美國
證券交易委員會
華盛頓特區20549
表格
（標記一）
根據1934年證券交易法第13或15(d)節的季度報告 |
截至季度結束日期的財務報告
或者
根據1934年證券交易法第13或15(d)節的轉型報告書 |
在過渡期內 到
佣金文件號
(根據其章程規定的註冊人準確名稱)
(所在州或其他司法管轄區) |
（IRS僱主 |
（總部地址，包括郵政編碼）
(註冊人電話號碼，包括區號)
在法案第12(b)條的規定下注冊的證券：
每一類的名稱 |
|
交易 符號: |
|
在其上註冊的交易所的名稱 |
|
|
請用勾號勾選以下內容：（1）在過去的12個月內（或者c註冊人所需要提交此類報告的更短期限內），c註冊人已經提交了根據1934年證券交易法第13或第15（d）條規定需要提交的全部報告；和（2）c註冊人在過去的90天內一直需要遵守此類提交要求。
請用勾號勾選以下內容：c註冊人是否已在過去的12個月內（或c註冊人需要提交此類文件的更短期限內）按照S-T法規第405條規定的要求遞交了每份互動數據文件。
勾選以下選框，指示申報人是大型加速評估提交人、加速評估提交人、非加速評估提交人、小型報告公司或新興成長型公司。關於「大型加速評估提交人」、「加速評估提交人」、「小型報告公司」和「新興成長型公司」的定義，請參見《交易所法規》第12億.2條。
|
☒ |
|
加速文件提交人 |
|
☐ |
|
非加速文件提交人 |
|
☐ |
|
較小的報告公司 |
|
|
新興成長公司 |
|
|
|
|
|
如果是新興成長型公司，在選中複選標記的同時，如果公司已選擇不使用根據證券交易法第13(a)條提供的任何新的或修訂後的財務會計準則的延長過渡期來符合新的或修訂後的財務會計準則，則表明該公司已選擇不使用根據證券交易法第13(a)條提供的任何新的或修訂後的財務會計準則的延長過渡期來符合新的或修訂後的財務會計準則。☐
請在以下方框內打勾，以指示註冊人是否爲殼公司（如交易所法規第12b-2條規定）。 是 ☐ 否
截至2024年11月5日，有
CSG系統國際公司。
2024年9月30日止季度的10-Q表格
指數
|
|
頁碼。 |
|
|
|
第一部分 - 財務信息 |
|
|
|
|
|
項目1。
|
3 |
|
|
|
|
|
4 |
|
|
|
|
|
5 |
|
|
|
|
|
6 |
|
|
|
|
|
8 |
|
|
|
|
|
9 |
|
|
|
|
事項二 |
17 |
|
|
|
|
第3項。 |
27 |
|
|
|
|
事項4。 |
27 |
|
|
|
|
第二部分 - 其他信息 |
|
|
|
|
|
項目1。 |
29 |
|
|
|
|
項目1A。 |
29 |
|
|
|
|
事項二 |
29 |
|
|
|
|
項目5。 |
29 |
|
|
|
|
項目6。 |
29 |
|
|
|
|
|
30 |
|
|
|
|
|
31 |
|
2
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED
(in thousands)
|
|
September 30, 2024 |
|
|
December 31, 2023 |
|
||
ASSETS |
|
|
|
|
|
|
||
Current assets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Settlement and merchant reserve assets |
|
|
|
|
|
|
||
Trade accounts receivable: |
|
|
|
|
|
|
||
Billed, net of allowance of $ |
|
|
|
|
|
|
||
Unbilled |
|
|
|
|
|
|
||
Income taxes receivable |
|
|
|
|
|
|
||
Other current assets |
|
|
|
|
|
|
||
Total current assets |
|
|
|
|
|
|
||
Non-current assets: |
|
|
|
|
|
|
||
Property and equipment, net of depreciation of $ |
|
|
|
|
|
|
||
Operating lease right-of-use assets |
|
|
|
|
|
|
||
Software, net of amortization of $ |
|
|
|
|
|
|
||
Goodwill |
|
|
|
|
|
|
||
Acquired customer contracts, net of amortization of $ |
|
|
|
|
|
|
||
Customer contract costs, net of amortization of $ |
|
|
|
|
|
|
||
Deferred income taxes |
|
|
|
|
|
|
||
Other assets |
|
|
|
|
|
|
||
Total non-current assets |
|
|
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
||
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
|
||
Current portion of long-term debt |
|
$ |
|
|
$ |
|
||
Operating lease liabilities |
|
|
|
|
|
|
||
Customer deposits |
|
|
|
|
|
|
||
Trade accounts payable |
|
|
|
|
|
|
||
Accrued employee compensation |
|
|
|
|
|
|
||
Settlement and merchant reserve liabilities |
|
|
|
|
|
|
||
Deferred revenue |
|
|
|
|
|
|
||
Income taxes payable |
|
|
|
|
|
|
||
Other current liabilities |
|
|
|
|
|
|
||
Total current liabilities |
|
|
|
|
|
|
||
Non-current liabilities: |
|
|
|
|
|
|
||
Long-term debt, net of unamortized discounts of $ |
|
|
|
|
|
|
||
Operating lease liabilities |
|
|
|
|
|
|
||
Deferred revenue |
|
|
|
|
|
|
||
Income taxes payable |
|
|
|
|
|
|
||
Deferred income taxes |
|
|
|
|
|
|
||
Other non-current liabilities |
|
|
|
|
|
|
||
Total non-current liabilities |
|
|
|
|
|
|
||
Total liabilities |
|
|
|
|
|
|
||
Stockholders' equity: |
|
|
|
|
|
|
||
Preferred stock, par value $ |
|
|
|
|
|
|
||
Common stock, par value $ |
|
|
|
|
|
|
||
Additional paid-in capital |
|
|
|
|
|
|
||
Treasury stock, at cost; |
|
|
( |
) |
|
|
( |
) |
Accumulated other comprehensive income (loss): |
|
|
|
|
|
|
||
Unrealized gain on short-term investments, net of tax |
|
|
|
|
|
|
||
Cumulative foreign currency translation adjustments |
|
|
( |
) |
|
|
( |
) |
Accumulated earnings |
|
|
|
|
|
|
||
Total stockholders' equity |
|
|
|
|
|
|
||
Total liabilities and stockholders' equity |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
(in thousands, except per share amounts)
|
Quarter Ended |
|
|
Nine Months Ended |
|
|
||||||||||
|
September 30, 2024 |
|
|
September 30, 2023 |
|
|
September 30, 2024 |
|
|
September 30, 2023 |
|
|
||||
Revenue |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of revenue (exclusive of depreciation, shown separately below) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling, general and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restructuring and reorganization charges |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other, net |
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
Total other |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income tax provision |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Net income |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earnings per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - UNAUDITED
(in thousands)
|
|
Quarter Ended |
|
|
Nine Months Ended |
|
|
||||||||||
|
|
September 30, 2024 |
|
|
September 30, 2023 |
|
|
September 30, 2024 |
|
|
September 30, 2023 |
|
|
||||
Net income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
Other comprehensive income (loss), net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency translation adjustments |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
||
Other comprehensive income (loss), net of tax |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
||
Total comprehensive income, net of tax |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - UNAUDITED
(in thousands)
|
Shares of Common Stock Outstanding |
|
Common Stock |
|
Additional Paid-in Capital |
|
Treasury Stock |
|
Accumulated Other Comprehensive Income (Loss) |
|
Accumulated Earnings |
|
Total Stockholders' Equity |
|
|||||||
For the Nine Months Ended September 30, 2024: |
|
||||||||||||||||||||
BALANCE, January 1, 2024 |
|
|
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
|
$ |
|
|||||
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Net income |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
||
Foreign currency translation adjustments |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
( |
) |
|
- |
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Repurchase of common stock |
|
( |
) |
|
( |
) |
|
( |
) |
|
( |
) |
|
- |
|
|
- |
|
|
( |
) |
Issuance of common stock pursuant to employee stock |
|
|
|
- |
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
|||
Issuance of restricted common stock pursuant to |
|
|
|
|
|
( |
) |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
||
Cancellation of restricted common stock issued |
|
( |
) |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Stock-based compensation expense |
|
- |
|
|
- |
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
||
Dividends |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
( |
) |
|
( |
) |
BALANCE, March 31, 2024 |
|
|
|
|
|
|
|
( |
) |
|
( |
) |
|
|
|
|
|||||
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Net income |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
||
Foreign currency translation adjustments |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
( |
) |
|
- |
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Repurchase of common stock |
|
( |
) |
|
- |
|
|
( |
) |
|
( |
) |
|
- |
|
|
- |
|
|
( |
) |
Issuance of common stock pursuant to employee stock |
|
|
|
- |
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
|||
Issuance of restricted common stock pursuant to |
|
|
|
|
|
( |
) |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
||
Cancellation of restricted common stock issued |
|
( |
) |
|
( |
) |
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
Stock-based compensation expense |
|
- |
|
|
- |
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
||
Dividends |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
( |
) |
|
( |
) |
BALANCE, June 30, 2024 |
|
|
|
|
|
|
|
( |
) |
|
( |
) |
|
|
|
|
|||||
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Net income |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
||
Foreign currency translation adjustments |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
- |
|
|
|
||
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Repurchase of common stock |
|
( |
) |
|
- |
|
|
( |
) |
|
( |
) |
|
- |
|
|
- |
|
|
( |
) |
Issuance of common stock pursuant to employee stock |
|
|
|
- |
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
|||
Issuance of restricted common stock pursuant to |
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
Cancellation of restricted common stock issued |
|
( |
) |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Stock-based compensation expense |
|
- |
|
|
- |
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
||
Dividends |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
( |
) |
|
( |
) |
BALANCE, September 30, 2024 |
|
|
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
|
$ |
