Q2 2025 CSG Systems International Inc Earnings Call

<unk> second quarter 2025 earnings call.

Speaker #3: Welcome, ladies and gentlemen, and thank you for standing by. My name is Chris, and I will be your conference operator for today. At this time, I would like to welcome everyone to CSG's second quarter 2025 earnings call.

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

The speaker's remarks, there will be a question and answer session if.

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

Speaker #3: All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If ou would like to ask a question during this time, simply press *1 on your telephone keypad.

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

I would now like to turn the conference over to John array you may begin.

Thank you operator, and thanks to everyone for joining us like last quarter, we will be working from our slide deck, which can be found on the investor Relations section of our website. Please take a moment to locate these slides.

Speaker #3: If you would like to withdraw your question, you may press *1 again. I would now like to turn the conference over to John Rea.

Speaker #3: You may begin.

Day'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 <unk>.

Speaker #4: 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.

Speaker #4: 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.

Operating and financial goals.

While these risks reflect our best current judgment they are subject to risks and uncertainties that could cause our actual results to differ materially. Please note that these forward looking statements reflect our opinions only as of the date of this call and we undertake no obligation to revise or publicly release any revision to these forward looking statements.

Speaker #4: While these risks reflect our best current judgment, they are subject to risk and uncertainties that could cause our actual results to differ materially. Please note that these forward-looking statements reflect our opinions only as of the date of this call, and we undertake no obligation to revise or publicly release any revision to these forward-looking statements in light of new or future events.

In light of new or future events in.

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.

Speaker #4: In addition to factors noted during this call, a more comprehensive discussion of our risk factors can be found in today's press release, as well as our most recently filed 10-K and 10-Q, which are all available in the Investor Relations section of our website.

Also we will discuss certain financial information that is not prepared in accordance with GAAP. We believe that these non-GAAP financial measures when reviewed in conjunction with our GAAP financial measures provide investors with greater transparency to the information used by our management team and our financial and operational decision, making for more information.

Speaker #4: 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.

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.

Speaker #4: For more information regarding our use of non-GAAP financial measures, we refer you 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 that I'd like to now turn the call over to Brian.

Thanks, John Hi, everyone welcome to the call as we begin on slide four team CSC delivered very strong results in Q2 and through the first half of 2025, we reported 19, 5% non-GAAP operating margin in the first half with a 250 basis point improvement.

Speaker #4: With me today on the phone are Brian Shepherd, Chief Executive Officer and Hai Tran, Chief Financial Officer. With that, I'd like to now turn the call over to Brian.

Speaker #5: Thanks, John. Hi, everyone. Welcome to the call as we begin on slide four. Team CSG delivered very strong results in Q2 and through the first half of 2025.

<unk> to 17% in the same prior year period.

Based on the confidence we have from our highly recurring revenue model our success selling higher gross margin SaaS deals and our ability to consistently unlock greater operating efficiencies for the second consecutive quarter. We were pleased to raise our 2025 full year profitability targets along with increasing.

Speaker #5: We reported 19.5% non-GAAP operating margin in the first half, with a $250 basis point improvement compared to 17% in the same prior year period.

Speaker #5: Based on the confidence we have from our highly recurring revenue model, our success selling higher gross margin SaaS deals, and our ability to consistently unlock greater operating efficiencies, for the second consecutive quarter, we are pleased to raise our 2025 full-year profitability targets along with increasing the midpoint of our non-GAAP adjusted free cash flow expectations for the full year.

The midpoint of our non-GAAP adjusted free cash flow expectations for the full year.

Even as revenue comes in at the lower end of our revenue growth guidance. We continue to diversify our revenue with a goal to have greater than 35% of our revenue coming from exciting new industry verticals by the end of 2026 in the first half of 2025, 32% of total <unk> revenue.

Speaker #5: Even as revenue comes in at the lower end of our revenue growth guidance, we continue to diversify our revenue with a goal to have greater than 35% of our revenue coming from exciting new industry verticals by the end of 2026.

Came from industries outside of cable and telecom up from 31% in the prior year period, the consistently improving revenue diversification is being driven by our data driven CX monetization and payment solutions with more revenue coming from faster growing new industry.

Speaker #5: In the first half of 2025, 32% of total CSG revenue came from industries outside of cable and telecom, up from 31% in the prior year period.

The verticals Bsg's revenue concentration also continues to improve with our top two customers charter and Comcast now representing 36% of total <unk> revenue.

Speaker #5: The consistently improving revenue diversification is being driven by our data-driven CX, monetization, and payment solutions. With more revenue coming from faster-growing new industry verticals, CSG's revenue concentration also continues to improve with our top two customers, Charter and Comcast, now representing 36% of total CSG revenue, a significant reduction from 49% in 2017.

<unk> reduction from 49% in 2017, and our revenue from charter and Comcast is still growing nicely said 2017, as we expanded what we do for both customers.

In Q2, we signed some exciting new logo sales wins and deal expansions and financial services insurance and property management that I will talk more about momentarily along with some great wins in the global telecom market on cash flow, we reported our best first half non-GAAP adjusted free cash flow.

Speaker #5: And our revenue from Charter and Comcast has still grown nicely since 2017, as we expanded what we do for both customers. In Q2, we signed some exciting new logo sales wins and deal expansions in financial services, insurance, and property management that I will talk more about momentarily, along with some great wins in the global telecom market.

In a decade generating $47 million of non-GAAP adjusted free cash flow in the first half a huge improvement over the $5 million, we generated in the same period last year and.

Speaker #5: On cash flow, we reported our best first half non-GAAP adjusted free cash flow in a decade. Generating $47 million of non-GAAP adjusted free cash flow in the first half, a huge improvement over the $5 million we generated in the same period last year.

And we are well on our way to meet or exceed our $100 million shareholder remuneration commitment for 2025, as we rewarded shareholders with $19 million of dividends and repurchased $40 million worth of CST shares in the first half of the year, we love the business.

Speaker #5: And we are well on our way to meet or exceed our $100 million shareholder remuneration commitment for 2025 as we rewarded shareholders with $19 million of dividends and repurchased $40 million worth of CSG shares in the first half of the year.

Momentum and acceleration, we see across every aspect of CSC as we become more disciplined more global and more diverse.

Slide five highlights the three long term value creation commitments that the <unk> leadership team and board of directors will hold ourselves accountable to deliver.

Speaker #5: We love the business momentum and acceleration we see across every aspect of CSG, as we become more disciplined, more global, and more diverse. Slide five highlights the three long-term value creation commitments that the CSG leadership team and board of directors will hold ourselves accountable to deliver.

She 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 <unk> revenue by 2026, we are pleased to reiterate our original full year 2025 revenue guidance range.

Speaker #5: 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.

But as we discussed last quarter, we expect to grow total revenue between 2% and 3% at the lower end of our range for full year 2025.

Speaker #5: We are pleased to reiterate our original full-year 2025 revenue guidance range that, as we discussed last quarter, we expect to grow total revenue between 2% and 3% at the lower end of our range for full-year 2025.

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 good annual organic revenue growth most quarters in years, and we expect this improving profitability to convert nicely into strong adjust.

Speaker #5: We are committed to consistently expanding non-GAAP adjusted operating margin with a long-term range of 18% to 20%, without impeding our ability to deliver good annual organic revenue growth most quarters and years.

Good free cash flow growth in both 2025 and 2026 with the midpoint of our 2025 guidance range sitting at $135 million, which represents approximately 20% year over year growth in free cash flow in 2025 versus last year.

Speaker #5: And we expect this improving profitability to convert nicely into strong adjusted free cash flow growth in both 2025 and 2026, with the midpoint of our 2025 guidance range sitting at $135 million dollars, which represents approximately 20% year-over-year growth in free cash flow in 2025 versus last year.

We're also committed to excellent shareholder capital returns year in year out as evidenced by the over $600 million in capital returned to shareholders. Since 2020, and we are clearly on track to meet our commitment to return more than $100 billion in share repurchases and dividends combined with.

Speaker #5: We are also committed to excellent shareholder capital returns year in, year out, as evidenced by the over $600 million in capital return to shareholders since 2020.

$59 million of capital returned to shareholders in the first half of the year.

Speaker #5: And we are clearly on track to beat our commitment to return more than $100 million in share repurchases and dividends combined with $59 million of capital return to shareholders in the first half of the year.

