergies that are baked into any sort of valuation.

Hai V. Tran: The answer this unsatisfactory as it just depends right defense and the type of assets that are available.

Hai V. Tran: And in certain assets will move.

Hai V. Tran: <unk> yield or require a higher multiple than others. So we do as Brian said have a quite a bit of liquidity as we sit here today roughly $570 million in cash and our.

Hai V. Tran: In our credit facility.

Hai V. Tran: So so it just depends but we are working hard to make sure. We're finding opportunities that are truly accretive right.

Hai V. Tran: Right out of the gate or shortly right out of the gate as we're as we're able to realize some of the synergies that baked into any sort of valuation case.

Speaker Change: Yes, no I was not looking for specifics.

Hai V. Tran: Yeah, no, I was not looking for specifics, just, you know, overall and average. I mean, are we looking to spend like three, four hundred million to hit that type of target? Or is it, you know, one or two hundred million on the 1.5 billion? Yeah.

Hai V. Tran: Overall, an average I mean, we're looking to spend like three or $400 million hit that type of target or is it one or $200 million.

Hai V. Tran: On the $1 5 billion.

Timothy Kelly Horan: Yeah, I mean, think about it this way, right, and we're going to have to acquire roughly $250 million in revenue, right? So, depending on the mix, right, if the $250 million in revenue that we acquire has more CX or payments in there, it's going to require a higher multiple, right? If it's going to be more in our traditional revenue monetization, then the valuation multiple will be more akin to kind of where we're trading at, right? So, those are some of the considerations.

Speaker Change: Yes, I mean think about it this way Randy we're going to have to acquire roughly $250 million in revenue right. So.

Timothy Kelly Horan: Depending on the on the mix.

Timothy Kelly Horan: If the $250 million of revenue that we acquire hedge more CX or payments in there it's going to require a higher multiple right. If it's going to be more in.

Timothy Kelly Horan: Our traditional revenue monetization.

Timothy Kelly Horan: Then the valuation multiple will be more akin to kind of where we're trading at right. So those are some of the considerations.

Timothy Kelly Horan: Got it. And then, um, can you give a little bit more color on the different segment revenue breakdown for the year? And I guess just specifically, you know, broadband obviously is under some pressure. Do you think you can grow that revenue line item this year, or what are you kind of assuming in your guidance? Or, um, and do you think it'll worsen here? Because it seems like the cable guys are, you know, about to come under a lot more pressure in the next six months, nine months or so.

Speaker Change: Got it and then.

Timothy Kelly Horan: Can you give a little bit more color on the different segment revenue breakdown for the year and I guess, just specifically broadband obviously was under some pressure do you think you can grow that revenue line item. This year or what are you kind of assuming in your guidance or.

Timothy Kelly Horan: And do you think it will worsen here because it seems like the cable guys are about to come under a lot more pressure in the next six months nine months or so.

Timothy Kelly Horan: Yeah, no, I think you said it, Tim, and that's why we refer to and use the language. We're feeling some smallish headwinds as it relates to broadband and some of that on the North American cable side based on the earnings calls we listened to from some of our customers last week. I think the general tone is you'd expect that to continue kind of through the next couple quarters, and I think there will be some impact on that.

Timothy Kelly Horan: Yeah, No I think you said, Tim and that's why we referred to and use the language, we're feeling some smallish headwinds as it relates to broadband and some of that on the North American sites based on the earnings calls we've listened to some of our customers last week I think the general tone as you'd expect.

Timothy Kelly Horan: That to continue kind of into through the next couple of quarters and I think there will be some impact on that that's that's been built into our plan, we had coming into the year, it's kind of as expected and we anticipate facing that which is why we're excited that the other parts of our business are growing even faster to offset.

Timothy Kelly Horan: That's been built into our plan. We had that in mind coming into the year. It's kind of as expected, and we anticipate facing that, which is why we're excited that the other parts of our business are growing even faster to offset some of those headwinds. Next year, I think, next year could be a different equation, right, with the homes passed with competitive response. We don't necessarily believe at this stage that it's a foregone conclusion that those headwinds will continue into next year, but for the next quarter or two, for sure, we're anticipating there'll be some smallish headwinds.

