Q1 2025 CSG Systems International Inc Earnings Call
Abby: Ladies and gentlemen, thank you for standing by. My name is Abby and I will be your conference operator today. At this time I would like to welcome everyone to CSG's first quarter 2025 earnings conference call.
Speaker Change: All lines have been placed on mute to prevent any background noise.
Speaker Change: After the speaker's remarks, there will be a question and answer session.
Speaker Change: If you would like to ask a question during that time simply press star followed by the number one on your telephone keypad.
Speaker Change: Thank you, operator, and thanks to everyone for joining us. Like last quarter, we will be working from a slide deck, which can be found on the Investor Relations section of our website. Please take a moment to locate these slides.
Today's discussion will contain a number of forward-looking statements.
Speaker Change: and our ability to successfully integrate and manage acquired businesses in order to achieve their expected strategic operating and financial goals.
Speaker Change: While these risks reflect our best current judgment, they are subject to risks and uncertainties that could cause our actual results to differ materially.
Speaker Change: 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.
Speaker Change: Also, we will discuss certain financial information that is not prepared in accordance with Gap.
Speaker Change: We believe that these non-GAAP financial measures when reviewing 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,
Speaker Change: 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.
Brian Shepherd: With that, I'd like to now turn the call over to Brian.
Brian Shepherd: Thanks, John . Hi, everyone. Welcome to the call as we begin on slide four.
Brian Shepherd: Q1 was an excellent start to 2025. We delivered 19.0% non-GAAP operating margin in the quarter, a 240 basis point improvement compared to 16.6% in Q1 2024.
Brian Shepherd: Based on the confidence we have from our 90% plus revenue visibility, our success selling higher gross margin sass deals, and our consistent ability to unlock greater operating efficiencies. We are pleased to raise our 2025 full-year profitability and non-GAAP EPS targets that high will cover in more detail.
Brian Shepherd: We diversified CSG's revenue even more with 33% of Q1 revenue coming from big, faster-growing industry verticals outside of cable and telecom led by our data-driven CX.
Brian Shepherd: Monetization and payment solutions. This is a new quarterly record for CSG up from 30% in the first quarter last year.
Brian Shepherd: Our top two customers, Charter and Comcast, now represent 37% of total Q1 revenue down from 49% of revenue in 2017.
Brian Shepherd: The great news is that this significant improvement in CSG's revenue concentration is not because the revenue we earn from our top two customers is declining.
Brian Shepherd: In fact, we've grown the annual revenue of Charter and Comcast by approximately $76 million from 2017 to 2024 representing a 2.6% compound annual growth rate
Brian Shepherd: and yet the revenue concentration from our big two customers has significantly improved because the other parts of our business are growing revenue even faster. A trend that we believe will continue in the years ahead.
Brian Shepherd: We reported our best first quarter non-GAAP adjusted free cash flow performance since 2018.
Brian Shepherd: Generating $7 million of non-JAPA-adjusted free cash flow in Q1, a huge improvement over the negative $34 million free cash outflow in Q1 2024.
Brian Shepherd: And as promised, we rewarded shareholders with even more dividends and more buybacks.
Brian Shepherd: We announced a 7% annual dividend increase in Q1 for the 12th consecutive year and we paid 9 million in dividends and repurchased $22 million worth of CSG shares in the first quarter.
Brian Shepherd: We hope these results prove the great operating discipline is becoming a trademark of Team CSG that investors can bank on.
Brian Shepherd: Flight 5 highlights the three long-term value creation commitments that the CSG leadership team and board of directors will hold ourselves accountable to deliver.
Brian Shepherd: First, CSG aspires to deliver 2% to 6% pure organic revenue growth and to diversify revenue from bigger, faster growing new industry verticals to greater than 35% of total CSG revenue by 2026.
Brian Shepherd: For 2025, we are reiterating our original full-year 2025 revenue guidance range with a midpoint of $1.23 billion in revenue.
Brian Shepherd: which would result in approximately 2.7% revenue growth even in the face of more macroeconomic
Brian Shepherd: Second, we are committed to consistently expand a non-GAAP adjusted operating margin with a long-term range of 18% to 20%, without impeding our ability to deliver a mid-single digit, annual organic revenue growth, most quarters and years.