On slide six investors can see the exciting revenue growth coming from big New verticals as a reminder, CSC target industry verticals that have high recurring customer relationships powered by complex subscription and consumption based business models, because the business problems and customer pain.

Speaker #5: On slide six, investors can see the exciting revenue growth coming from big new verticals. 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 and customer pain points are surprisingly similar across industry verticals.

<unk> are surprisingly similar across the industry verticals, where csc's integrated workflow solutions, our customer sell monetize engage better as we help them simplify their complex monetization and customer engagement processes.

The highly sticky mission critical nature of our SaaS solutions is also why we enter most years with 90% or greater revenue visibility and it's why the vast majority of our customers stay with CSC for decades, thereby reducing the risk for us and our investors even during times of greater market volatility.

Speaker #5: 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. The highly sticky, mission-critical nature of our SaaS solutions is also why we enter most years with 90% or greater revenue visibility and it's why the vast majority of our customers stay with CSG for decades thereby reducing the risk for us and our investors even during times of greater market volatility.

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And our global sales and go to market teams delivered exciting new sales wins in the quarter starting off I'm pleased to share that we want a fantastic new deal with Orange business. The enterprise Division of the Orange group, and our leading network and digital integrator. The Orange business teams selected <unk> to help accelerate it.

Speaker #5: And our global sales and go-to-market teams delivered exciting new sales wins in the quarter. Starting off, I'm pleased to share that we won a fantastic new deal with Orange Business, the enterprise division of the Orange Group and a leading network and digital integrator.

Digital transformation journey across more than 25 different countries team CSC will help by simplifying the quote to cash process by leveraging our catalog driven <unk> solution to enable faster error free product configuration and order fulfillment, we look forward to helping orange.

Speaker #5: The Orange Business team selected CSG to help accelerate its digital transformation journey across more than 25 different countries, Team CSG will help by simplifying the quote-to-cash process by leveraging our catalog-driven CPQ solution to enable faster error-free product configuration and order fulfillment.

Business continued to pursue its digital transformation to deliver simpler more flexible customer experiences.

We also extended our relationship with Liberty Communications of Puerto Rico, one of the largest operations in Liberty Latin America's portfolio.

Speaker #5: We look forward to helping Orange Business continue to pursue its digital transformation to deliver simpler, more flexible customer experiences. We also extended our relationship with Liberty Communications of Puerto Rico one of the largest operations in Liberty Latin America's portfolio.

Liberty, Puerto Rico will continue to trust ESG for integrated billing and subscriber management across our residential and beta be fixed line subscribers. We are proud to announce this win with Liberty Latin America and look forward to propelling its business forward, even more by helping them deliver great customer experience.

Speaker #5: Liberty Puerto Rico will continue to trust CSG for integrated billing and subscriber management across their residential and B2B fixed-line subscribers. We are proud to announce this win with Liberty Latin America and look forward to propelling its business forward even more by helping them deliver great customer experiences.

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Moving outside of Telecom in April we executed a great renewal with a large mutual life insurance and financial services company in the United States using <unk> exponent suite. This customer will continue to trust <unk> to help them optimize how they attract and convert new customer.

Speaker #5: Moving outside of telecom in April, we executed a great renewal with a large mutual life insurance and financial services company in the United States.

<unk> enables smarter data driven decisions and how they identify engage and onboard new advisors. This is another fantastic win for <unk> in the insurance and financial services industry.

Speaker #5: Using CSG's exponent suite, this customer will continue to trust Team CSG to help them optimize how they attract and convert new customers and enable smarter data-driven decisions in how they identify and engage in onboard new advisors.

And payments, we closed an exciting new win with a leading U S property management Technology company. This customer selected <unk> cloud based payment platform to modernize the payment experience for their residents and fuel scalable future growth. This is another great win for teams DSG to move us further into a high.

Speaker #5: This is another fantastic win for CSG in the insurance and financial services industry. In payments, we closed an exciting new win with a leading US property management technology company.

Speaker #5: This customer selected CSG's cloud-based payment platform to modernize the payment experience for their residents and fuel scalable future growth. This is another great win for Team CSG to move us further into a high-margin property management vertical.

Margin property management vertical.

We continue to see good business performance and growth in payments, where we grew our merchant base, 14% year over year to 142000 merchants in Q2, we continue to see good business performance and growth and expect that to continue in the quarters ahead.

Speaker #5: We continue to see good business performance and growth in payments, where we grew our merchant base 14% year-over-year to $142,000 merchants in Q2. We continue to see good business performance and growth and expect that to continue in the quarters ahead.

Moving to slide seven I want to remind investors, where the <unk> management team and board are focused to turbocharge, CFC profitability and free cash flow well beyond our good <unk> results.

We're committed to evolving into a more asset light SaaS business that consistently generates higher profit and cash flow from every dollar we invest and although our annual Capex remained modest at 20 million to $30 million. Each year. We are focused on further optimizing working capital and reducing <unk>.

Speaker #5: Moving to slide seven, I want to remind investors where the CSG management team and board are focused to turbocharge CSG profitability and free cash flow well beyond our good H1 results.

Speaker #5: We are committed to evolving into a more asset-light SaaS business that consistently generates higher profit in cash flow from every dollar we invest. And although our annual CapEx remains modest at $20 million to $30 million each year, we are focused on further optimizing working capital and reducing fixed asset intensity with the same operational discipline that's also driving our big margin expansion.

Fixed asset intensity with the same operational discipline, that's also driving our big margin expansion.

Boeing steady non-GAAP operating margin expansion from 16, 6% in 2022 to 17, 2% in 2023 and 18, 1% in 2020 for our updated 2025 midpoint guidance of 18, 8% reinforces our belief.

Speaker #5: Following steady non-GAAP operating margin expansion, from $16.6% in 2022 to $17.2% in 2023, and $18.1% in 2024, our updated 2025 midpoint guidance of $18.8% reinforces our belief that CSG can reach or exceed the upper end of our 18% to 20% target range in the years ahead with an aspiration to operate above 19% by 2026.

The CSC can reach or exceed the upper end of our 18% to 20% target range in the years ahead with an aspiration to operate above 19% by 2026, and we are seeing similar improvements in adjusted EBITDA margin, where we grew our adjusted EBITDA margin to her.

Wondered 40 basis points to 24, 4% in the first half of 2025 year over year a trend we expect to continue which is represented in our revised 2025 guidance as we drive these operating improvements one of the top priorities remains translating stronger prop.

Speaker #5: And we are seeing similar improvements in adjusted EBITDA margin where we grew our adjusted EBITDA margin 240 basis points to 24.4% in the first half of 2025 year-over-year.

Stability into double digit non-GAAP adjusted free cash flow growth in both 2025 and 2026.

Speaker #5: A trend we expect to continue which is represented in our revised 2025 guidance. As we drive these operating improvements, one of the top priorities remains translating stronger profitability into double-digit non-GAAP adjusted free cash flow growth in both 2025 and 2026.

Turning to slide eight <unk> is a strong healthy balance sheet, a proven ability to unlock shareholder value with disciplined M&A and a commitment to being an excellent offensive and defensive choice for investors looking for relative safety in today's turbulent markets. We believe CFT stock price represents an excellent <unk>.

Speaker #5: Turning to slide eight, CSG has a strong healthy balance sheet that proven ability to unlock shareholder value with disciplined M&A and a commitment to being an excellent offensive and defensive choice for investors looking for relative safety in today's turbulent markets.

For investors and for <unk>. So we will stay balanced disciplined and focused on any strategic or financial move that the board of directors and management believe will deliver excellent value for shareholders with respect to M&A. We are very pleased with the two smaller highly accretive acquisitions closed in 2020.

Speaker #5: We believe CSG's stock price represents an excellent buy for investors and for CSG, so we will stay balanced, disciplined, and focused on any strategic or financial move that the board directors and management believe will deliver excellent value for shareholders.

We were able to acquire both companies are highly attractive multiples with both small tuck in deals at a highly profitable recurring revenue per C. S. G. We continue to actively search for that and potentially close more value, adding M&A deals in 2025.

Speaker #5: 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 at highly attractive multiples with both small tuck-in deals adding highly profitable recurring revenue for CSG.

As I wrap up my opening remarks, we are excited about our good first half of the year as we stay laser focused on making 2025, a year a breakthrough results to become the springboard for even bigger growth heading into 2026 and beyond.