Timothy Kelly Horan: Some of those headwinds next year I think.

Timothy Kelly Horan: Next year, it could be a different equation right with the homes passed with competitive response.

Timothy Kelly Horan: Yes.

Timothy Kelly Horan: We don't necessarily believe at this stage, but it's a foregone conclusion that those headwinds would continue into next year, but for the next quarter or two for sure we're anticipating there'll be some smallish headwinds.

Timothy Kelly Horan: Okay.

Brian A. Shepherd: And is there any product you can upsell to improve your ARPU, basically to help the cable guys get more efficient? You know, your ARPU is relatively low. I know you're doing kind of a modest few things for them, but, you know, with AI and a whole bunch of the other products that you have, do you see any way to upsell to make them more efficient? Yeah, I mean, first of all, I think they're doing a lot.

Timothy Kelly Horan: Or is there much products you can upsell to improve your <unk>.

Brian A. Shepherd: Basically to help the cable guys get more efficient.

Brian A. Shepherd: Europe, who is relatively low I know youre doing kind of a modest few things for them, but with AI and a whole bunch of the other products that you have do you see any way to upsell that make them more efficient.

Brian A. Shepherd: Yeah, I mean, first of all, I think they're doing a lot in their own right to continue to be efficient, drive improved CX, and we try to do our part to help them with that. But I think the biggest opportunity both for North American cable customers and global telecom is on the digital CX side. And a lot of our early success with our journey analytics and journey orchestration platform was in those other verticals. And now we've really, it was one of the top two topics at Mobile in Congress this year, and last on the global telecom, was all around, how do we simplify our business? How do we drive digital CX?

Speaker Change: Yes, I mean first I think theyre doing a lot in their own rights to continue to be efficient drive improved CX and we try to do our part to help them with that but I think the biggest opportunity both in North American cable customers and global Telecom is on the digital side and a lot of our success with our journey.

Brian A. Shepherd: Analytics toward the orchestration platform within those other verticals and now we've really it was the top.

Brian A. Shepherd: One of the top two topics at mobile World Congress This year and last on the global Telecom was all around how do we simplify our business how do we drive digital CX. It's also true of the North American cable customers. That's why we've targeted things around AI.

Brian A. Shepherd: It's also true of North American cable customers. That's why we've targeted things around AI driven sales assistance to cross sell to their customers. It's why we've rolled out BillExplainer.ai, which has a huge impact. We used digital CX use cases around promo roll-off because a big part of churn comes when somebody, a subscriber, rolls off, maybe their introductory price period. So I do think there are a lot of opportunities, especially in digital CX, both in North America and globally.

Brian A. Shepherd: AI driven sales.

Brian A. Shepherd: Sales of SaaS to cross sell to their customers. It's why we've rolled out bill Explainer Dot AI, which has a huge implication we view and digital CX use cases around promo roll off because a big part of churn comes when somebody a subscriber rolls off maybe their introductory price periods. So I do think there is a lot of opportunities.

Brian A. Shepherd: Especially in the digital CX, both in North America and globally.

Speaker Change: Thank you.

Speaker Change: Thanks, Jeff.

Michael H. Berg: Our next question comes from the line of Michael Berg from Wells Fargo. Please go ahead.

Brian A. Shepherd: Our next question comes from the line of Mike Goldberg from Wells Fargo. Please go ahead.

Michael H. Berg: Hi, Thanks for taking my question I just have a quick one on the seasonality of the business.

Michael H. Berg: Hi, thanks for taking my question. I just have a quick one on the seasonality of the business. Just looking back historically, it looks like the other revenue line item takes a step function up in terms of the mix of total and Q1 and tends to be fairly flat throughout the rest of the year. Is there any dynamics to point to that's driving that phenomenon?

Michael H. Berg: Looking back historically it looks like the other revenue line item takes a step function up in terms of the mix of total in Q1 that tends to be fairly flat throughout the rest of the year is there any dynamics to point to point to that's driving that phenomena.