Brian Shepherd: And we expect this improving profitability to convert nicely into strong double digit adjusted free cash flow growth in both 2025 and 2026.
Brian Shepherd: with the midpoint of our 2025 guidance range, setting it $130 million, which would represent approximately 15% year-over-year growth in free cash flow.
Brian Shepherd: Third, we are also committed to excellence shareholder capital returns year in year out as evidenced by the over $570 million worth of capital return to shareholders since 2020.
Brian Shepherd: and specifically for 2025, we committed to return more than $100 million in share repurchases and dividends combined, which we are well on our way towards achieving with $32 million of capital return to shareholders in Q1.
Brian Shepherd: As a reminder, CSG targets industry verticals that have high recurring customer relationships powered by complex subscription and consumption based business models because the business problems in customer pain points are surprisingly similar.
Brian Shepherd: With CSG's Integrated Workflow Solutions, our customers sell, monetize, and engage better as we help them simplify their complex monetization and customer engagement processes.
Brian Shepherd: The highly sticky, mission-critical nature of our SaaS solutions is also why we intermote years with 90% a greater revenue visibility, and it's why the vast majority of our customers stay with CSG for decades.
Brian Shepherd: thereby reducing the risk for us and our investors even in times of greater market volatility.
Brian Shepherd: This also explains why we announced so many fantastic new sales wins, including in 2024 with leading brands like Comcast, Formula One, Walgreens,
Brian Shepherd: 5G's global sales and go-to-market teams continue this momentum with more good sales wins in the first quarter. I'm excited to announce that we extended our 30-year relationship with MediaCom, the fifth-largest cable provider in the United States.
Brian Shepherd: Mediacom employs an arsenal of integrated CSG solutions, trusting us to manage the billing, product catalog, order management and provisioning activities.
Brian Shepherd: Processed to cure payments with their cloud-based payments platform, optimize their dispatch and field tech-offs functions, and digitally engage with customers in intuitive and personal ways to reduce call center volumes with CSG Exponent.
Brian Shepherd: I'm also excited to announce that with this extension, MediaCom will continue to leverage CSG Bill explainer.ai, our leading edge AI driven solution to help to eliminate Bill confusion in a relevant customer engagement to create a clear and engaging customer journey.
Brian Shepherd: We look forward to continuing to help media comm increase long term customer loyalty and mitigate call center costs.
Brian Shepherd: In April , we announced a fantastic expansion with Liberty Latin America, a long-standing CSG customer and one of the leading communication companies in the region.
Brian Shepherd: Liberty Latin America chose CSG to streamline its wholesale business and unify operations across 21 countries and multiple lines of business.
Brian Shepherd: CSG's digital wholesale suite will optimize their wholesale rating, charging, and settlement processes by reducing operational costs and simplifying the management of their B2B partner agreements and business relationships.
Brian Shepherd: We want an excellent extension with PLDK, the Philippines' largest fully integrated telecom company.
Brian Shepherd: Team CSG will continue to help PLDT enhance its wireless customer experience by delivering smart invoicing solutions that streamline the billing operations and enable more personalized and transparent billing communications.
Brian Shepherd: We are proud to help PLDT strengthen their customer retention as a result of their enhanced subscriber experience.
Brian Shepherd: In financial services, we've expanded our relationship with JP Morgan Chase at CSG Solutions will now help improve their card holder overdraft experience. This is another great example of our sales team growing CSG's share of wallet with existing customers.
Brian Shepherd: After helping JP Morgan Chase improve its fraud alert cardholder experience with our data-driven CSG exponent suite, we were able to identify other areas to help them be even easier to do business with and lower their cost to serve.
Brian Shepherd: We closed an exciting new win with North Texas Tolling Authority in TTA, selected CSG to provide data-driven customer experience solutions to streamline communications with drivers who use their toll roads.
Brian Shepherd: just went further diversified CSG's presence in the tolling and transportation industry and comes on the heels of another exciting tolling when we announced in Q4 2024 with the Oklahoma Turnpike Authority.