|
|||||
6
|
Shares of Common Stock Outstanding |
|
Common Stock |
|
Additional Paid-in Capital |
|
Treasury Stock |
|
Accumulated Other Comprehensive Income (Loss) |
|
Accumulated Earnings |
|
Total Stockholders' Equity |
|
|||||||
For the Nine Months Ended September 30, 2023: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
BALANCE, January 1, 2023 |
|
|
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
|
$ |
|
|||||
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Net income |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
||
Foreign currency translation adjustments |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
- |
|
|
|
||
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Repurchase of common stock |
|
( |
) |
|
( |
) |
|
( |
) |
|
|
|
- |
|
|
- |
|
|
( |
) |
|
Issuance of common stock pursuant to employee stock |
|
|
|
- |
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
|||
Issuance of restricted common stock pursuant to |
|
|
|
|
|
( |
) |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
||
Cancellation of restricted common stock issued |
|
( |
) |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Stock-based compensation expense |
|
- |
|
|
- |
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
||
Dividends |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
( |
) |
|
( |
) |
BALANCE, March 31, 2023 |
|
|
|
|
|
|
|
( |
) |
|
( |
) |
|
|
|
|
|||||
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Net income |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
||
Foreign currency translation adjustments |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
- |
|
|
|
||
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Repurchase of common stock |
|
( |
) |
|
- |
|
|
( |
) |
|
- |
|
|
- |
|
|
- |
|
|
( |
) |
Issuance of common stock pursuant to employee stock |
|
|
|
- |
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
|||
Issuance of restricted common stock pursuant to |
|
|
|
|
|
( |
) |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
||
Cancellation of restricted common stock issued |
|
( |
) |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Stock-based compensation expense |
|
- |
|
|
- |
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
||
Dividends |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
( |
) |
|
( |
) |
BALANCE, June 30, 2023 |
|
|
|
|
|
|
|
( |
) |
|
( |
) |
|
|
|
|
|||||
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Net income |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
||
Foreign currency translation adjustments |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
( |
) |
|
- |
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Repurchase of common stock |
|
( |
) |
|
- |
|
|
( |
) |
|
( |
) |
|
- |
|
|
- |
|
|
( |
) |
Issuance of common stock pursuant to employee stock |
|
|
|
- |
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
|||
Issuance of restricted common stock pursuant to |
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
Cancellation of restricted common stock issued |
|
( |
) |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Stock-based compensation expense |
|
- |
|
|
- |
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
||
Purchase of capped call transactions (net of tax) |
|
- |
|
|
- |
|
|
( |
) |
|
- |
|
|
- |
|
|
- |
|
|
( |
) |
Dividends |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
( |
) |
|
( |
) |
BALANCE, September 30, 2023 |
|
|
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
|
$ |
|
|||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(in thousands)
|
Nine Months Ended |
|
|
|||||
|
September 30, 2024 |
|
|
September 30, 2023 |
|
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
||
Net income |
$ |
|
|
$ |
|
|
||
Adjustments to reconcile net income to net cash provided by operating activities- |
|
|
|
|
|
|
||
Depreciation |
|
|
|
|
|
|
||
Amortization |
|
|
|
|
|
|
||
Asset impairment |
|
|
|
|
|
|
||
Gain on lease modifications |
|
|
|
|
( |
) |
|
|
Unrealized foreign currency transaction (gain) loss, net |
|
|
|
|
( |
) |
|
|
Deferred income taxes |
|
( |
) |
|
|
( |
) |
|
Stock-based compensation |
|
|
|
|
|
|
||
Changes in operating assets and liabilities, net of acquired amounts: |
|
|
|
|
|
|
||
Trade accounts receivable, net |
|
( |
) |
|
|
( |
) |
|
Other current and non-current assets and liabilities |
|
( |
) |
|
|
( |
) |
|
Income taxes payable/receivable |
|
( |
) |
|
|
( |
) |
|
Trade accounts payable and accrued liabilities |
|
( |
) |
|
|
( |
) |
|
Deferred revenue |
|
|
|
|
|
|
||
Net cash provided by operating activities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Cash flows from investing activities: |
|
|
|
|
|
|
||
Purchases of software, property, and equipment |
|
( |
) |
|
|
( |
) |
|
Proceeds from sale/maturity of short-term investments |
|
|
|
|
|
|
||
Business combinations, net of cash and settlement assets acquired of $ |
|
|
|
|
|
|
||
Net cash provided by (used in) investing activities |
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
||
Cash flows from financing activities: |
|
|
|
|
|
|
||
Proceeds from issuance of common stock |
|
|
|
|
|
|
||
Payment of cash dividends |
|
( |
) |
|
|
( |
) |
|
Repurchase of common stock |
|
( |
) |
|
|
( |
) |
|
Deferred acquisition payments |
|
( |
) |
|
|
( |
) |
|
Proceeds from long-term debt |
|
|
|
|
|
|
||
Payments on long-term debt |
|
( |
) |
|
|
( |
) |
|
Purchase of capped call transactions related to convertible notes |
|
|
|
|
( |
) |
|
|
Payments of deferred financing costs |
|
|
|
|
( |
) |
|
|
Payments on financing obligations |
|
( |
) |
|
|
|
|
|
Settlement and merchant reserve activity |
|
( |
) |
|
|
( |
) |
|
Net cash used in financing activities |
|
( |
) |
|
|
( |
) |
|
Effect of exchange rate fluctuations on cash, cash equivalents, and restricted cash |
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
||
Net decrease in cash, cash equivalents, and restricted cash |
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
||
Cash, cash equivalents, and restricted cash, beginning of period |
|
|
|
|
|
|
||
Cash, cash equivalents, and restricted cash, end of period |
$ |
|
|
$ |
|
|
||
|
|
|
|
|
|
|
||
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
||
Cash paid during the period for- |
|
|
|
|
|
|
||
Interest |
$ |
|
|
$ |
|
|
||
Income taxes |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Non-cash investing and financing activities- |
|
|
|
|
|
|
||
Software, property, and equipment included in current and noncurrent liabilities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Reconciliation of cash, cash equivalents, and restricted cash: |
|
|
|
|
|
|
||
Cash and cash equivalents |
$ |
|
|
$ |
|
|
||
Settlement and merchant reserve assets |
|
|
|
|
|
|
||
Restricted cash included in current and non-current assets |
|
|
|
|
|
|
||
Total cash, cash equivalents, and restricted cash |
$ |
|
|
$ |
|
|
||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8
CSG SYSTEMS INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. GENERAL
We have prepared the accompanying unaudited condensed consolidated financial statements as of September 30, 2024 and December 31, 2023, and for the quarters and nine months ended September 30, 2024 and 2023, in accordance with accounting principles generally accepted in the United States of America (“U.S.”) (“GAAP”) for interim financial information, and pursuant to the instructions to Form 10-Q and the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of our management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of our financial position and operating results have been included. The unaudited Condensed Consolidated Financial Statements (the “Financial Statements”) should be read in conjunction with the Consolidated Financial Statements and notes thereto, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), contained in our Annual Report on Form 10-K for the year ended December 31, 2023 (our “2023 10-K”), filed with the SEC. The results of operations for the quarter and nine months ended September 30, 2024 are not necessarily indicative of the expected results for the entire year ending December 31, 2024.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue. The majority of our future revenue is related to our customer contracts for our SaaS and related solutions that include variable consideration dependent upon a series of monthly volumes and/or daily usage of services and have contractual terms ending from
The nature, amount, timing, and uncertainty of our revenue and how revenue and cash flows are affected by economic factors is most appropriately depicted by revenue type, geographic region, and customer vertical.