Speaker #5: We continue to actively search for, vet, and potentially close more value-adding M&A deals in 2025. As I wrap up my opening remarks, we are excited about our good first half of the year as we stay laser-focused on making 2025 a year of breakthrough results, to become the springboard for even bigger growth heading into 2026 and beyond.

As we pursue every creative new idea that can help us elevate our performance and accelerate our results. The foundation of our success remains constant PSG has an unwavering commitment to being a humble culture first diverse global leader CSC will hold ourselves highly accountable.

Speaker #5: As we pursue every creative new idea that can help us elevate our performance and accelerate our results, the foundation of our success remains constant.

The World class operating discipline with a relentless drive to constantly learn and get better.

Speaker #5: CSG has an unwavering commitment to being a humble, culture-first, diverse global leader. CSG will hold ourselves highly accountable to world-class operating discipline with a relentless drive to constantly learn and get better.

CSC will co create quantifiable game changing value with customers all around the world as we help them sell monetize engage better with our integrated domain specific <unk> workflow solutions.

Speaker #5: 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 solutions.

We will put our money, where our mouth is by tightly linking management compensation to the business and financial commitments, we made to shareholders and <unk> around the world will stay hungry and obsessed because we know growth oriented relentlessness is an essential ingredient to creating sustained value regardless of the <unk>.

Speaker #5: CSG will put our money where our uth is by tightly linking management compensation to the business and financial commitments we make to shareholders. And CSGers around the world will stay hungry and obsessed because we know growth-oriented, relentlessness is an essential ingredient to creating sustained value regardless of the obstacles standing in our way.

Political standing in our way I want to recognize and thank every single <unk> employee and leader for what Theyre doing to contribute to the huge success and growth. The CSC is experiencing with that I will turn it over to high.

Speaker #5: I want to recognize and thank every single CSG employee and leader for what they're doing to contribute to the huge success and growth that CSG is experiencing.

Thanks, Brian Let's walk through our Q2 2025 financial results and then I'll wrap up with some key conclusions.

Starting on Slide 10, we reported a record high of $597 million of revenue in the first half of 2025.

Speaker #5: With that, I will turn it over to Hai.

Speaker #6: Thanks, Brian. Let's walk through our Q2 2025 financial results. And then I'll wrap up with some key conclusions. Starting on slide 10, we reported a record high $597 million of revenue in the first half of 2025.

$585 million.

In 2024.

This represents the highest revenue in the first half of the year in <unk> history.

Phasing perspective, our Q2 non-GAAP results came in slightly better than we had expected and benefited from a $6 million nonrecurring high margin license revenue arrangement recognized in Q2.

Speaker #6: Versus $585 million in 2024. This represents the highest revenue in the first half of the year in CSG's history. From a phasing perspective, our Q2 non-GAAP results came in slightly better than we had expected, and benefited from a $6 million non-recurring high-margin licensed revenue arrangement recognized in Q2.

Moving on our first half 2025, non-GAAP operating income was $106 million or.

Our non-GAAP adjusted operating margin of 19, 5%.

As compared to $91 million or <unk>, 17.0% in the prior year period.

Speaker #6: Moving on, our first half 2025 non-GAAP operating income was $106 million, or a non-GAAP adjusted operating margin of 19.5%. As compared to $91 million or $17.0% in the prior year period.

Similarly, our non-GAAP adjusted EBITDA was $132 million for the first half or 24, 4% of revenue excluding transaction fees.

As compared to $118 million or 22.0% in the prior year period.

Speaker #6: Similarly, our non-GAAP adjusted EBITDA was $132 million for first half, or $24.4% of revenue excluding transaction fees. As compared to $118 million or $22.0% in the prior year period.

Margin expansion is being driven by improvement in our operating efficiencies and our increasing success in selling sticky SaaS revenue solutions and because of our continued profitability improvement we are raising our profitability guidance targets for the second quarter in a row.

Speaker #6: Our margin expansion is being driven by improvements in our operating efficiencies and our increasing success in selling sticky SaaS revenue solutions. And because of our continued profitability improvements, we are raising our profitability guidance targets for the second quarter in a row.

More on that in a moment.

Lastly, our first half 2025, non-GAAP EPS was $2 29.

A 13% increase as compared to $2.

The prior year period, the increase in non-GAAP EPS is mainly due to the higher non-GAAP adjusted operating income and to a lesser degree a lower non-GAAP effective tax rate and lower diluted shares outstanding.

Speaker #6: More on that in a moment. Lastly, our first half 2025 non-GAAP EPS was $2.29. A 13% increase as compared to $2.02 in the prior year period.

These increases are partially offset by adverse foreign currency movement.

Speaker #6: The increase in non-GAAP EPS is mainly due to the higher non-GAAP adjusted operating income and to a lesser degree a lower non-GAAP effective tax rate and lower diluted shares outstanding.

Turning to slide 11, I will go through the balance sheet, our cash flow performance and shareholder returns.

Our cash flow from operations was $49 million in the first half of 2025 as compared to $14 million in the first half of the prior year.

Speaker #6: These increases are partially offset by adverse foreign currency movements. Turning to slide 11, I will go through the balance sheet, our cash flow performance, and shareholder returns.

Further we had non-GAAP adjusted free cash flow of $47 million in the first half of 2025 as compared to $5 million of non-GAAP adjusted free cash flow over the same period last year.

Speaker #6: Our cash flow from operations was $49 million in the first half of 2025 as compared to $14 million in the first half of the prior year.

This represents our strongest first half non-GAAP adjusted free cash flow result in a decade and is driven primarily by our increased operating margins and improvements in our working capital, including changes in our variable incentive compensation.

Speaker #6: Further, we had non-GAAP adjusted free cash flow of $47 million in the first half of 2025, as compared to $5 million of non-GAAP adjusted free cash flow over the same period last year.

Speaker #6: This represents our strongest first half non-GAAP adjusted free cash flow result in a decade. And is driven primarily by our increased operating margins and improvements in our working capital including changes in our variable incentive compensation.

Moving on we ended the second quarter of 2025, with a $146 million of cash and cash equivalents.

That along with our outstanding debt at June 32025.

<unk> $404 million of net debt and our net debt leverage ratio sits at one five times adjusted EBITDA.

Speaker #6: Moving on, we ended the second quarter of 2025 with $146 million of cash and cash equivalents. That, along with our outstanding debt at June 30th, 2025, resulted in $440 million of net debt.

Further we have $621 million in liquidity as of the end of the quarter.

Turning to page I'll revisit our 2025 guidance.

Speaker #6: And our net debt leverage ratio sits at 1.5 times adjusted EBITDA. Further, we have $621 million in liquidity as of the end of the quarter.

Marie we are raising our profitability targets for the second quarter in a row, while simultaneously increasing our non-GAAP adjusted free cash flow target, partially driven by a lower effective tax rate further.

Speaker #6: Turning the page, our revisit our 2025 guidance targets. In summary, we are raising our profitability targets for the second quarter in a row. While simultaneously increasing our non-GAAP adjusted free cash flow targets.

Further we are reiterating all other guidance targets for full year 2025.

And as Brian mentioned, we are reiterating our original revenue guidance range, but believe total revenue growth will likely come in between 2% and 3% just like we messaged on our last earnings call, primarily driven by continued small headwinds in the North American broadband market.

Speaker #6: Partially driven by a lower effective tax rate. Further, we are reiterating all other guidance targets for full-year 2025. And as Brian mentioned, we are reiterating our original revenue guidance range but believe total revenue growth will likely come in between 2% and 3%, just like we messaged on our last earnings call.

Lately elongated sales cycles.

We also wanted to note that we terminated the contract with a Latin American telecommunications customer in July.

Speaker #6: Primarily driven by continued small headwinds in the North American broadband market and slightly elongated sales cycles. We also wanted to note that we terminated a contract with a Latin American telecommunications customer in July.

This customer accounted for $1 $4 million.

First half 2025 revenue.

We do not expect this contract termination had a significant impact on our 2025 revenue.

From a revenue facing perspective, we now expect approximately 49% of our full year revenue that come from our first half performance and 51% will be generated in the second half with Q4 revenue expected to be higher than Q3 revenue consistent with our historical norms.

Speaker #6: This customer accounted for $1.4 million of first half 2025 revenue. We do not expect this contract termination to have a significant impact on our 2025 revenue.