Brian Shepherd: CSG is highly focused on bringing greater value to toll road operators all across the US with opportunities to expand our tolling presence globally over time.
Brian Shepherd: Payments also continue to contribute nicely to our revenue diversification success and revenue growth, where we grew our payments merchant-based 13% year over year to 135,000 merchants in Q1. We continue to see good business performance and growth in payments.
Brian Shepherd: Moving to slide seven, the CSG management team and board are fully committed to turbocharging our profitability and free cash flow well beyond our good Q1 results.
Brian Shepherd: While we have relatively low annual CAPEX spend ranging from $20 million to $30 million, we aspire to reduce our working capital needs and fixed asset levels going forward with the same discipline that we've applied to our profit improvement efforts.
Brian Shepherd: With the consistency that we have expanded, non-GAAP adjusted operating margin from 16.6% in 2022 to 17.2% in 2023 to 18.1% in 2024 with the midpoint of our revised 2025 guidance now sitting at 18.6%
Brian Shepherd: The upper end of our 18-20% non-GAAP adjusted operating margin over the next several years with an aspiration to operate in the 19% to 20% range for 20-26.
Brian Shepherd: And we are seeing similar improvements in adjusted EBITDA margin where we grew our adjusted EBITDA margin 220 basis points to 23.7% in Q1 year-over-year.
Brian Shepherd: A trend we expect to continue which is represented in our Revive 2025 guidance.
Brian Shepherd: As we work hard to achieve all these improved operating results, one of the metrics we care most about is seeing this better profitability convert nicely in the strong double digit non-GAAP adjusted free cash flow growth in both 2025 and 2026
Brian Shepherd: Turning to slide 8, CSG has a strong, healthy balance sheet, a proven ability to unlock shareholder value with Displand M&A in a commitment to being an excellent, offensive and defensive choice for investors looking for relative safety in today's turbulent markets.
Brian Shepherd: We believe CSG stock price represents an excellent buy for investors and for CSG so we will stay balanced and disciplined as we focus on any strategic or financial move that the Board of Directors and Management believe will deliver excellent value for shareholders.
Brian Shepherd: With respect to M&A, we are very pleased with the two smaller, highly accretive acquisitions closed in 2024. We were able to acquire both companies that highly attractive multiples with both small tuck-in deals at highly profitable, high-recurring revenue for CSG.
Brian Shepherd: We continue to actively search for, vet and potentially close more value creating M&A deals in 2025.
Brian Shepherd: As I wrap up my opening remarks, we are excited about our good Q1 start as we stay laser focused on making 2025 a year of breakthrough results that can become the springboard for even bigger growth heading into 2026 and beyond.
Brian Shepherd: As we pursue every creative new idea that can help us elevate our performance and accelerate our results, the foundations of our success remain constant.
Brian Shepherd: CSG has an unwavering commitment to being a humble, culture-first, diverse global leader. CSG will hold ourselves accountable to world-class operating discipline with a relentless drive to constantly learn and get better.
Brian Shepherd: CSG will co-create quantifiable game-changing value with customers all around the world as we help them sell, monetize, and engage better with our integrated, domain-specific CSG Workflow
Speaker Change: CSG will put our money where our mouth is by tightly linking management compensation to the business and financial commitments we make to our shareholders.
Speaker Change: and CSG is all around the world. We'll stay hungry and obsessed because we know growth-oriented relentlessness is an essential ingredient to creating sustained value regardless of the obstacle standing in our way. With that, I will turn it over to high for more details.
Hai Tran: Thanks, Brian . Let's walk through our Q1 2025 financial results, and then I'll wrap up with some key conclusions.
Hai Tran: Starting on slide 10, we generated $299 million of revenue versus the $295 million we generated last year and represents the highest first quarter revenue in our company's history.
Hai Tran: From a phasing perspective, our Q1 results came in slightly better than we had expected and benefited from a couple million dollars of revenue we had anticipated coming in later in the year.