Revenue by type for the quarters and nine months ended September 30, 2024 and 2023 was as follows (in thousands):
|
|
Quarter Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, 2024 |
|
|
September 30, 2023 |
|
|
September 30, 2024 |
|
|
September 30, 2023 |
|
||||
SaaS and related solutions |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Software and services |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Maintenance |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
We use the location of the customer as the basis of attributing revenue to geographic regions. Revenue by geographic region for the quarters and nine months ended September 30, 2024 and 2023, as a percentage of our total revenue, was as follows:
|
|
Quarter Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, 2024 |
|
|
September 30, 2023 |
|
|
September 30, 2024 |
|
|
September 30, 2023 |
|
||||
Americas (principally the U.S.) |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Europe, Middle East, and Africa |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Asia Pacific |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Total revenue |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
9
We generate our revenue primarily from the global communications markets; however, we serve an expanding group of customers in other markets including retail, financial services, healthcare, insurance, and government entities. Revenue by customer vertical for the quarters and nine months ended September 30, 2024 and 2023, as a percentage of our total revenue, was as follows:
|
|
Quarter Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, 2024 |
|
|
September 30, 2023 |
|
|
September 30, 2024 |
|
|
September 30, 2023 |
|
||||
Broadband/Cable/Satellite |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Telecommunications |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Other |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Total revenue |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Deferred revenue recognized during the quarters ended September 30, 2024 and 2023 was $
Cash and Cash Equivalents. We consider all highly liquid investments with original maturities of three months or less as of the date of purchase to be cash equivalents. As of September 30, 2024 and December 31, 2023, our cash equivalents consist primarily of institutional money market funds and time deposits held at major banks. For the cash and cash equivalents denominated in foreign currencies and/or located outside the U.S., we do not anticipate any material amounts being unavailable for use in running our business, but may face limitations on moving cash out of certain foreign jurisdictions due to currency controls and potential negative economic consequences.
Settlement and Merchant Reserve Assets and Liabilities. Settlement assets and settlement liabilities represent cash collected on behalf of merchants via payments processing services which is held for an established holding period until settlement with the customer. The holding period is generally to business days depending on the payment model and contractual terms with the customer. During the holding period, cash is subject to restriction and segregation based on the nature of our custodial relationship with the merchants. Should we fail to remit these funds to our merchants, the merchant's sole recourse for payment would be against us. These rights and obligations are set forth in the contracts between us and the merchants. Settlement assets are held with various major financial institutions and a corresponding liability is recorded for the amounts owed to the customer. At any given time, there may be differences between the cash held and the corresponding liability due to the timing of operating-related cash transfers.
Merchant reserve assets/liabilities represent deposits collected from merchants to mitigate our risk of loss due to nonperformance of settlement obligations initiated by those merchants using our payments processing services, or non-payment by customers for services rendered by us. We perform a credit risk evaluation on each customer based on multiple criteria, which provides the basis for the deposit amount required for each merchant. For the duration of our relationship with each merchant, we hold their reserve deposits with major financial institutions. We hold these funds in separate accounts, which are offset by corresponding liabilities.
The following table summarizes our settlement and merchant reserve assets and liabilities as of the indicated periods (in thousands):
|
|
September 30, 2024 |
|
|
December 31, 2023 |
|
||||||||||
|
|
Assets |
|
|
Liabilities |
|
|
Assets |
|
|
Liabilities |
|
||||
Settlement assets/liabilities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Merchant reserve assets/liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
10
Financial Instruments. Our financial instruments as of September 30, 2024 and December 31, 2023 include cash and cash equivalents, settlement and merchant reserve assets and liabilities, accounts receivable, accounts payable, and debt. Due to their short maturities, the carrying amounts of cash equivalents, settlement and merchant reserve assets and liabilities, accounts receivable, and accounts payable approximate their fair value.
We have chosen not to record our debt at fair value, with changes recognized in earnings each reporting period. The following table indicates the carrying value and estimated fair value of our debt as of the indicated periods (in thousands):
|
|
September 30, 2024 |
|
|
December 31, 2023 |
|
||||||||||
|
|
Carrying Value |
|
|
Fair Value |
|
|
Carrying Value |
|
|
Fair Value |
|
||||
2023 Convertible Notes (par value) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
2021 Credit Agreement (carrying value including |
|
|
|
|
|
|
|
|
|
|
|
|
||||
The fair value of our convertible notes was estimated based upon quoted market prices or recent sales activity, while the fair value of our credit agreement was estimated using a discounted cash flow methodology, both of which are considered Level 2 inputs. See Note 4 for a discussion regarding our debt.
Pillar Two. Numerous foreign jurisdictions have enacted, or are in the process of enacting, legislation to adopt a minimum effective tax rate. Pillar Two, which was established by the Organization for Economic Co-operation and Development (OECD), generally provides for a 15% minimum effective tax rate for multinational enterprises in every jurisdiction in which they operate. The U.S. has not yet adopted Pillar Two, however, various other governments around the world have. These rules did not have a material impact on our taxes for the quarter and nine months ended September 30, 2024. We continue to monitor evolving tax legislation in the jurisdictions in which we operate.
Accounting Pronouncements Issued but Not Yet Effective. In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280), (“ASU 2023-07”), which enhances reportable segment disclosure requirements in part by requiring entities to disclose significant expenses related to their reportable segments. ASU 2023-07 also requires disclosure of the title and position of the company’s Chief Operating Decision Maker (“CODM”) and how the CODM uses financial reporting to assess segment performance and allocate resources. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The adoption of this standard only impacts disclosures and is not expected to have a material impact on our Financial Statements.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which requires entities to disclose more detailed information about their effective tax rate reconciliation as well as information on income taxes paid. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. The adoption of this standard only impacts disclosures and is not expected to have a material impact on our Financial Statements.
3. GOODWILL AND INTANGIBLE ASSETS
Goodwill.
January 1, 2024, balance |
|
$ |
|
|
Effects of changes in foreign currency exchange rates |
|
|
|
|
Goodwill acquired during the period |
|
|
|
|
September 30, 2024, balance |
|
$ |
|
Goodwill acquired during the period relates to the acquisitions discussed in Note 5.
Other Intangible Assets. Our other intangible assets subject to ongoing amortization consist of acquired customer contracts and software.
|
|
September 30, 2024 |
|
|
December 31, 2023 |
|
||||||||||||||||||
|
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net Amount |
|
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net Amount |
|
||||||
Acquired customer contracts |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Software |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Total other intangible assets |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Acquired customer contracts and software as of September 30, 2024 include the assets acquired as part of the acquisitions discussed in Note 5.