Speaker #6: From a revenue phasing perspective, we now expect approximately 49% of our full-year revenue to have come from our first half performance. And 51% will be generated in the second half with Q4 revenue expected to be higher than Q3 revenue consistent with our historical norms.

Wrapping up on guidance, while it is early we are likely to be in the similar 2% to 4% revenue growth range in 2020.

Wrapping up we love what we see in our business powered by our operating discipline R&D innovation and ongoing sales.

Speaker #6: Wrapping up on guidance, while it is early, we are likely to be in a similar 2% to 4% revenue growth range in 2026. Wrapping up, we love what we see in our business, powered by our operating discipline, R&D innovation, and ongoing sales moves.

BSG will continue to relentlessly prioritize every investment we make and stay very disciplined in the allocation of resources and the use of capital.

Innovation, including how we leverage the transformative power of AI across ESG and in adherence to our risk reward framework with continuous learning our key cornerstones of how we have and will continue to grow top and bottom result, even faster.

Speaker #6: CSG will continue to relentlessly prioritize every investment we make and stay very disciplined in the allocation of resources, and the use of capital. 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 result even faster.

ESG is well positioned with a strong sales pipeline and our high quality recurring revenue customer base, we remain.

<unk> committed to accelerating and diversifying our revenue growth, which may include closing and integrating disciplined value, adding acquisitions. We believe this approach combined with our consistent capital distributions will serve our shareholders well.

Speaker #6: 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.

With that I will turn it over to the operator to facilitate the question and answer session.

Speaker #6: We believe this approach combined with our consistent capital distribution will serve our shareholders well. With that, I will turn it over to the operator to facilitate the question and answer session.

And with that ladies and gentlemen, if you would like to ask a question you May press star one on your telephone keypad.

Again, Thats star one to join the question queue.

The first step we have Dan Bergstrom of RBC capital markets.

Speaker #7: And with that, ladies and gentlemen, if you would like ask a question, you may press star one on your telephone keypad. Again, that's star one to join the question queue.

Hello, Thanks for taking my questions, maybe just to start on the broader macro environment. So is there anything to point out from your perspective. It seems like there's been some uncertainty for a few quarters now you Didnt really point anything out last quarter, whereas other companies did I guess, just anything to point out around that end market.

Speaker #7: But first up, we have Dan Bergstrom of RBC Capital Markets.

Speaker #8: Hello. Thanks for taking my estions. Maybe just to start on the broader macro environment, is there anything to point out from your perspective seems like there's been some uncertainty for a few quarters now?

Where we are now versus the start of the year and where we sit as we enter the back half of the year.

Speaker #8: You didn't really point anything out last quarter, whereas other companies did. I guess just anything to point out around that the end market, you ow, where we are now versus the start of the year or where we sit as we enter the back half of the year?

Yes, no hey, Dan Thanks for joining appreciate the question I mean, what we see is we don't see anything.

That's really changed it.

What we've seen over the last I'd say 12 to 18 months as in the prior three years, we have consistently grown organic revenue kind of five to five 5%.

Speaker #9: Yeah. No. Hey, Dan. Thanks for joining. Appreciate the question. I mean, what we see is we don't see anything that's really changed. What we've en over the last, I'd say, 12 to 18 months is in the prior three years, we've istently grown organic revenue kind of 5 to 5 and a half percent.

What we've seen as we've just seen a little bit more cautiousness and on some of the discretionary spend.

All around the world across different industry verticals, we've just seen decision makers. They are a little more thoughtful and careful on some of those what we see is big strategic decisions transformations, new technology deployments that have a quick payback or a strategic element, we still see our customers, making buying decisions and moving forward.

Speaker #9: And so what we've seen is we've just seen a little bit more cautiousness. And on some of the discretionary spend, all around the world, across different industry verticals, we've just seen decision makers be a little more thoughtful and careful on some of those.

Speaker #9: What we see is big strategic decisions, transformations, new technology deployments that have a quick payback or a strategic element, we still see our customers making buy decisions and moving forward like some of the deals we announced this quarter.

Like some of the deals we announced this quarter, we don't think that's changed but on the margin I would say there is still just a cautiousness and what that's done is that's kind of caused us to be at the lower end like we've said this year. We said, we expect revenue growth in the 2% to 3% range. That's kind of the same thing we've seen over the last several orders in there.

Speaker #9: We don't think that's changed. But on the margin, I would say there's still just a cautiousness. And what that's done is it's kind of caused us to be at the lower end, like we've said this year.

It's kind of what we're seeing heading into Q3 and Q4.

Speaker #9: We think we expect revenue growth in the 2% to 3% range. That's kind of the same thing we've seen over the last several quarters.

That's great helpful. And then there are some large M&A this quarter within the customer base.

Maybe help frame.

Speaker #9: And that's kind of what we're seeing heading into Q3 and Q4.

Acquisitions, such as that from within the base from your perspective I guess.

Have you seen historically when there's been consolidation among customers.

Speaker #8: That's great. Helpful. And then there are some large M&A this quarter within the customer base. Could you maybe help frame acquisitions such as that from within the base from your perspective?

Yes, I mean, I think you may be referring to there was an announcement in the U S cable broadband side of a potential large strategic movements going through the regulatory process now between charter and Cox I mean, what we've seen at least on the cable broadband and telco side globally is for two decades now.

Speaker #8: And I guess, you know, what have you seen historically when there's been consolidation among customers?

Speaker #9: Yeah. I an, I think you may be referring to there was an announcement in the US cable broadband side of a potential large strategic move that's going through the regulatory process now between Charter and Cox.

As consolidation and so that's just a trend that's been there for a few decades and that's likely to continue even though.

Speaker #9: I an, what we've seen at least on the cable broadband and telco side globally is for two decades now is consolidation. And so that's just a trend that's been here for a few decades.

There is just fewer players out there now what we've seen on the CSD side as historically as those acquisitions occur if youre. The large incumbent that's had two to three decade long relationship with some of these players you have served in one of his you've earned the right to keep doing more rhythm. It typically has worked out well for us obviously.

Speaker #9: And that's likely to continue, even though there's just fewer players out there now. What we've seen on the CSG side is historically, as those acquisitions occur, if you're the large incumbent that's had two to three decade-long relationship with some of these players, you've served them well.

Specifically to that when there is time will tell there is no guarantees, but obviously we were successful in displacing a competitor and winning all of the triple play business at charter.

Speaker #9: You've earned the right to keep doing more with them. It typically has worked out well for us. Obviously, if you're specifically to that one, there's time will tell.

Going back a few years ago, so will the pacbio prolonged time will tell so as long as we keep bringing value and serving them well, we like where we're positioned.

Speaker #9: There's no guarantees. But obviously, we were successful in displacing a competitor and winning all of the triple play business at Charter going back a few years ago.

Thank you.

Thanks, so much.

Speaker #9: So will the past be a prologue? Time will tell. As long as we keep bringing value and serving them well, we like where we're positioned.

Alright next up we have Greg Burns.

Dotty.

Good afternoon.

You've been talking you've talked recently about the success, you're having on the global Telecom Global Telecom space.

Speaker #8: Thank you.

Speaker #9: Thanks so much, Dan.

Speaker #7: All right. Next up, we have Greg Burns of Sadati.

Getting into the enterprise division's of this.

Speaker #10: Good noon. You've been talked recently about the success you're having on the global telecom in the global telecom space. Getting into the enterprise divisions of these telecom operators, Orange was a good example that this quarter.

Telecom operators Orange was a good example of that this quarter why is that why is that such a good opportunity for you and are there any examples of you are getting in the door, maybe through the enterprise vertical but expanding beyond that over time.

Yeah, Hey, great. Thanks for joining thanks for the question.

Speaker #10: Why is that? Why is that like such a good opportunity for you? And are there any examples of you getting in the door maybe through the enterprise vertical but expanding beyond that over time?

I think at the end of the day that is kind of where we had signed our differentiated capability is on the enterprise space, we do particularly well where there is complexity.

Speaker #9: Yeah. So hey, Greg. Thanks for joining. Thanks for the question. You know, I think at the end of the ay, that is kind where we have defined our differentiated capability is on the enterprise space.

And.

And we've proven that time and time again specific to Orange, we think we have an industry leading capability on the <unk> side.