Hai Tran: Looking ahead, we now expect to go revenue in 2025 between 2% and 3%
Hai Tran: Moving on, our Q-1 2025 non-GAAP operating income was $51 million or a non-GAAP adjusted operating margin of 19%. As compared to $45 million or 16.6% in the prior year period.
Hai Tran: Similarly, our non-GAAP adjusted EBITDA was $64 million for the first quarter, or 23.7% revenue excluding transaction fees.
Hai Tran: as compared to $58 million or 21.5% in the prior year period. [inaudible]
Hai Tran: We are excited to see non-GAAP adjusted EBITDA improve over 200 basis points in Q1 of 2025, and we believe we have a clear path to see 25% non-GAAP adjusted EBITDA margins in the coming years.
Hai Tran: Our margin expansion is being driven by our increasing success in selling sticky SaaS revenue solutions combined with operating leverage enhancing initiatives that include improved procurement, increased productivity and process re-engineering.
Hai Tran: Specifically, we were able to grow Q1 non-GAAP adjusted operating income and non-GAAP adjusted at 15% and 11% respectively against the prior year period.
Hai Tran: We expect to maintain our higher profitability metric as we have taken significant cost efficiency actions to optimize our capacity and better align CSG's resources to areas of our business that would deliver faster growth.
I'll share more on our revised 2025 guidance targets momentarily.
Hai Tran: Lastly, our Q-1 2025 non-GAAP EPS with $1.14, a 13% increase as compared to a $1.1 in the prior year period.
Hai Tran: The increase in non-GAAP EPS is mainly due to the higher non-GAAP adjusted operating income, partially offset by adverse foreign currency movements.
Hai Tran: As investors can see, Team CSG is delivering on our commitment to consistently grow non-GAAP adjusted EBITDA, non-GAAP adjusted operating margin, and non-GAAP EPS much faster than revenue growth in 2025 and 2026.
Hai Tran: Turning to slide 11, I will go through the balance sheet, our casual performance and shareholder returns.
Hai Tran: Our Q1 2025 cash reform operations was $11 million as compared to cash used in operations of $29 million in Q1 of the prior year.
Hai Tran: Further, we had non-GAAP adjusted free cash load of $7 million in Q1 of 2025, as compared to $34 million of non-GAAP adjusted free cash outflows in Q1 of 2024.
Hai Tran: This represents our strongest Q1 non-GAAP adjusted free cash for results in seven years, and has driven primarily by our increased operating margins, improvements in our working capital, including changes in our variable incentive compensation, and active management of vendor relationships.
Hai Tran: Moving on, we ended the first quarter of 2025 with $136 million of cash and cash equivalent.
Hai Tran: That, along with our outstanding debt at March 31, 2025, results in $415 million of net debt. And our net debt leverage ratio sits at 1.6 times adjusted EBITDA.
Hai Tran: Further, we have $610 million in liquidity as of the end of the quarter.
Hai Tran: I'm also pleased to share that in March, we entered into a new five-year revolving credit facility.
Hai Tran: With this transaction, we were able to consolidate our term loan and revolver into one highly flexible and capital efficient $600 million revolving credit facilities.
Hai Tran: This transaction had multiple benefits, including our ability to secure a barring rate identical to our former 2021 credit facility terms.
Hai Tran: and overall covenant-like package and greater flexibility with a hundred percent revolving line of credit structure.
Turning the page, I'll revisit our 2025 guidance targets.
In summary, we are raising profitability and non-GAAP EPS targets.
Hai Tran: Further, we still expect approximately 48% of our revenue to be generated in the first half of 2025 and the remaining 52% in the second half.
Hai 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.
Hai Tran: We remain committed to our two to six percent long-term annual revenue growth reigns with the expectation to be at the mid-point of higher emotions.
Hai Tran: As part of our commitment, I want to highlight CSG's focus on sticky high-quality recurring revenue that continues to support our improved margin expansion and non-GAAPA, just a free cash flow growth.
Hai Tran: Rapping up, we love what we see in our business, powered by our operating discipline, R&D innovation, and ongoing sales wins.
Hai Tran: CSG will continue to relentlessly prioritize every investment we make and say very disciplined in the allocation of resources and the use of capital.