11
The total amortization expense related to other intangible assets for the third quarters of 2024 and 2023 was $
Customer Contract Costs. As of September 30, 2024 and December 31, 2023, the carrying values of our customer contract cost assets, related to those contracts with a contractual term greater than one year, were as follows (in thousands):
|
|
September 30, 2024 |
|
|
December 31, 2023 |
|
||||||||||||||||||
|
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net Amount |
|
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net Amount |
|
||||||
Customer contract costs |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
The total amortization expense related to customer contract costs for the third quarters of 2024 and 2023 was $
4. DEBT
As of September 30, 2024 and December 31, 2023, our long-term debt was as follows (in thousands):
|
|
September 30, |
|
|
December 31, |
|
||
2023 Convertible Notes: |
|
|
|
|
|
|
||
2023 Convertible Notes – senior unsecured convertible notes, due |
|
$ |
|
|
$ |
|
||
Less – deferred financing costs |
|
|
( |
) |
|
|
( |
) |
2023 Convertible Notes, net of unamortized discounts |
|
|
|
|
|
|
||
2021 Credit Agreement: |
|
|
|
|
|
|
||
2021 Term Loan, due , interest at adjusted SOFR plus |
|
|
|
|
|
|
||
Less – deferred financing costs |
|
|
( |
) |
|
|
( |
) |
2021 Term Loan, net of unamortized discounts |
|
|
|
|
|
|
||
$ |
|
|
|
|
|
|
||
Total debt, net of unamortized discounts |
|
|
|
|
|
|
||
Current portion of long-term debt |
|
|
( |
) |
|
|
( |
) |
Long-term debt, net of unamortized discounts |
|
$ |
|
|
$ |
|
||
2023 Convertible Notes. The 2023 Convertible Notes will be convertible at the option of the noteholders before June 15, 2028, upon the occurrence of certain events. On or after June 15, 2028, and until the close of business on the second scheduled trading day immediately preceding September 15, 2028, the maturity date, noteholders may convert all or any portion of their notes at any time regardless of these conditions.
The 2023 Convertible Notes will be convertible at an initial conversion rate of
We are required to satisfy our conversion obligation as follows: (i) paying cash up to the aggregate principal amount of notes to be converted; and (ii) to the extent the value of our conversion obligation exceeds the par value, we will satisfy the remaining conversion obligation in our common stock, cash, or a combination thereof, at our election. As of September 30, 2024, none of the conditions to early convert have been met.
We may not redeem the 2023 Convertible Notes prior to September 21, 2026. On or after
12
In connection with the pricing of the 2023 Convertible Notes, we entered into privately negotiated capped call transactions (the “Capped Call Transactions”) with certain of the initial purchasers of the 2023 Convertible Notes and other financial institutions (collectively, the “Option Counterparties”). As of September 30, 2024, all the Capped Call Transactions were outstanding and cover, subject to anti-dilution adjustments substantially similar to those applicable to the 2023 Convertible Notes,
2021 Credit Agreement. During the nine months ended September 30, 2024, we made $
As of September 30, 2024, our interest rate on the 2021 Term Loan was
The interest rates under the 2021 Credit Agreement are based upon our choice of an adjusted SOFR rate plus an applicable margin of
Other. We finance certain of our internal use software. During the nine months ended September 30, 2024, we entered into two additional financing agreements at a total cost of $
5. ACQUISITIONS
Prior Years Acquisition. On
The DGIT acquisition includes provisions for up to approximately $
Current Year Acquisitions. On
The preliminary estimated fair values of assets acquired primarily include goodwill of $
On
The iCG Pay acquisition includes provisions for up to $
13
The preliminary estimated fair values of assets acquired primarily include settlement assets of $
The cash paid for the acquisitions discussed above, less cash and settlement assets acquired, resulted in net cash provided by business combinations for the nine months ended September 30, 2024 of $
6. RESTRUCTURING AND REORGANIZATION CHARGES
During the third quarters of 2024 and 2023, we recorded restructuring and reorganization charges of $
During the nine months ended September 30, 2024, we reduced our global workforce by approximately
The activity in the restructuring and reorganization reserves during the nine months ended September 30, 2024 was as follows (in thousands):
|
|
Termination Benefits |
|
|
Other |
|
|
Total |
|
|||
January 1, 2024, balance |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Charged to expense during period |
|
|
|
|
|
|
|
|
|
|||
Cash payments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Adjustment for accelerated depreciation |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Other |
|
|
|
|
|
|
|
|
|
|||
September 30, 2024, balance |
|
$ |
|
|
$ |
|
|
$ |
|
|||
During the nine months ended September 30, 2024, we paid $
As of September 30, 2024, $
7. COMMITMENTS, GUARANTEES AND CONTINGENCIES
Guarantees. In the ordinary course of business, we may provide guarantees in the form of bid bonds or performance bonds. As of September 30, 2024, we had $
We have performance guarantees in the form of surety bonds and standby letters of credit, along with money transmitter bonds, issued through third-parties that are not required to be reflected on our Balance Sheets. As of September 30, 2024, we had performance guarantees of $
Warranties. We generally warrant that our solutions and related offerings will conform to published specifications, or to specifications provided in an individual customer arrangement, as applicable. The typical warranty period is
Solution and Services Indemnifications. Arrangements with our customers generally include an indemnification provision that will indemnify and defend a customer in actions brought against the customer that claim our products and/or services infringe upon a copyright, trade secret, or valid patent. Historically, we have not incurred any significant costs related to such indemnification claims, and as a result, do not maintain a reserve for such exposure.
14
Claims for Company Non-performance. Our arrangements with our customers typically limit our liability for breach to a specified amount of the direct damages incurred by the customer resulting from the breach. From time-to-time, these arrangements may also include provisions for possible liquidated damages or other financial remedies for our non-performance, or in the case of certain of our solutions, provisions for damages related to service level performance requirements. The service level performance requirements typically relate to system availability and timeliness of service delivery. As of September 30, 2024, we believe we have adequate reserves, based on our historical experience, to cover any reasonably anticipated exposure as a result of our nonperformance for any past or current arrangements with our customers.
Indemnifications Related to Officers and the Board of Directors. Other guarantees include promises to indemnify, defend, and hold harmless our directors, and certain officers. Such indemnification covers any expenses and liabilities reasonably incurred by a person, by reason of the fact that such person is, was, or has agreed to be a director or officer, in connection with the investigation, defense, and settlement of any threatened, pending, or contemplated action, suit, proceeding, or claim. We maintain directors’ and officers’ (“D&O”) insurance coverage to protect against such losses. We have not historically incurred any losses related to these types of indemnifications and are not aware of any pending or threatened actions or claims against any officer or member of our Board of Directors (the "Board"). As a result, we have not recorded any liabilities related to such indemnifications as of September 30, 2024. In addition, as a result of the insurance policy coverage, we believe these indemnification agreements are not significant to our results of operations.
Legal Proceedings. From time to time, we are involved in litigation relating to claims arising out of our operations in the normal course of business.
8. EARNINGS PER COMMON SHARE
Basic and diluted earnings per common share (“EPS”) amounts are presented on the face of our unaudited Condensed Consolidated Statements of Income (the "Income Statements").
The reconciliation of the basic and diluted EPS denominators related to common shares is included in the following table (in thousands):
|
|
Quarter Ended |
|
|
Nine Months Ended |
|
|
||||||||||
|
|
September 30, 2024 |
|
|
September 30, 2023 |
|
|
September 30, 2024 |
|
|
September 30, 2023 |
|
|
||||
Basic weighted-average common shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Dilutive effect of restricted common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Diluted weighted-average common shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
The dilutive effect of restricted common stock is computed using the treasury stock method. The dilutive effect of the 2023 Convertible Notes is computed using the if-converted method and will only have an effect in those quarterly periods in which our average stock price exceeds the current effective conversion price.
Potentially dilutive common shares related to non-participating unvested restricted stock and stock warrants were excluded from the computation of diluted EPS, as the effect was anti-dilutive, and were not material in any period presented.
9. STOCKHOLDERS’ EQUITY AND EQUITY COMPENSATION PLANS
Stock Repurchase Program. We currently have a stock repurchase program, approved by our Board, authorizing us to repurchase shares of our common stock from time-to-time as market and business conditions warrant (the “Stock Repurchase Program”). During the third quarter and nine months ended September 30, 2024, we repurchased approximately
The excise tax imposed as part of the 2022 Inflation Reduction Act, which is included as a cost of treasury stock, is not reflected in the share repurchase amounts above.