Speaker #9: We do particularly well where there's complexity. And we've proven that time and time again, specific to Orange, we think we have an industry-leading capability on the CPQ side, right?

And Thats kind of played itself out it was a very competitive process.

We're just went through obviously orange being a tier one operator.

Pretty diligent in their evaluation.

And it just reinforces that our differentiation differentiated.

Speaker #9: And that's kind of played itself out. It was a very competitive process. That Orange went through, obviously, Orange being a tier one operator, you know, was pretty diligent in their evaluation.

A solution really stood above the rest of the competition and as a result of that announcement by Orange. What we're seeing is we're in a number.

Speaker #9: And it just reinforces our that our differentiated solution really stood above the rest of the competition. And as a result of that announcement by Orange, what we're seeing is we're in a number of conversations now with other operators in the tier one and tier two space.

Conversations with other operators.

In the tier one and tier two space. So I think it's early innings, yet we think it bodes well in terms of our capabilities once again that does.

That is really specialized and differentiated on the enterprise side.

The only thing I might add that's exactly right. Greg you ask the second part of that question have we seen cross sell success and the answer is yes, I can't talk about too specifically.

Speaker #9: So I think it's early innings yet. We think it bodes well in s of our capabilities. Once again, that is really specialized and differentiated on the enterprise side.

Announced in the past big wins and expansions with MTN in South Africa in that case, we actually started many years ago. We won their interconnected wholesale business performed well. We then move to enterprise for all the reasons that <unk> be that high talked about eventually we then serve them well there and we want the consumer there is all.

Speaker #9: No. I think the only thing I might add is exactly right, Hai. Greg, you had asked in the second part of that question, have we seen cross-sell success?

Speaker #9: And the answer is yes. I can talk about two specifically. We've announced in the past big wins and expansions with MTN and South Africa.

Speaker #9: In that case, we actually started many years ago; we won their interconnected wholesale business, performed well, we then moved to enterprise for all the reasons in B2B that Hai talked about.

So an example.

In Asia Pacific, where we started with a wedding the large enterprise business with one customer after they had grown through some additional acquisitions. We then one meaningful piece of business on the consumer so in Austin candidly took.

Speaker #9: And eventually, we then served them well there, and we won the consumer. There's also an example in Asia Pacific where we started with a winning the large enterprise business with one customer, after they had grown through some additional acquisitions, we then won meaningful piece of business on the consumer.

Sure.

<unk> stack, because we can bring more value doesn't always sometimes they run different stacks, but it can.

Great. Thank you.

Thanks, so much Greg.

Speaker #9: So it often can lead to an integrated stack because it can bring more value. Doesn't always. Sometimes they run different stacks, but it can.

Alright next definitely have Matthew Harrigan benchmark.

Thank you I have one down in the weeds question, and then one more or less face the nation Sunday morning show question that I'm sure you'll be.

Speaker #10: Great. Thank you.

Speaker #9: Thanks so much, Greg.

Speaker #7: All right. Next up, we have Matthew Harrigan of Benchmarks.

Delighted with.

I guess honestly go with the latter first.

Speaker #11: Thank you. I have one down in the weeds question, and then one more or less based to nation Sunday morning show question that I'm sure you'll be delighted with.

<unk> got a realistic view of the applications of AI, because you have to deliver.

Right.

So to your clients and Thats, one reason why you've been successful in this.

Speaker #11: I guess I'm actually, I'll actually go with the latter. First, I mean, ou've got a realistic view of the implications of AI because you have to deliver ROI that you can show to your clients.

Bidding processes, but when you look at kind of the Mckinsey view.

All of these effects in global GDP.

A significant percentage points I mean, you'd have to conclude that.

Speaker #11: And that's one reason why you've been successful in these bidding. Processes. But when you look at kind the McKinsey view of AI and all these effects in global GDP, you know, significant percentage points, I mean, you have to conclude that, you know, GDP would be down globally like 3 or 4 percent.

GDP would be down globally like three or 4%. This year if it wasn't for for AI, where do you think we are in the maturation process and Youre kind of an adult in the room, because you don't have to really create the cooler too much because you can show the immediate impact whereas lauder.

Speaker #11: This year, if it wasn't for for AI. Where do you think we are in the maturation process? And you're kind of the adult in the room because you don't have to really drink the Kool-Aid too much because you can show the immediate impact.

It's out there, it's just kind of kind of out there and I know thats kind of a.

Literally the fascination question.

I thought you might have an interesting perspective on it.

Yes, Matt Thanks Love the questions, Yes, ESG is not really to accumulate and highest kind of company as you know.

Speaker #11: Whereas a lot of what's out there is just kind of kind of out there. And I know that's kind literally a face to nation question, but I thought I thought you might have an interesting perspective on it.

What I will tell you is up maybe start with the broader on the on the profitability side, we've talked a lot. The last couple of years about quarter turns the wrench of which I AI is starting to be a contributor now youre going to hear us talk more about half turns the range youre starting to see us take 80% to 90% to 100 basis point.

Speaker #9: Yeah. No. It's not bad. Thanks. Love the question. Yeah. CSG is not really a Kool-Aid and hype kind of company as you ow. What I'll tell you is I'll maybe start with the broader on the on the profitability side we've ked a lot the last couple of years about quarter turns of the wrench.

Steps up and that's through a combination of mix shift operating discipline and I would say AI, if you'd ask us our view.

Speaker #9: Of which AI is starting be a contributor. Now you're going to hear us talk more about half turns of the wrench. You're starting see us take 80 to 90 to 100 basis points steps up.

Four quarters ago, three quarters ago, we said great capability, probably further out we got to experiment, we're going to go a little slower I say, we're getting more bullish on the impact of what AI can do to both enable us to bring much greater value by building it into our products, we are already doing that.

Speaker #9: And that's through a combination of mix shift, operating discipline, and I would say AI, if you ask us our view, four quarters ago, three quarters ago, we'd said great capability, probably further out, we got to experiment, got to go a little slower.

Without exception every one of our products, we are bringing AI and data driven solutions to market as we speak youre seeing it in terms of the efficiency and the quality of our R&D and how we can accelerate R&D and the efficiency in how we can just run our company more cost effectively I would say if anything.

Speaker #9: I say we're etting more bullish on the impact of what AI could do to both enable us to bring much greater value by building it into our products.

Speaker #9: We're ready doing that in almost without exception. Every one of our products we're bringing AI and data-driven solutions to market as we speak. You're seeing it in terms of the efficiency and the quality of our R&D and how we can accelerate R&D.

The time horizon of how we get on the EBITDA side from we were at 21% a few years ago. We're now approaching 25 getting to the 28% to 30% in the out years of our five year plan similar things on op margin.

Speaker #9: And the efficiency and how we could just run our company more cost-effectively. I would say if anything, the time horizon of how we get on the EBITDA side from we were at 21% a few years ago, we're now approaching 25.

We think it's going to come faster and be more impactful. Even then we thought two or three quarters ago.

Speaker #9: Getting to the 28 to 30 percent in the out years of our five-year plan. Similar things on op margin. We think it's going to come faster and be more impactful even than we thought two or three quarters ago.

And the second question is supposed to be.

Somewhat of adjunct to the last question former analyst close the facility.

Yes.

Liberty, Puerto Rico I mean.

Taxable sales, but clearly they have some issues integrating AT&T mobile acquisition.

Speaker #10: And the second question this might be somewhat of an adjunct to the last question or the former analyst question from Sadati. Is Liberty Puerto Rico, I mean, you're too tactful to this, but clearly, they had some issues integrating AT&T.

I think there are a lot of instances of telecom companies real really mangled billing system integrations and when they do integrations and thats not to pick on Liberty, Puerto Rico, It seems to happen almost across the board.

Speaker #10: Mobile acquisition. And you know I think there are a lot of instances of telecom companies having really mangled billing system integrations when they do integrations.

When you look at <unk>.

Aspects on the telecom side do you think again.

Speaker #10: And that's not to pick on Liberty Puerto Rico. It seems to happen almost across the board. When you look at prospects on the telecom side, do you think, and again, not talking about companies that have specific integration issues right , but do you think there's just an incredible opportunity not just to displace competitors but to really fix something that maybe companies didn't realize how suboptimized it was?

I'll talk about companies that have specific integration issues right now, but do you think there is just an incredible opportunity not just to displace competitors, but to really.