Speaker Change: Yes, I think what Youre seeing is that there is seasonality on the payments business right. So if you look at our payments business by the very nature of it Q4, and Q1 ended up being the two strongest quarters, and then Q2 and Q3 are there'll be two quarters.

Hai V. Tran: Yeah, I think what you're seeing is that there's seasonality in payments. Right, so if you look at our payments business, by the very nature of it, Q4 and Q1 end up being the two strongest quarters, and then Q2 and Q3 are the weaker quarters. And a lot of that is because a chunk of our payments business is serving the government sector, so a lot of tax payments, right? And so those transactions happened in Q4 and Q1, and so that's why you're seeing some of that trend.

Hai V. Tran: And a lot of that is because.

Hai V. Tran: A chunk of our payments businesses, serving the government sector. So a lot of tax payments and so those transactions hit in Q4 and Q1.

Hai V. Tran: That's why you're seeing some of that trend.

Speaker Change: Got it helpful. And then just one quick follow up in terms of the guidance and M&A does the current does the reiteration of guidance incorporate the acquisition you did and does it also potentially include the acquisitions you seem to be likely to do.

Michael H. Berg: Got it, helpful. And then just one quick follow-up: in terms of the guidance on M&A, does the current, or reiteration of the guidance incorporate the acquisition you did, and does it also potentially include the acquisitions you seem to be likely to do?

Hai V. Tran: So, in terms of the guidance, yes, but bear in mind the acquisitions, the actual revenue is quite small here, right, or we're talking about single digits in terms of revenue, so the impact is quite nominal, particularly once you prorate it for the timing of the year. I think the only other thing I would add to that is we've

Speaker Change: Yes, so in terms of the guidance, yes, but bear in mind the acquisition the actual revenues quite small here right or we're talking about single digit.

Hai V. Tran: Terms of revenue so the impact is quite nominal, particularly once you prove it or timing of the year.

Hai V. Tran: I think the only other thing I would add to that is, we expect to have good organic growth in fiscal year 2024. So even with that guidance where we reiterated on the revenue side, and we typically talk a lot about the midpoint, and so we talk about the midpoint of our current reiterated guidance, which is four percent growth. As I said, we still believe we can achieve four percent growth organically, and there's some smallish impacts from acquisition.

Hai V. Tran: I think the only other thing I would add to that is we expect to have good organic growth in fiscal year 2024.

Hai V. Tran: So even with that guidance, where we reiterated on the revenue side and we typically talk a lot about midpoint and so we talk about at mid point of our current reiterated guidance of 4% growth and as I said we.

Hai V. Tran: We still believe we can achieve 4% growth organically and there is some smallish impacts from from acquisitions.

Speaker Change: Helpful. Thank you.

Speaker Change: Thanks, so much.

Hai V. Tran: At this time I'm showing there are no more questions I'll now turn the call back over to Brian <unk> for closing remarks.

Brian A. Shepherd: At this time, I'm showing that there are no more questions. I'll now turn the call back over to Brian Shepherd for closing remarks.

Brian A. Shepherd: Now, thanks, everyone. I appreciate you joining us. We're focused on delivering against our guidance commitments. We're focused on driving a lot of efficiency ongoing. As you saw in our adjusted margin guidance, we expect to be strongly in the 17% range. We expect to grow our top line. We expect to deliver better results as we get into Q2, Q3, Q4. It's up to us to execute on that, and that's exactly what this management team is focused on doing. Thank you for joining us on today's call.

Brian A. Shepherd: No. Thanks, everyone. Appreciate you joining we're focused on delivering against our our guidance commitments. We're focused on driving a lot of efficiency ongoing as you saw in our.

Brian A. Shepherd: Adjusted margin guidance, we expect a strongly be in the 17% range. We expect to grow top line, we expect to do deliver better results as we get into Q2 Q3, Q4, it's up to us to execute that and Thats exactly what this management team is focused on doing thank you for joining today's call.

Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for Chinese you may now disconnect.

Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining us. You may now disconnect.

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