In August 2024, our Board authorized an additional $
15
Stock Repurchases for Tax Withholdings. In addition to the above-mentioned stock repurchases, during the third quarters of 2024 and 2023, we repurchased and then cancelled approximately
Cash Dividends. During the third quarter of 2024, our Board approved a quarterly cash dividend of $
Warrants. In July 2014, in conjunction with the execution of an amendment to our agreement with Comcast Corporation (“Comcast”), we issued stock warrants (the “Warrant Agreement”) for the right to purchase up to
Stock-Based Awards. During the nine months ended September 30, 2024 we granted restricted stock awards to key members of management in the form of: (i) performance-based awards of approximately
During the nine months ended September 30, 2024, we also granted restricted stock awards to key members of management in the form of time-based awards of approximately
We recorded stock-based compensation expense for the third quarters of 2024 and 2023 of $
16
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The information contained in this MD&A should be read in conjunction with the Financial Statements and Notes thereto included in this Form 10-Q and the audited consolidated financial statements and notes thereto in our 2023 10-K.
Forward-Looking Statements
This report contains a number of forward-looking statements relative to our future plans and our expectations concerning our business and the industries we serve. These forward-looking statements are based on assumptions about a number of important factors and involve risks and uncertainties that could cause actual results to differ materially from estimates contained in the forward-looking statements. Some of the risks that are foreseen by management are outlined within Part I, Item 1A. Risk Factors of our 2023 10-K. Readers are strongly encouraged to review that section closely in conjunction with MD&A.
Company Overview
We are a purpose-driven SaaS platform company that enables global companies in a wide variety of industry verticals to tackle the ever-growing complexity of business in the digital age. Our industry leading revenue management and digital monetization, customer experience, and payments solutions make ordinary customer experiences extraordinary. Our cloud-first architecture and customer-centric approach help companies around the world acquire, monetize, engage, and retain the B2B (business-to-business), B2C (business-to-consumer), and B2B2X (business-to-business-to-consumer) customers. As brands reimagine their engagement strategies in an increasingly connected world, we sit at the center of a complex, multi-sided business model ensuring monetization and customer engagement is handled at all levels of the ecosystem.
We leverage 40 years of experience to deliver innovative customer engagement solutions for every stage of the customer lifecycle so our customers can deliver an outstanding customer experience that adapts to their customers’ rapidly changing demands. Our diverse, worldwide workforce draws from real-world knowledge and extensive expertise to design and implement business solutions that make our customers’ hardest decisions simpler so that they can focus on delivering differentiated and real-time experiences to their customers. As a global technology leader, we aspire to envision, invent, and shape a better, more future-ready world.
We focus our research and development (“R&D”) and acquisition investments on expanding our offerings in a timely and efficient manner to address the complex, transformative needs of our customers. Our scalable, modular, and flexible solutions combined with our domain expertise and our ability to effectively migrate customers to our solutions, provide the industry with proven solutions to improve their profitability and consumers’ experiences. We have specifically architected our solutions to offer a phased, incremental approach to transforming our customers' businesses, thereby reducing the business interruption risk associated with this evolution.
As discussed in Note 2 to our Financial Statements, we generate a majority of our revenue from the global communications markets; however, we serve an expanding group of customers in other markets including retail, financial services, healthcare, insurance, and government entities.
We are a member of the S&P Small Cap 600 and Russell 2000 indices.
17
Management Overview of Quarterly Results
Third Quarter Highlights. A summary of our results of operations for the third quarter of 2024, when compared to the third quarter of 2023, is as follows (in thousands, except per share amounts and percentages):
|
|
Quarter Ended |
|
|
|||||
|
|
September 30, 2024 |
|
|
September 30, 2023 |
|
|
||
Revenue |
|
$ |
295,143 |
|
|
$ |
286,868 |
|
|
Transaction fees (1) |
|
|
22,524 |
|
|
|
20,314 |
|
|
Operating Results: |
|
|
|
|
|
|
|
||
Operating income |
|
$ |
31,822 |
|
|
$ |
32,731 |
|
|
Operating margin percentage |
|
|
10.8 |
% |
|
|
11.4 |
% |
|
Diluted EPS |
|
$ |
0.67 |
|
|
$ |
0.62 |
|
|
Supplemental Data: |
|
|
|
|
|
|
|
||
Restructuring and reorganization charges (2) |
|
$ |
2,943 |
|
|
$ |
1,152 |
|
|
Executive transition costs |
|
|
- |
|
|
|
1,148 |
|
|
Acquisition-related costs: |
|
|
|
|
|
|
|
||
Amortization of acquired intangible assets |
|
|
3,929 |
|
|
|
2,996 |
|
|
Earn-out compensation |
|
|
2,591 |
|
|
|
- |
|
|
Transaction-related costs |
|
|
32 |
|
|
|
(40 |
) |
|
Stock-based compensation (2) |
|
|
8,759 |
|
|
|
7,216 |
|
|
Revenue. Revenue for the third quarter of 2024 was $295.1 million, a 2.9% increase when compared to revenue of $286.9 million for the third quarter of 2023. The increase in revenue is primarily attributed to continued growth of our SaaS and related solutions revenue to include the revenue generated from the businesses acquired in the second quarter of 2024, which more than offset lower software and services revenue for the quarter.
Operating Results. Operating income for the third quarter of 2024 was $31.8 million, or a 10.8% operating margin percentage, compared to $32.7 million, or an 11.4% operating margin percentage for the third quarter of 2023. The decrease in operating income is mainly attributed to the increase in acquisition-related expenses in the third quarter of 2024, to include earn-out compensation and amortization of acquired intangible assets.
Diluted EPS. Diluted EPS for the third quarter of 2024 was $0.67 compared to $0.62 for the third quarter of 2023, with the third quarter of 2024 benefiting from a lower effective income tax rate and a lower share count, partially offset by foreign currency movements.
Cash and Cash Flows. As of September 30, 2024, we had cash and cash equivalents of $118.4 million, as compared to $110.4 million as of June 30, 2024 and $186.3 million as of December 31, 2023. Our cash flows provided by operating activities for the third quarter of 2024 were $39.5 million. See the Liquidity section below for further discussion of our cash flows.
Significant Customer Relationships
A large percentage of our revenue is generated from a limited number of customers in the global communications industry, with our three largest customers being Charter Communications Inc. (“Charter”), Comcast, and DISH Network L.L.C.
Customer Concentration. We have significant customer concentration, with the following two customers exceeding 10% of our revenue (in thousands, except percentages):
|
|
Quarter Ended |
|
|||||||||||||||||||||
|
|
September 30, 2024 |
|
|
June 30, 2024 |
|
|
September 30, 2023 |
|
|||||||||||||||
|
|
Amount |
|
|
% of Revenue |
|
|
Amount |
|
|
% of Revenue |
|
|
Amount |
|
|
% of Revenue |
|
||||||
Charter |
|
$ |
59,070 |
|
|
|
20 |
% |
|
$ |
60,629 |
|
|
|
21 |
% |
|
$ |
59,432 |
|
|
|
21 |
% |
Comcast |
|
|
58,688 |
|
|
|
20 |
% |
|
|
54,576 |
|
|
|
19 |
% |
|
|
53,653 |
|
|
|
19 |
% |
18
The percentages of net billed accounts receivable balances attributable to these customers as of the dates indicated were as follows:
|
|
As of |
|
|||||||||
|
|
September 30, 2024 |
|
|
June 30, 2024 |
|
|
December 31, 2023 |
|
|||
Charter |
|
|
20 |
% |
|
|
22 |
% |
|
|
23 |
% |
Comcast |
|
|
16 |
% |
|
|
18 |
% |
|
|
17 |
% |
See our 2023 10-K for additional discussion of our business relationships and contractual terms with Charter and Comcast.
Comcast. On October 30, 2024, we entered into an amendment to our current agreement with Comcast (the “Amended Agreement”). The key terms of the Amended Agreement are as follows:
A copy of the Amended Agreement, with confidential information redacted, will be filed as an exhibit to our Form 10-K for the year ended December 31, 2024.