Fixed something that maybe companies didn't realize how sub optimized there was I mean, even if you, particularly women and stuck in exponent CST exponent as well to complement what you would be doing on the billing side. Thanks.

Yes, no I think.

Speaker #10: I mean, even if you particularly if you ent in and stuck in exponent CSG exponent as well to complement what you would be doing on the billing side.

We do we do see.

We still see customers.

Very thoughtful about billing system conversions I mean, effectively these are the lifeblood of the <unk>.

Speaker #10: Thanks.

Speaker #9: Yeah. No. I ink we do see we still see customers being very thoughtful about billing system conversions. I an, effectively, these are the lifeblood and the ATMs of these companies.

<unk> of these companies and so for them to embrace and make a decision to move off of a swap out a billing system is still a big decision, but what we see in kind of our view strategically is it's a business imperative for many many global telecom operators all around the world and the reason it is.

Speaker #9: And so for them to embrace and make a decision to move off of a or swap out a billing system, it's still a big decision.

Just because they're under a lot of pressure on the Opex side. There is an expectation that there'll be lower price points. They have more capex spend and for them to hit their kind of financial returns. It starts not with a technology refresh it actually starts with a business simplification, becoming more digital and therefore simpler.

Speaker #9: But what we see and kind of our view strategically is it's a business imperative for many, many global telecom operators all around the world.

Speaker #9: And the reason is is because they're under a lot of pressure on the OPEX side. There's an expectation that there'll be lower price points.

Speaker #9: They have more CapEx spend. And for them to hit their kind of financial returns, it starts not with a technology refresh. It actually starts with a business simplification becoming more digital.

Their business process, which could enable them to serve their customers in a new digital AI driven way and often they need new technology. That's also more SaaS and product base that is a trend that is hugely in our favor relative to more services managed services based competitors that we have and we've.

Speaker #9: And therefore, simplifying their business process, which can enable them to serve their customers in a new digital AI-driven way. And often, they need new technology that's also more SaaS and product-based.

Thank you.

It's what's driven a lot of the sales wins, we've had in the last couple of years, we think that can continue and even accelerate but they still tend to be lumpy because it's still a big decision for them debate. So.

Speaker #9: That is a trend that is hugely in our favor relative to more services, managed services-based competitors that we have. And we think it's what's driven a lot of the sales wins we've had in the last couple of years.

We think thats going to continue.

Sorry, it's Brian I'll go through on the Sicario next Wednesday.

Speaker #9: We think that can continue and even accelerate but they still tend to be lumpy because it's still a big decision for them to make.

Yeah.

Thanks, Matt.

Speaker #9: So we think that's going to continue.

Next up we have needs to Lee.

<unk> Fitzgerald.

Speaker #10: Thanks, Brian. I'll get to you on Farid Zakari next Sunday.

Thank you for taking my question.

Congrats on the strong offsetting consistent execution, so Bryan I'd like my question revolves around our longer term strategy that in this quarter I understand that.

Speaker #9: Thanks, Matt.

Speaker #7: Next up, we have Ye Thu Lee of Cantor Fitzgerald.

Speaker #12: Thank you for taking my question. And congrats on the strong steady consistent execution. So you know Brian and Hai, my estion revolves around a lot more longer-term strategy rather than just this quarter.

CST is more disciplined when it comes to M&A.

One I just thought of doing more of a transformational.

Larger M&A deal to kind of like accelerate the diversification whether it be cross border on the U S. What are your thoughts on that and but very.

Speaker #12: Understand that you know CSG is more disciplined when it comes to M&A. What are your thoughts of doing more of a transformational larger M&A deal to kind of like accelerate the diversification whether it be cross-border or in the US?

Articles would it be or adjacency would it be if so.

Yes, no you will.

Come to the company on the call and joining us I appreciate your comments thank.

Speaker #12: What are your thoughts on that? And what verticals would it be or adjacency would it be? If so.

There's really there's really two avenues on the bigger strategic moves.

And yes.

We have moves like that in our sites, we would like to actually execute those.

Speaker #9: Yeah. No. You're welcome to the company and the call and joining us. I appreciate your comments. There's

We've always talked about we're pretty disciplined acquirer and so therefore to do the bigger deals we've got to get those right and so we've had a great track record we want to keep that great track record going the bigger moves would really fall into two categories. One is the core of what we do is we help large brands in multiple verticals.

Speaker #12: Thank you.

Speaker #9: really two avenues on the bigger strategic moves. And yes, we have moves like that in our sites. We would like to actually execute those.

Speaker #9: But we've always ked about we're a pretty disciplined acquirer. And so therefore, to do the bigger deals, we've got to get those right. And so we've had a great track record.

Simplify how they sell monetize them engage with their customers in these recurring revenue industry verticals, So where we've had massive success like in the U S cable broadband market in global Telecom is when we had the full integrated stack for that vertical we have the catalog we have the building.

Speaker #9: We want to ep that great track record going. The bigger moves would really fall into two categories. One, at the core of what we do is we help large brands and multiple verticals simplify how they sell, monetize, and engage with their customers in recurring revenue industry verticals.

Wallet workflows, we touch every aspect of their.

Speaker #9: So where we've had massive success, like in the US cable broadband market, in global telecom, is when we have the full integrated stack for that vertical.

Our digital customer engagement and so therefore, what you could see US do is where we've sold CX payments some of our point solutions. In these other verticals you could see us actually did acquire a domain specific monetization platform. So that we can then stitched together with SaaS product integrated workflow so that.

Speaker #9: We have the catalog. We have the billing. We have the wallet. We have the workflows. We touch every aspect of the digital customer engagement.

Speaker #9: And so therefore, what you could see us do is where we've sold CX, payments, some of our point solutions, in these other verticals, you could see us actually then acquire a domain-specific monetization platform so that we can then stitch it together with SaaS product integrated workflow so that we have effectively the ATM, end-to-end workflow for those other verticals.

We have effectively the ATM into a workflow for those over that would be the type of an example of a bigger move that we would look at it.

There are clearly those out there, but we got to get those right. We've talked about the verticals we care most about the other one would be in more of the global.

Speaker #9: That would be the type and example of a bigger move that we would look at. And there are clearly those out there. But we got to get those right.

TMT space is scale acquisition, where we could acquire a good product capability our portfolio expansion.

Speaker #9: We've talked about the verticals we care most about. The other one would be in more of the global TMT space is scale acquisition. Where we could acquire a good product capability, a portfolio expansion, or just a competitor that could actually give us scale at a really attractive pre-synergy price and even more attractive post-synergy price on a cost-synergy basis.

Or just a competitor that can actually give a scale at a really attractive pre synergy price and an even more attractive post synergy priced on a cost synergy basis. Those would typically be the two bigger moves that you might see us do in the coming period of time.

Thank you for that Brian and I just wanted to follow up quickly I know the previous caller talked about NII in AIE says I apologize.

Speaker #9: Those would typically be the two bigger moves that you might see us do in the coming period of time.

I'll have to dial back in as some of the questions I'll answer on that part piece of it I felt like this is an area that that affects everything.

Speaker #12: Thank you for that, an. And I just want to follow up quickly. I know the previous caller talked about Gen AI and AI usage.

In terms of the economics technology to gain efficiency on in terms of leveraging <unk> AI.

Speaker #12: Apology, I dropped off. I have to dial back in if some of the questions are answered on that part. Piece of it. I felt like this is an area that affects everything.

No.

August acquisition of buying a high that like you could it's.

Speaker #12: In terms of the economics, technology that you could gain efficiency on. In terms of leveraging Gen AI, are there targets, acquisition, Brian or Hai, that you could target that can help you accelerate whether it be a specific vertical like customer experience or data fraud protection, that it was a at use case in the financial services.

Target that can help you sell a <unk> specific protocol like customer experience or data protection.

It was a great use case in the financial services I think you mentioned a couple of quarters as well.

That could help you speed up on that.

In terms of that.

Then lastly, Latin America termination contract can you just give us a little more color on why this contract was terminated and thats. It from me. Thank you very much Ken.

Speaker #12: I think you mentioned a uple of quarters as well. That could help you speed up on that. And Hai, in terms of the last Latin America termination contract, can you just give us a little more color on why this contract was terminated?

Thanks, So much I'll cover the first I'll cover the sector and give a little more color.

First we we've done a lot with data even before there was gen AI going back to machine learning natural language processing, we both have built products around data driven CX and we acquired a few years ago, a fantastic industry, leading asset at a great price and multiple.