Hai 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 have and will continue to grow top and bottom results even faster.
Hai Tran: CSG is well positioned with a strong sales pipeline and a 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.
Hai Tran: We believe this approach, combined with our consistent capital distribution, will serve our shareholders well.
Hai Tran: With that, our turn it over to the operator to facilitate the question and answer session.
Speaker Change: Thank you, and 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 a second time.
Speaker Change: If you are called upon to ask your question and are listening via speaker phone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. To be able to take as many questions as possible, the asset you please limit yourself to one question and one follow-up.
Speaker Change: Again, it is Star One, if you would like to join the queue.
Speaker Change: And our first question comes from the line of Dan Bergstrom with RBC Capital Markets. Your line is open.
Okay, thanks for taking my questions.
Speaker Change: you know, anything to note around those last couple of weeks we've heard.
Speaker Change: You know, different views across software so far as to whether it was a normal clothes or there were some elevated uncertainty. And then maybe could you talk to the tone of business through the first month of the new quarter here.
Speaker Change: Yeah, sure. Thanks, Dan. Appreciate the question. You know, I wouldn't say there's anything unique in Q1 or the first month of this quarter. I think just the global macroeconomic uncertainty in general. It's been around for a couple quarters. We see that continuing. And so what we see in most industry verticals. And so what we see in most industry verticals.
are some bell-tightening. [inaudible]
Speaker Change: and therefore any solution that can actually improve experience can help drive cross-cell or upsell in their hat or cut their operating costs. It has a short ROI payback. You're seeing those deals still move through even with some of that, I just say, the height and concern that most.
customers and most companies are operating with it today.
Speaker Change: I think the second thing that we see is if there's a strategic longer term.
Speaker Change: Transformation or Horizon that can really move the business and put it in a better competitive position. We still see those bigger deals coming to the market. We still see deals getting signed as we've been asked a bunch of those, but I would say people are thoughtful and they're measuring two or three times before they move forward with those bigger transformations. But we see them, it's just they're being thoughtful.
Anything else you'd add to that?
And Mr. Transline did disconnect.
All right, thanks.
Speaker Change: We'll just ask a follow up then on the on the margin side really really impressive here in the first quarter and appreciate the added color in the script around guidance.
Speaker Change: The presentation pointed to constantly optimizing and reinventing how you do business around the expense side. Maybe Brian , could you take a step back and maybe expand on those concepts a bit and then talk to your philosophy around constantly optimizing costs?
Speaker Change: Yeah, love that question. You're going to hear us just talk nonstop for every quarter to come about operating discipline.
and one of the things I'm most proud of is...
Speaker Change: The way the CSG teams are taking a hard look at everything we do. Anything that doesn't add value to a customer and doesn't add value to our business and our shareholders. George Notter, George Notter, Nehal Chokshi, Michael Bergstrom, George Notter, Nehal Chokshi, Michael Bergstrom,
Speaker Change: Then stop doing it or reinvent it. That's everything from AI. That's...
Speaker Change: looking at just good old-fashioned operational improvement. We talked about these quarter terms of the wrench. I think you're seeing CSG now it starts to do half turns of the wrench. And I think we're just getting started on the ability to continue to expand our EBITDA and our op margin. But it's not just the efficiency. It's also taking, you know, using innovation. You see as our margins go up, you actually see R&D growing in a much faster rate because we believe as a mission critical technology company.
at theCUBE.
Speaker Change: Productive spends and redirecting it to a more value-riding use. I think that's something I'm pretty pleased it's moved to come a long way in the last two years.
Speaker Change: And in part of it, it has part of the margin expansion, it has nothing to do with operational efficiency, it has to do with our revenue makeshift that high talks a lot about. We're just as we sell more SAS higher gross margin deals as we diversify into other faster growing industry verticals. That's also just giving us operating leverage across the business. You're seeing that at the gross margin line as well as at the operating margin of EBITDA line in the free cash flow.
Speaker Change: The part that I am most excited about is what I think we could do with free cash flow.