Risk of Customer Concentration. We expect to continue to generate a large percentage of our future revenue from a limited number of customers. There are inherent risks whenever a large percentage of total revenue is concentrated with a limited number of customers. Should a significant customer: (i) terminate or fail to renew their contracts with us, in whole or in part, for any reason; (ii) significantly reduce the number of customer accounts processed on our solutions, the price paid for our services, or the scope of services that we provide; or (iii) experience financial or operating difficulties, it could have a material adverse effect on our financial position and results of operations.
Critical Accounting Policies
The preparation of our Financial Statements in conformity with U.S. GAAP requires us to select appropriate accounting policies, and to make judgments and estimates affecting the application of those accounting policies. In applying our accounting policies, different business conditions or the use of different assumptions may result in materially different amounts reported in our Financial Statements.
We have identified the most critical accounting policies that affect our financial position and the results of our operations. Those critical accounting policies were determined by considering the accounting policies that involve the most complex or subjective decisions or assessments. The most critical accounting policies identified relate to the following items: (i) revenue recognition; (ii) impairment assessments of long-lived assets; (iii) income taxes; and (iv) loss contingencies. These critical accounting policies, as well as our other significant accounting policies, are discussed in our 2023 10-K.
Results of Operations
Revenue. Total revenue for the: (i) third quarter of 2024 was $295.1 million, a 2.9% increase when compared to $286.9 million for the third quarter of 2023; and (ii) nine months ended September 30, 2024 was $880.6 million, a 1.0% increase when compared to $871.9 million for the nine months ended September 30, 2023.
19
Revenue by type for the third quarters and nine months ended September 30, 2024 and 2023 was as follows (in thousands):
|
|
Quarter Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, 2024 |
|
|
September 30, 2023 |
|
|
September 30, 2024 |
|
|
September 30, 2023 |
|
||||
SaaS and related solutions |
|
$ |
263,701 |
|
|
$ |
250,777 |
|
|
$ |
788,054 |
|
|
$ |
764,253 |
|
Software and services |
|
|
19,705 |
|
|
|
23,578 |
|
|
|
56,780 |
|
|
|
73,235 |
|
Maintenance |
|
|
11,737 |
|
|
|
12,513 |
|
|
|
35,762 |
|
|
|
34,446 |
|
Total revenue |
|
$ |
295,143 |
|
|
$ |
286,868 |
|
|
$ |
880,596 |
|
|
$ |
871,934 |
|
The increases in revenue are primarily attributed to continued growth of our SaaS and related solutions revenue, to include the revenue generated from the businesses acquired during the second quarter of 2024 (see Note 5 to our Financial Statements). These acquired businesses contributed approximately $6 million and $9 million, respectively, of revenue during the third quarter and nine months ended September 30, 2024. These increases were offset to a certain degree by lower software and services revenue, to include the software license revenue resulting from the closure of approximately $10 million of license upgrades in the first quarter of 2023.
We use the location of the customer as the basis of attributing revenue to individual countries. Revenue by geographic regions for the third quarters and nine months ended September 30, 2024 and 2023 was as follows (in thousands):
|
|
Quarter Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, 2024 |
|
|
September 30, 2023 |
|
|
September 30, 2024 |
|
|
September 30, 2023 |
|
||||
Americas (principally the U.S.) |
|
$ |
258,620 |
|
|
$ |
246,880 |
|
|
$ |
771,193 |
|
|
$ |
746,299 |
|
Europe, Middle East, and Africa |
|
|
26,381 |
|
|
|
25,502 |
|
|
|
72,199 |
|
|
|
88,795 |
|
Asia Pacific |
|
|
10,142 |
|
|
|
14,486 |
|
|
|
37,204 |
|
|
|
36,840 |
|
Total revenue |
|
$ |
295,143 |
|
|
$ |
286,868 |
|
|
$ |
880,596 |
|
|
$ |
871,934 |
|
Total Operating Expenses. Total operating expenses for the: (i) third quarter of 2024 were $263.3 million, a 3.6% increase when compared to $254.1 million for the third quarter of 2023; and (ii) nine months ended September 30, 2024 were $791.6 million, a 2.4% increase when compared to $772.8 million for the nine months ended September 30, 2023. The increases in total operating expenses are a result of the higher SaaS and related solutions revenue between periods and the additional costs from the acquired businesses, to include acquired intangible asset amortization and earn-out compensation, in addition to the increases in restructuring and reorganization charges, discussed below.
The components of total operating expenses are discussed in more detail below.
Cost of Revenue (Exclusive of Depreciation). The cost of revenue for the: (i) third quarter of 2024 was $149.5 million, a 2.1% decrease when compared to $152.7 million for the third quarter of 2023; and (ii) nine months ended September 30, 2024 was $460.3 million, a 0.3% increase when compared to $458.9 million for the nine months ended September 30, 2023.
Total cost of revenue as a percentage of revenue for the: (i) third quarters of 2024 and 2023 was 50.6% and 53.2%, respectively; and (ii) nine months ended September 30, 2024 and 2023 was 52.3% and 52.6%, respectively.
20
R&D Expense (Exclusive of Depreciation). R&D expense for the: (i) third quarter of 2024 was $41.7 million, an 18.1% increase when compared to $35.3 million for the third quarter of 2023; and (ii) nine months ended September 30, 2024 was $116.2 million, an 8.2% increase when compared to $107.4 million for the nine months ended September 30, 2023. The increases in R&D expense between periods are mainly attributed to increased employee-related costs. During 2024 our R&D investment increased from prior periods as a result of the continued development of our SaaS platforms as we gain further traction in new industry verticals along with the integration of the recently acquired businesses into our solutions. These investments are focused on the continued evolution of our solutions that enable us to launch, monetize, and scale new digital services quickly and across any channel, while delivering an exceptional customer experience.
As a percentage of total revenue, R&D expense for the: (i) third quarters of 2024 and 2023 was 14.1% and 12.3%, respectively; and (ii) nine months ended September 30, 2024 and 2023 was 13.2% and 12.3%, respectively.
Selling, General, and Administrative ("SG&A") Expense (Exclusive of Depreciation). SG&A expense for the: (i) third quarter of 2024 was $63.9 million, an 8.1% increase when compared to $59.1 million for the third quarter of 2023; and (ii) nine months ended September 30, 2024 was $186.8 million, a 3.2% increase when compared to $180.9 million for the nine months ended September 30, 2023. The increases in SG&A expense are mainly attributed to increased employee-related costs, to include stock-based compensation and acquisition-related earn-out compensation.
As a percentage of total revenue, SG&A expense for the: (i) third quarters of 2024 and 2023 was 21.7% and 20.6%, respectively; and (ii) nine months ended September 30, 2024 and 2023 was 21.2% and 20.8%, respectively.
Restructuring and Reorganization Charges. Restructuring and reorganization charges for the: (i) third quarter of 2024 was $2.9 million, a $1.7 million increase when compared to $1.2 million for the third quarter of 2023; and (ii) nine months ended September 30, 2024 was $12.0 million, a $3.6 million increase when compared to $8.4 million for the nine months ended September 30, 2023. The restructuring and reorganization charges for the nine months ended September 30, 2024 relate mainly to initiatives to better align and allocate resources to areas of the business where we have identified growth opportunities, which have resulted in restructuring charges related to involuntary terminations of $9.6 million.
See Note 6 to our Financial Statements for additional discussion.
Operating Income. Operating income for the: (i) third quarter of 2024 was $31.8 million, or 10.8% of total revenue, compared to $32.7 million, or 11.4% of total revenue for the third quarter of 2023; and (ii) nine months ended September 30, 2024 was $89.0 million, or 10.1% of total revenue, compared to $99.1 million, or 11.4% of total revenue, for the nine months ended September 30, 2023.
Interest Income. Interest income for the: (i) third quarter of 2024 was $1.9 million, a $0.7 million increase when compared to $1.2 million for the third quarter of 2023; and (ii) nine months ended September 30, 2024 was $6.6 million, a $4.1 million increase when compared to $2.5 million for the nine months ended September 30, 2023, with the increase primarily attributed to certain settlement assets being swept into overnight money market accounts on a daily basis.