Speaker #12: And that's it for me. Thank you very much, gentlemen.

Speaker #9: Okay. Thanks so much. I'll cover the first, Hai. I'll cover the second. Give a little more color. First, we've done a lot with data, even before there was Gen AI.

Speaker #9: Going to machine learning, natural language processing, we both have built products around data-driven CX. And we acquired a few years ago a fantastic industry-leading asset at a great price and multiple.

<unk> really moved us in a much bigger way into the data driven CX, we're going to continue to focus on leveraging those assets and I would say from the ecosystem the partnership side.

Speaker #9: That really moved us in a much bigger way into the data-driven CX. We're going to continue to focus on leveraging those assets. And I would say, from the ecosystem, the partnership side, you'll see us leverage large hyperscalers and do more of a partnership play to add more capability.

You'll see us leverage large hyperscale.

And do more of a partnership play to add more capability I don't think youll see us or would anticipate any meaningful M&A move because quite frankly, we see that the multiples of the money getting thrown around as being.

Let's just say.

Speaker #9: I don't think you'll see us or would anticipate any meaningful M&A move because, quite frankly, we see the multiples and the money getting thrown around as being let's just say as not necessarily conducive to shareholder value.

Not necessarily conducive to shareholder value. So we think we can execute it with R&D and partnerships based on the assets that we've already either built or acquired don't anticipate as much on the acquisition side in AI and data.

You want to take the second part of that yes. So the customers did yourself. They are an operator in the Caribbean across multiple different markets.

Speaker #9: So we think we can execute it with R&D and partnerships. Based on the assets that we've already ither built or acquired, don't anticipate as much on the acquisition side in AI and data.

That organization.

Highly respect the leadership and the team the organization, but that organization has gone through quite a number of changes organizationally leadership their balance sheet.

Speaker #9: Hai, you ant to take the second part of that?

Speaker #12: Yeah. So the customer's digital self, they're an operator in the Caribbean across multiple different markets. You know that organization, you ow we highly respect the leadership and the team in that organization.

And so throughout all of that to the extent that there is a change in strategic direction.

Speaker #12: But that organization has gone through quite a number of changes organizationally, the leadership, their balance sheet even. And so throughout all that, to the extent that there's a change in strategic direction, you know that happens, right?

That happens, but at the end of the day, what's important is kind of what we highlighted in the prepared remarks, the revenue impact to us in the first half it's quite small $1 4 million they don't.

The termination does not impact our revenue guidance for the year either right. So that's what I would focus.

Speaker #12: But at the end of the day, what's important is kind of what highlighted in the prepared marks. The revenue impact to us in the first half is quite small, 1.4 million dollars.

Thank you very much high in thinking about supply and keep up the good work.

Thank you.

Alright next up we have <unk> hall chalk sheet of Northland capital markets.

Thank you and congrats on the.

Strong profitability results.

Typically you guys.

Yes.

Assess that the driver of.

Profitability growth are the quarter turns of a bench and then also the ongoing SaaS mix shift.

Was it a <unk>.

50, 50 mix as usual or was it a little bit more tilted towards SaaS mix shifts this year. This.

This quarter.

Yes, so this quarter, specifically, there's a couple of things.

You look at even at the gross margin calculation.

The big year, we do believe a lot of that but the 6 million dollar kind of license nonrecurring license that we talked about that's very high margin.

That I believe drove the kind of outsized improvement.

At the gross margin line, however, with that said, even if you back that number out youre still showing over 100 basis point movement year over year in terms of gross margin improvement and that that is a combination skill.

Improvements in our cost of goods sold primarily around our services.

And therefore, our services margin are improving.

Accrues to gross margin as well as mentioned.

Great.

And then just to pick a little bit here on.

Guidance raised here can you help me understand why doesn't the $3 million.

Translate to an increase in EPS.

Yes, so the biggest one of the things that we talked about in the prepared remarks is the adverse currency impacts most of which are kind of on the balance sheet basis, youll see that in kind of the.

The other line in <unk>.

Great. Uh, and then just to take a little bit here on the guidance rates here C, can you help me? Understand why doesn't the 3 million increase in beta? Translate to an increase in eps?

P&L right at the end of the day, that's mostly revaluation of balance sheet items that flows through our P&L and impact our EPS.

And without that it would be a much bigger.

Impact positive impact on EPS, but with that said the underlying business doing well so as currency movements come back in our favor youll see that outside.

So said another way.

Said another way they are all exactly like you were you're highlighting is without that negative forex impact you would've seen in the 13% EPS.

Year over year growth in first half be even bigger.

Yeah, so the biggest 1 of the things that you, you know, we talked about the preferred remarks nahal is the adverse currency, uh, impact. Most of which are kind of on the balance sheet basis. You'll see that in kind of a, a net other line in the in our pnl, right? At the end of the day, that's mostly revaluation and a balance sheet items that flows through our pnl and impacts that our EPS, right? It's and without that, you know, it would be a much bigger, uh, impact positive impact or EPS. But with that said the, the underlying business is doing well. So as currency movements, come back in our favor, you'll see that outside the Improvement system.

Got it okay, well that was a little bit too easy so I'm going to sneak another one in here.

So send another 1 there.

Brian you mentioned that you're striving for greater profit for every dollar that you invest basically that's that's an ROIC metric.

Is that actual <unk> holds itself to stake.

No I said another way NATO. Exactly like you were you were highlighting is without that negative -4 4X impact. You would have seen the 13% EPS uh year-over-year growth in first half be even bigger.

And what was it say one and three years ago.

Yes look.

If you think about this way right. Our WAC is probably high single digits at this point in time so.

It will be well in excess of that right. That's the way, we think about it and we think about very simplistically. When we make decisions on a day to day basis, the way to translate ROIC to action for.

Got it. Okay, well that was a little bit too easy. So I'm going to take another 1 in here. Um Brian you mentioned that uh you're striving for a greater profit for every dollar that you invest. Basically that's that's an roic metric. Um what is that actual Roc? That CSG holds itself to today

and what was it? Say one in three years ago,

Our team has to think through cash on cash return. So every time, we the team is making investment we are literally thinking about cash on cash return and but the nice part about that Neil is that we fundamentally believe that we're nearly at a tipping point for accelerating.

A possibility because AI.

Others have mentioned and kind of impact.

Alright, Thank you very much.

Thanks, Dave.

Alright next step we have George Notter of Wolfe research.

Hey, guys just to turn on for George just a quick question on AI.

Nearly at a Tipping Point for accelerating uh, growth of possibility. Because AI, as as others have mentioned, it's going to impact them.

See increased competition from AI enabled competitors, especially.

Great, thank you very much.

Thanks Dave.

Given the fact that you guys focus on this complex filling space and yes that would be great on that.

All right. Next up. We have George nder of Wolfe research.

Yes, we really don't see direct competition I think what we see.

On the <unk> side of the business, which has been a strong double digit growth business for us, we really have to get even sharper than we have in our in our selling value proposition and our targeted.

Hey guys, this is Tan on for George. Um just a quick question on AI. Are you guys seeing increased competition? From AI enabled competitors especially in given the fact that you guys focused on this complex billing space? Yeah, any AI. That would be great on that.

Messaging of the value of the use cases, because in some cases.

This can we do it in the company is thinking about can we do it ourselves to reuse a bigger tool do we can do we go with somebody like our <unk> solution. We just have to be sharper and so what we've stayed focus on is really around the use case and the speed of the payback and so far that's worked extremely well for us.

As we continue to grow the business.

We have not seen it would be an impact and part of that in the core of our monetization.

Or even in our payment side of the business and part of that is is just.

Laxity and the interrelated mess of what we do we are effectively the ATM or the entire backbone of everything from customer onboarding customer engagement monetization and so what we find is we can go in and actually optimize that ecosystem that into wins.

Yeah, we we really don't see direct competition. I think what we see is on the CX side of the business, which has been a strong double digit growth business for us, we really have to get even sharper and we have in our in our selling value proposition in our targeted, uh uh messaging of the value and the use cases because in some cases uh this can we do it? Our companies thinking about, can we do it ourselves? Do we use a bigger tool? Do we can, you know do we go with somebody? Like our CSG on our exponent is solution, we just have to be sharper and so what we've stayed focused on is really around the use case and the speed of the payback and so far that's worked extremely well for us as we continue to grow the business. Um, we have not seen it be an impact and part of that in the, in the core of our monetization, uh, or even in our

Way faster and Thats why its having such a positive impact and effect on us and we don't see the risk that you might see and simpler use cases or standalone applications, that's a different model than <unk>.