Speaker Change: And I think we're finally now starting to see the proof-profit ability really converting the free cash flow and we've got a real focus on becoming more asset light and generating double digit returns.
Speaker Change: through 2026. Stay tuned for what happens after 2026, but we don't want that music to stop.
Thank you.
Speaker Change: Thanks, Jim. And your next question comes from the line of Greg Burns with Sedotti and Company. Your line is open.
Greg Burns: Good evening. If you just talk about the revenue trends in charter and Comcast, it looks like...
Charter, I'm sorry, I'm-
Greg Burns: Comcast was flat year over year but down sequentially, maybe that's just a seasonality thing and charter was down a little bit.
Greg Burns: Year of Year and quarter of a quarter. So maybe if we can just talk about what's driving that in the general demand dynamics within the cable market.
Speaker Change: Sure. Hi, Greg. Hope you're good and well. I think there's a couple of things I think if you look at what we've tended to see with our big two is you look at that that trend that we shared in the script.
Speaker Change: that we've seen a compounded annual growth rate of about 2.6% going back from 2017 to now. Over the medium to longer term, we still see and believe that you could kind of see annual growth in that range. There's price escalators built into the contracts. There's new solutions, a new landmass we could sell and help them with. And so you will get some quarterly fluctuation. As we've talked a lot about, we really don't.
Speaker Change: Our revenue was driven very little by the number of broadband ads or total ads they have, so therefore that headwind I would say that they faced isn't really impacted this much [inaudible]
Speaker Change: The one comp around Q1 I would call out that you asked about was the reminder we want a really exciting new deal with Comcast in a new area of building outside the core triple plays that I think we did. Thank God.
Speaker Change: Insights last year that drove about $10 million of one-time revenue that will make the comp comparison on growth from 2024 to 2025.
Speaker Change: Look a little questionable. The second thing is that fantastic six-year renewal we did with Comcast.
Speaker Change: The only thing we did give was no price increase in 2025, and so therefore we won't get the benefit this year of a price increase at Comcast, but as part of that fantastic six-year deal we did. So I think a couple of those things are what's driving a little bit of the quarter-over-fourter comp that you asked about.
All right, great. Thank you.
Thanks, Fred.
Speaker Change: And your next question comes from the line of Matthew Harrigan with Benchmark. Your line is open.
Matthew Harrigan: Thank you, congratulations on the guidance. I'm curious on the M&A side as you look to be more active and maybe some larger assets get dislodged. I know every circumstance is a little.
Matthew Harrigan: What sort of disparity are you seeing in that parent, you know, seller versus buyer multiples when you layer in synergies? I know someone's on the revenue side and it's realized over time and it's tricky but just kind of
Matthew Harrigan: You know, general thoughts more specifically on your ideal M&A candidate. I know probably different companies have different possibilities and then secondly, also on the thing one and thing two, otherwise known as Charter and Comcast.
Matthew Harrigan: You've seen some divergence in results. I mean, Charter, I think it's done a better job on bundling and pricing.
Matthew Harrigan: Sometimes even though there's a lot of commonalities on the product, it feels like broadband is becoming more and more of a unified category between mobile. It's a lot more of a unified category between mobile and mobile.
Matthew Harrigan: and fixed line, and the walls are breaking down. It feels like there's even more, maybe you have an imperative for these companies to have unified billing on a competitive vantage point. So those are my two quick questions, I guess fairly broad. Thank you.
No, thanks so much, Matt, for sharing it. On the M&A side, there's a couple, great.
Aspects we could dig into first.
We feel zero pressure to do any deal.
Matthew Harrigan: maybe to give a little more color on what we're looking at, is we really see in this world where across industry vertical...
Matthew Harrigan: A end-to-end integrated domain specific solution that includes things like product catalog or management, monetization, digital CX.
Matthew Harrigan: Integrated Customer Engagement, and so we love that sticky integrated aspect of it. And so if we have an opportunity, what we want to spend two-thirds of our M&A capital buying companies better than us.