Other, net. Other, net for the: (i) third quarter of 2024 was $2.2 million of other expense, a $3.0 million change when compared to $0.8 million of other income for the third quarter of 2023; and (ii) nine months ended September 30, 2024 was $1.5 million of other expense, a $1.5 million change when compared to $3.0 million of other expense for the nine months ended September 30, 2023, with the changes primarily attributed to foreign currency movements.
Income Tax Provision. The effective income tax rates for the: (i) third quarters of 2024 and 2023 were 20% and 30%, respectively; and (ii) nine months ended September 30, 2024 and 2023 were 26% and 29%, respectively. The third quarter of 2024 effective income tax rate benefited from the revaluation of certain deferred income taxes. Our estimated full year 2024 effective income tax rate is approximately 28%, consistent with our 2023 full year effective income tax rate.
21
Liquidity
Cash and Liquidity. As of September 30, 2024, our principal sources of liquidity included cash and cash equivalents of $118.4 million, compared to $110.4 million as of June 30, 2024, and $186.3 million as of December 31, 2023.
As part of our 2021 Credit Agreement, we have a $450.0 million senior secured revolving loan facility with a syndicate of financial institutions that expires in September 2026, the 2021 Revolver. As of September 30, 2024, we had no borrowings outstanding on the 2021 Revolver balance, and have issued standby letters of credit for $1.5 million that count against the available 2021 Revolver balance, leaving $448.5 million available to us. The 2021 Credit Agreement contains customary affirmative, negative, and financial covenants. As of September 30, 2024, and the date of this filing, we believe we are in compliance with the provisions of the 2021 Credit Agreement.
Our cash and cash equivalents balances as of the end of the indicated periods were located in the following geographical regions (in thousands):
|
|
September 30, 2024 |
|
|
December 31, 2023 |
|
||
Americas (principally the U.S.) |
|
$ |
82,183 |
|
|
$ |
142,515 |
|
Europe, Middle East, and Africa |
|
|
24,113 |
|
|
|
32,974 |
|
Asia Pacific |
|
|
12,148 |
|
|
|
10,775 |
|
Total cash and cash equivalents |
|
$ |
118,444 |
|
|
$ |
186,264 |
|
We generally have ready access to substantially all of our cash and cash equivalents, but may face limitations on moving cash out of certain foreign jurisdictions due to currency controls and potential negative economic consequences.
As of September 30, 2024 and December 31, 2023, we had $1.8 million and $2.9 million, respectively, of cash restricted as to use primarily to collateralize guarantees included in our other current and non-current asset balances. In addition, as of September 30, 2024 and December 31, 2023, we had $240.8 million and $274.7 million, respectively, of settlement and merchant reserve assets which are deemed restricted due to contractual restrictions with the merchants and restrictions arising from our policy and intention. It has historically been our policy to segregate settlement and merchant reserve assets from our operating cash balances and we intend to continue to do so.
Cash Flows from Operating Activities. We calculate our cash flows from operating activities beginning with net income, adding back the impact of non-cash items or non-operating activity (e.g., depreciation, amortization, impairments, gain/loss on items such as investments, lease modifications, and debt extinguishments/conversions, unrealized foreign currency transactions gain/loss, deferred income taxes, stock-based compensation, etc.), and then factoring in the impact of changes in operating assets and liabilities. See our 2023 10-K for a description of the primary uses and sources of our cash flows from operating activities.
Our cash flows from operating activities, broken out between operations and changes in operating assets and liabilities, for the indicated quarterly periods are as follows (in thousands):
|
|
Operations |
|
|
Changes in Operating Asset and Liabilities |
|
|
Net Cash Provided by (Used In) Operating Activities – Totals |
|
|||
Cash Flows from Operating Activities: |
|
|
|
|
|
|
|
|
|
|||
2024: |
|
|
|
|
|
|
|
|
|
|||
March 31 (1) |
|
$ |
51,655 |
|
|
$ |
(81,006 |
) |
|
$ |
(29,351 |
) |
June 30 |
|
|
35,625 |
|
|
|
7,480 |
|
|
|
43,105 |
|
September 30 |
|
|
44,354 |
|
|
|
(4,895 |
) |
|
|
39,459 |
|
Total |
|
$ |
131,634 |
|
|
$ |
(78,421 |
) |
|
$ |
53,213 |
|
|
|
|
|
|
|
|
|
|
|
|||
2023: |
|
|
|
|
|
|
|
|
|
|||
March 31 (2) |
|
$ |
50,158 |
|
|
$ |
(34,761 |
) |
|
$ |
15,397 |
|
June 30 |
|
|
26,539 |
|
|
|
(14,153 |
) |
|
|
12,386 |
|
September 30 |
|
|
34,618 |
|
|
|
(10,036 |
) |
|
|
24,582 |
|
Total |
|
$ |
111,315 |
|
|
$ |
(58,950 |
) |
|
$ |
52,365 |
|
22
Variations in our net cash provided by/(used in) operating activities are generally related to the changes in our operating assets and liabilities (related mostly to fluctuations in timing at quarter-end of customer payments, billing milestones, and changes in accrued expenses), and generally over longer periods of time, do not significantly impact our cash flows from operations.
Significant fluctuations in key operating assets and liabilities between 2024 and 2023 that impacted our cash flows from operating activities are as follows:
Billed Trade Accounts Receivable
Management of our billed trade accounts receivable is one of the primary factors in maintaining strong cash flows from operating activities. These balances include significant billings for several non-revenue items (primarily postage, sales tax, and deferred revenue items). As a result, we evaluate our performance in collecting our billed trade accounts receivable through our calculation of Days Billings Outstanding (“DBO”) rather than a typical Days Sales Outstanding (“DSO”) calculation.
Our gross and net billed trade accounts receivable and related allowance for expected losses (“Allowance”) as of the end of the indicated quarterly periods, and the related DBOs for the quarters then ended, are as follows (in thousands, except DBOs):
Quarter Ended |
|
Gross |
|
|
Allowance |
|
|
Net Billed |
|
|
DBOs |
|
||||
2024: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
March 31 |
|
$ |
281,051 |
|
|
$ |
(5,692 |
) |
|
$ |
275,359 |
|
|
|
67 |
|
June 30 |
|
|
270,934 |
|
|
|
(4,720 |
) |
|
|
266,214 |
|
|
|
66 |
|
September 30 |
|
|
284,740 |
|
|
|
(4,810 |
) |
|
|
279,930 |
|
|
|
64 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
2023: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
March 31 |
|
$ |
261,028 |
|
|
$ |
(5,254 |
) |
|
$ |
255,774 |
|
|
|
68 |
|
June 30 |
|
|
260,928 |
|
|
|
(4,618 |
) |
|
|
256,310 |
|
|
|
65 |
|
September 30 |
|
|
279,892 |
|
|
|
(4,731 |
) |
|
|
275,161 |
|
|
|
66 |
|
As of September 30, 2024 and 2023, approximately 95% and 93%, respectively, of our net billed trade accounts receivable balances were less than 60 days past due.
We may experience adverse impacts to our DBOs if and when customer payment delays occur. However, the recurring monthly payments that cross a reporting period-end do not raise collectability concerns, as payment is generally received subsequent to quarter-end. All other changes in our gross and net billed accounts receivable reflect the normal fluctuations in the timing of customer payments at quarter-end, as evidenced by our relatively consistent DBO metric.
As a global provider of solutions and services, a portion of our trade accounts receivable balance relates to international customers. This diversity in the geographic composition of our customer base may adversely impact our DBOs as longer billing cycles (i.e., billing terms and cash collection cycles) are an inherent characteristic of international software and professional services transactions. As a result, we may experience fluctuations in our trade accounts receivable balance as our ability to invoice and collect arrangement fees is dependent upon, among other things: (i) the completion of various customer administrative matters, local country billing protocols and processes (including local cultural differences), and non-customer administrative matters; (ii) meeting certain contractual invoicing milestones and dates; (iii) the overall project status in certain situations in which we act as a subcontractor to another vendor on a project; or (iv) currency controls in certain foreign jurisdictions.