Great.

Thanks, Thanks for the answer and also.

Is that CX in paints business of the each growing that combo the rule of 30 still.

Are there any changes in each individual one and anymore.

Payments side of the business and part of that is, is just the complexity and the interrelatedness of what we do. We are effectively the ATM or the the entire backbone of everything from customer onboarding, customer engagement. Monetization. And so we we're what we find is, we can go in and actually optimize that ecosystem and that indent way faster. And that's why it's having such a positive impact and effect on us. And we don't see the risk that you might see in simpler, use cases or Standalone applications. That's a different model than where CSG is.

They salaries.

I think in combination youre right its around the world 30, that's kind of where we remain with that said we do expect.

Great. Um thanks. Thanks for the answer and also,

Some acceleration in the back half.

Great. Thanks.

Uh, is that CX and payments business of each growing like that combo, the rule of 30 still? Yeah. Are there any changes in each individual one?

Thanks Terry.

And any more insights. They accelerate, yeah.

All right next up we have Matt <unk> of William Blair.

I think in combination, you're right; it's around the rule of 30. That's kind of where we remain. With that said, we do expect.

I see.

some acceleration in the back half of the

On for Maggie Congrats on the results I guess, how are you thinking about new business pipeline into the second half I know you cited some elongated sales cycles youre still dealing with I guess, what's causing that how are you embedding the newer sales pipeline and close rates and win rates into your outlook.

Great, thanks.

Thanks Terry.

All right, next up we have Matt desort of William Blair.

Hey, Brad Thanks for joining in.

<unk> congratulations on the New addition to the family and look forward to having when she comes back.

What we're seeing in the first like we've talked about pretty much the same as the last few quarters continue to have a strong healthy sales pipeline continued to see a lot of new deals coming into the funnel. We like the same shape of the pipeline. What we've seen is it's just translated into a few singles.

Team, this is Matt on from Maggie. Congrats on the results. I guess. How are you thinking about new business pipeline into the second half? I know you cited some elongated sales Cycles. You're still dealing with I guess. What's causing that. How are you embedding the newer? Sales Pipeline and close rates. Um, and win rates into your outlook.

Percentage lower growth overall that we saw kind of from 2020 to 2023. There is no one aspect of that kind of all parts of our business are performing well with good deal flow, what you're seeing customers two things customers being a little more cautious on the edges needing that strong quick payback to move forward.

And on the margin, we're seeing a little bit of a reduction in discretionary spend that can kind of fluctuate in some quarters, but thats really the difference between what we would have been three years in a row at low 5% organic growth and now were talking more 2% to 3%. So in terms of Q3 to Q4 whenever.

We give guidance, we give we were pretty we call it straight.

Hey Matt thanks for joining and uh give backyard. Congratulations. On the new addition to the family, you look forward to having when she comes back. Uh you know what we're saying in the s first, like we've talked about pretty much the same as the last few quarters continue to have a strong healthy sales pipeline continue to see a lot of new deals coming into the funnel. We like the same shape of the pipeline. What we've seen is is just translated into a few single digit percentage lower growth overall that we saw kind of from 2020 to 2023. There's No 1 aspect of that, kind of all parts of our business are performing well with good deal flow. We're just seeing customers 2 things customers being a little more cautious on the edges needing that Strong Quick payback to move forward and on the margin, we're seeing a little bit of reduction in discretionary spend that can kind of fluctuate in some.

Straight down the middle of the road and so as we talk about this 49 51 split it we talk about to expecting this year's revenue growth to be at the 2% to 3% range that kind of gives you an idea of what we're seeing for Q3 and Q4.

Thanks, and then can I ask about pricing and contract renewals within the big two can you just remind us of the timing of those when you last renewed how the pricing came in versus your expectations and how youre thinking about expansionary opportunities with special clients as spending rebounds.

Quarters. But that's really the difference between what we would have been 3 years in a row at low. 5% are getting growth and now we're talking more 2 to 3%. So in terms of Q3 Q4, uh, whenever we give guidance, we give, you know, we we're pretty, we call it straight down the middle of the road. And so, as we talk about this 4951, split, we talk about 2 expected growth to be at the 2, to 3% range. That kind of gives you an idea of what we're seeing for Q3 and Q4,

<unk>.

Yes, I mean first we are extremely grateful for the business that are big two or top two at all of our customers do with US as a reminder, we have been extremely well positioned we won if you widen the range back to about time I was joining the company we won get converted 9 million subscribers.

How the pricing came in versus your expectations and how you're thinking about expansionary opportunities with those special clients as spending rebounds.

Amdocs at that customer that those conversions were successful we've grown nicely at Comcast we've expanded our business into digital we won meaningful piece of business.

A different area than Triple play cable that we announced in the second half of last year and we're growing well we think we have.

Continued upside and opportunities as long as we can deliver.

Delivering great value, which were fixated on charter a few years later made the decision to consolidate all of their triple play subscribers and move 14 million subscribers off a competitor on to see MSG. We've also expanded our relationship. So if you look at the top two customers.

They've grown about two 6%.

Year over year compounded with us since 2017, some of that's from subscriber gains some of Thats for winning new lines of business.

Yeah, I mean, first, we're we're extremely grateful for the big, the business that our big 2, our top 2, and all of our customers do with us, as a reminder, we've been extremely, well, positioned. We won. If you widen the range back to about the time, I was joining the company, we won and converted 9 million subscribers off. Vamos at that. Customer that those conversions were successful. We've grown nicely at Comcast, we've expanded our business into digital. We won meaningful piece of business in, in a different area than Triple Play cable that we announced in the second half of last year and we've grown grown well. And we, we think we have, uh, continued upside and opportunities as long as we keep, delivering Great Value which we're fixated on Charter. A few years later, made the decision to consolidate all their Triple Play subscribers and move. 14 million subscribers off the competitor. On to CSG. We've also expanded our relationship. So if you look at the top 2 customers,

Even as they sometimes trim some discretionary spending that we grow through that over time.

Far as the renewals.

We just signed here recently in the last couple.

Orders, a best ever renewal with Comcast that takes us out through the end of 2030, there was no price discount given which was a first we did let them avoid some annual price escalators this year.

And we also.

The number of the charter to the largest their contract is through about the second quarter of 2028 at this stage.

Yeah.

Great. Thank you.

Thanks Pat.

And with that I am seeing no further questions in queue. So I'll turn things over to Brian Shepherd for concluding remarks.

Customers, uh, they they've grown about 2.6%, uh, year-over-year compounded with us since 2017. Some of that's from subscriber gains, some of that's from winning, you know, new lines of business, uh, even as they sometimes trim, some discretionary spending that we, uh, grow through that over time. Uh, as far as the renewals, uh, we just signed, uh, here recently in the last couple, uh, quarters a best ever, uh, renewal with with Comcast that takes us out through the end of 2030. There was no price discount given which was a first we did. Let them avoid some annual price escalator this year. Uh, and we also with the number of the charter. The largest their contract is through about the second quarter of 2028 at this stage.

Hey, Thanks, everyone for joining hopefully you can see why we're excited and love what's going on in the business. We are now.

Great. Thank you.

Thanks Matt.

What.

Five weeks into third quarter, we are fixated on trying to ensure that Q3 and Q4 are even more impressive than Q1 and Q2, we've got work to do but that's what we're laser focused super grateful to every citizen here around the world. Thanks for joining.

And with that, I'm seeing no further questions in queue, so I'll turn things over to Brian Shepard for concluding remarks.

All right, ladies and gentlemen, this does conclude your call you may now disconnect your lines and thank you again for joining us today.

Yeah.

Hey, thanks everyone for joining. Hopefully you see why we're excited and love what's going on in the business? Uh, we are now uh What uh 5 weeks in to third quarter. We are fixated on trying to ensure that Q3 and Q4 are even more impressive than q1 and Q2 we got work to do but that's what we're laser focused soon.

Super grateful to every CSG or around the world. Thanks for joining.

All right, ladies and gentlemen this does conclude your call. You may now disconnect your lines and thank you again for joining us today.