Matthew Harrigan: That could be a fantastic opportunity, they can extend the good performance we've been having the last couple of years [inaudible]
quite attractive for our shareholders. So we're really looking at both those sets of opportunities.
to deploy capital in the way to SMART. [inaudible]
Matthew Harrigan: that's very well-risk-adjusted and that could really accelerate on top of the double-digit organic growth that we're seeing. So that's on the M&A side and we can dig into that more if we wanted to.
Matthew Harrigan: On the big two, I think we've been talking a little bit first.
Matthew Harrigan: We love and are honored to serve both charter and concuss and everything they're doing. They are the two fastest growing wireless companies in the US market and we think that I'll continue. They base some headwinds on the broadband and I think they're both taking their own approaches on how they'll respond. I talked several quarters about I never underestimate the competitive response of either concuss or charter when they're faced with some market challenges and headwinds, so we love what's going on.
Matthew Harrigan: and what we do is we just try to stay mission-critical, deliver every day for them and bring them innovative ideas that could maybe improve their converts experience, help them lower costs so that they could get even more aggressive on their pricing and their customer acquisition, because that's good for them, and it would be good for us. And so I think you'll continue to see probably slightly different but strong competitive responses from both those companies in the coming quarters and years ahead.
Matthew Harrigan: CSG is going to try to be helpful to their efforts in that. [inaudible]
Matthew Harrigan: And since you clearly have a purge of you even outside the US, if that's the right word on...
on telecom. I would think that...
even if you look at Europe or Africa or India.
Matthew Harrigan: You're seeing more of an imperative on companies to kind of break down the walls on the...
Separate Billing for broadband. .
And Moe, I know you can't be too specific on-
Matthew Harrigan: Charter and Comcast, but it just feels like it's ever more of an imperative and how tricky is it? I mean, how fast could you do that? I mean, based on what you're doing in Africa, for instance, I would think you could probably do that, implement that pretty fast because you certainly have the experience internationally. Good boy.
Matthew Harrigan: I mean, obviously what we've seen in markets outside the U.S.
Matthew Harrigan: where I think there was much more price but pressure and intense competition across cable and wireless. That drove a level of maybe reinventing a more radical re-invention of business process. It doesn't start with a tech stack. If you want to radically reduce your cost.
have an easier
Matthew Harrigan: Digital Experience, and so what we saw in other markets is them simplifying their business process, driving a converged experience exactly like you're talking about, that therefore enabled a lower-cost tech stack to actually be part of the winning strategy for a lot of these operators. That's been a core tenant in both consumer wireless and enterprise wireless that's caused a big part of our growth in that part of the market. [inaudible]
Matthew Harrigan: I think that pressure now is clearly finally come to the US market. We see that with T-Mobile and Verizon and AT&T getting the lion's share of the broadband ads. You see that in the US market with Comcast and Charter being the fastest-growing wireless buying a landslide and so therefore I think being more intentional about simplifying business process and product
Matthew Harrigan: simplifying the pricing and lowering the cost to serve. We think it is fundamental to winning big in the US market or in the global markets and we're trying to do our part. So, obviously we have our view that a converged experience.
on broadband and wireless.
Significant
Consumer Benefits and Significance Cost Saving Advantage
Matthew Harrigan: When some of our customers make decide to take advantage of that, that's clearly their decision, we're just trying to bring my ideas and solutions.
Great. Thanks, Brian . Thanks, Matt.
Speaker Change: And your next question comes from the line of Michael Berg with Wells Fargo. Your line is open.
Speaker Change: Hi, thanks for taking my question. I just wanted to dig in a little bit differently on the tall co-angle. There is a look through some...
Speaker Change: Some weakness in that vertical there. Is that strictly a function of the charter declaration here in QAnimics is digging to the benefit of the dynamics of the weakness in charter and telco in that relationship there? Thanks.
Speaker Change: Yeah, hi, have you joined? You want to talk anything about the telco side?
Yeah, no, I mean, it isn't specific to...
Speaker Change: to Charter. It is generally speaking, you know, the part and parcel of the natural cycles that we're seeing across the board, you know, Brian said, the global technical business.
Speaker Change: The normal anxiety, given the uncertainty in the marketplace, that does slow down some of the decision-making. But nothing abnormal with regards to what we're seeing in that global talk business except maybe an extension of the decision-making.
Speaker Change: Yeah, maybe the thing I would add on top of that as well, Michael, to your good question is...
Um...
Speaker Change: You're also seeing as part of the strategic focus that we believe could enable a big transformation in global telecom, but it's over a little longer time horizon, which is...
with the big wins we've announced it with our SAS.
Speaker Change: AWS platform ascended in telecom, 6 or 7 fantastic wins in telecom.
a little bit of a sass.
Speaker Change: revenue play out in the numbers. We haven't seen any slowdown in telecom. In fact, the opposite. We've announced more wins than ever, but you will also see a little bit of the shift from an on-prem implementation services accounting to more of the SaaS that will play out. I think over the next.
Superhubble Tower, thank you.
Thanks, Michael.
Speaker Change: And as a reminder, it is Star One if you would like to ask a question and your next question comes from Nehal Chokshi with Northland Capital Markets. Your line is open.
Speaker Change: Battery Growth and at least what you're putting up a review wise or just, you know,
I re-honored his, uh, religion.
Speaker Change: Sounds like we lost high. I can take that Nehal and appreciate joining and appreciate the question. You know, when we look at it we track
Like most companies, we track over all sides of…
Speaker Change: of the pipeline on a weighted, non-weighted basis, both annual contract value and TCB. We track the progression through our six stages of ourselves pipeline. We look at where deals are falling out. We're able to accelerate. We also look at the win rate.
Speaker Change: and the Lost Rate, once we get to stage five and six around it. And overall, I would tell you, the overall size of the pipeline is a little bigger than it was this time last year. The shape is healthy. We still see good wind rates and progressives through, so when high-gives color like that.
Speaker Change: We see the overall size and shape in a very good shape and we should be able to announce good wins in the coming quarters as we just execute that so from an overall we don't break out the specifics of that but that's what I was referring to and we like what we're seeing kind of across the board.
Speaker Change: We are seeing, we have seen an increase, especially in global telecom, in media, and one of the exciting things is actually in financial services will renounce
Speaker Change: really exciting deal in Australia on our AWS Assassin and platform. We also see it in quoted order our CPQ side of the business. We see a strong pipeline on the
Speaker Change: in the payments business, and we also like what we're seeing. There are small, mid and large telecom deals on consumer wireless and enterprise in our mid and mid stages of our sales pipeline. So it's kind of across the board on that.
Speaker Change: Okay, and then the other question I had was on cash from operations. Definitely much stronger than what we expected. It looks like stronger than consensus. Is it fair to say that it was also stronger than what you guys are expecting?
Hai Tran: I think as Hai said, we came in in general Q1.
Hai Tran: Due to some timing and just also strong performance came in slightly ahead of our expectations, so we were super pleased with that.
Hai Tran: But as we've been talking, we gave, you know, our, we tend to focus a lot on midpoint in the ranges that we give.
Hai Tran: So with it, you know, going from something like 1.13 last year to a midpoint of 1.30, showed strong double digits. So we expect...
John: to have a very strong double digit free cash flow here. And yes, we still got off to a slightly better start in Q1. But yeah, so that was good to see. And Nehal, it's John maybe just from a phasing perspective because it was such a, you know, B versus kind of estimates.
John: We still expect Q1 to be the low point of the year, so this was not the case where we had significant pull forward from other quarters. We still expect it to be the low point of the year and to grow free cash flow from here as we progress through the next three quarters.
That's very very helpful. Thank you. Congratulations
Thanks, Neal.
John: And there are no further questions at this time. I will now turn the conference back over to Mr. Brian Shepherd for closing remarks.
Brian Shepherd: Now, thanks, everyone, for attending. As you heard, we're proud of the Q1 start for not satisfied at all. We think Team CSG is just getting started on this operating discipline, constantly putting up results that we're proud of, and we think we can do a lot better, and we're holding ourselves accountable to ensure we do that in the coming quarters. So, thanks for joining and look forward to talking to you this time next floor. Thank you for joining us.