Unbilled Trade Accounts Receivable
Unbilled trade accounts receivable increased $0.4 million to $82.6 million as of September 30, 2024, from $82.2 million as of December 31, 2023. These unbilled trade accounts receivable balances relate primarily to large implementation projects where various milestone and contractual billing dates have not yet been reached or are delayed. Unbilled trade accounts receivable are an inherent characteristic of certain software and services transactions and may fluctuate between quarters, as these types of transactions typically have scheduled invoicing terms over several quarters, as well as certain milestone billing events.
Income Taxes Payable/Receivable
Net income taxes payable/receivable (current and non-current) as of September 30, 2024 was a net income taxes receivable balance of $10.4 million, compared to a net income taxes payable balance of $5.8 million as of December 31, 2023. This net $16.2 million change is primarily due to the timing of our estimated federal and state income tax payments.
23
Accrued Employee Compensation
Accrued employee compensation decreased $26.7 million to $57.7 million as of September 30, 2024, from $84.4 million as of December 31, 2023, due primarily to the payment of the 2023 employee incentive compensation during the first quarter of 2024 that was fully accrued at December 31, 2023 and the timing of accrued wages, partially offset by the accruals for the 2024 employee incentive compensation.
Cash Flows From Investing Activities. Our typical investing activities consist of purchases of software, property, and equipment, and in 2024, our business combination activities, which are discussed below.
Purchases of Software, Property, and Equipment
Our capital expenditures for the nine months ended September 30, 2024 and 2023 for software, property, and equipment were $16.5 million and $22.9 million, respectively, and consisted principally of investments in: (i) communication design and delivery center equipment and infrastructure; (ii) software and related equipment; (iii) computer hardware; and (iv) lease improvements.
Business Combinations, net of Cash and Settlement Assets Acquired
The cash paid for the acquisitions discussed in Note 5 to our Financial Statements, less cash and settlement assets acquired, resulted in net cash provided by business combinations for the nine months ended September 30, 2024 of $17.3 million.
Cash Flows From Financing Activities. Our financing activities typically consist of activities with our common stock, various debt-related transactions, and settlement and merchant reserve activity.
Cash Dividends Paid on Common Stock
During the nine months ended September 30, 2024 and 2023, our Board approved dividends totaling $26.4 million for both periods, and we made dividend payments of $26.6 million and $26.2 million, respectively, with the differences between the amount approved and paid attributed to dividends accrued on unvested incentive shares that are paid upon vesting.
Repurchase of Common Stock
During the nine months ended September 30, 2024 and 2023, we repurchased approximately 716,000 and 1,991,000 shares of our common stock, respectively, under our Stock Repurchase Program for $33.7 million and $107.0 million, respectively.
Additionally, outside of our Stock Repurchase Program, during the nine months ended September 30, 2024 and 2023, we repurchased from our employees and then canceled approximately 172,000 and 171,000 shares of our common stock, respectively, for $9.1 million and $9.6 million, respectively, in connection with minimum tax withholding requirements resulting from the vesting of restricted stock under our stock incentive plans.
Through the nine months ended September 30, 2024 and 2023, we have paid $42.4 million and $116.4 million, respectively, for our total repurchases of common stock, with any differences when compared to the amounts purchased attributed to the timing of the settlement and the accrued excise tax imposed as part of the 2022 Inflation Reduction Act.
See Note 9 to our Financial Statements for additional discussion of our repurchases of common stock.
Long-Term Debt
During the nine months ended September 30, 2024 and 2023, we made principal repayments on our 2021 Term Loan of $5.6 million during each period. Additionally, during the nine months ended September 30, 2024, we borrowed and subsequently repaid $15.0 million from our 2021 Revolver for general corporate purposes.
During the nine months ended September 30, 2023, we borrowed $45.0 million under our 2021 Revolver for general corporate purposes and subsequently repaid $30.0 million. In September 2023, we issued the 2023 Convertible Notes offering and received proceeds of $425.0 million. We used a portion of these proceeds to repay $275.0 million of our 2021 Revolver balance and pay the $34.3 million premiums for the Capped Call Transactions. Additionally, during the nine months ended September 30, 2023, we paid deferred financing costs of $13.5 million.
See Note 4 to our Financial Statements for additional discussion of our long-term debt.
24
Settlement and Merchant Reserve Activity
During the nine months ended September 30, 2024 and 2023, we had net settlement and merchant reserve activity of $(79.6) million and ($46.2) million, respectively, related to the cash collected, held on behalf, and paid to our merchants related to our payments services and the net change in deposits held on behalf of our merchants. These balances can significantly fluctuate between periods due to activity at the end of the period and the day in which the period ends.
See Note 2 to our Financial Statements for additional discussion of our settlement and merchant reserves.
Off-Balance Sheet Arrangements
Our off-balance sheet arrangements are mainly limited to money transmitter bonds, bid bonds, performance bonds, and standby letters of credit. These arrangements do not have a material impact and are not reasonably likely to have a material future impact to our financial condition, results of operations, liquidity, capital expenditures, or capital resources. See Note 7 to our Financial Statements for additional information on these guarantees.
Capital Resources
The following are the key items to consider in assessing our sources and uses of capital resources:
Current Sources of Capital Resources. Below are the key items to consider in assessing our current sources of capital resources:
Uses/Potential Uses of Capital Resources. Below are the key items to consider in assessing our uses/potential uses of capital resources:
Under our Stock Repurchase Program, we may repurchase shares in the open market or in privately negotiated transactions, including through an accelerated stock repurchase plan or under a SEC Rule 10b5-1 plan. The actual timing and amount of share repurchases are dependent on the current market conditions and other business-related factors. Our common stock repurchases are discussed in more detail in Note 9 to our Financial Statements.
During the nine months ended September 30, 2024, we repurchased approximately 716,000 shares of our common stock for $33.7 million (weighted-average price of $47.07 per share).
Outside of our Stock Repurchase Program, during the nine months ended September 30, 2024, we repurchased from our employees and then cancelled approximately 172,000 shares of our common stock for $9.1 million in connection with minimum tax withholding requirements resulting from the vesting of restricted common stock under our stock incentive plans.
25
During the nine months ended September 30, 2024, the Board declared dividends totaling $26.4 million. Going forward, we expect to pay cash dividends each year in March, June, September, and December, with the amount and timing subject to our Board’s approval.
We expect to return a total of $100.0 million to our shareholders through combined common stock repurchases and cash dividends in each of 2024 and 2025.
During the second quarter of 2024, we acquired two businesses, discussed in further detail in Note 5 to our Financial Statements. The acquisition date fair value of the consideration transferred totaled $32.6 million, subject to customary working capital adjustments. The iCG Pay purchase agreement includes provisions for up to $15.0 million of potential future earn-out payments tied to performance-based goals and a defined service period. The earn-out period is through June 3, 2027. As of September 30, 2024, we have accrued $3.5 million related to potential earn-out payments. These acquisitions were funded with available cash.
As part of our growth strategy, we are continually evaluating potential business and/or asset acquisitions and investments in market share expansion with our existing and potential new customers and expansion into verticals outside the global communications market.
2023 Convertible Notes. The 2023 Convertible Notes are convertible at the option of the note holders before June 15, 2028 upon the occurrence of certain events, however, there are no scheduled conversion triggers over the next twelve months. As a result, we expect our required debt service cash outlay during the next twelve months for the 2023 Convertible Notes to be limited to interest payments of $16.5 million.
2021 Credit Agreement. The mandatory repayments under our 2021 Credit Agreement for the next twelve months are $7.5 million and the cash interest expense (based upon then-current interest rates) for the 2021 Term Loan is $7.7 million. We have the ability to make prepayments without penalties on our 2021 Credit Agreement.
Our long-term debt obligations are discussed in more detail in Note 4 to our Financial Statements.
In summary, we expect to continue to have material needs for capital resources going forward, as noted above. We believe that our current cash and cash equivalents balances and our 2021 Revolver, together with cash expected to be generated in the future from our current operating activities, will be sufficient to meet our anticipated capital resource requirements for at least the next twelve months. We believe we could obtain additional capital through other debt sources which may be available to us if deemed appropriate.
26
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market risk is the potential loss arising from adverse changes in market rates and prices. As of September 30, 2024, we are exposed to various market risks, including changes in interest rates, fluctuations and changes in the market value of our cash equivalents and settlement and merchant reserve assets, and changes in foreign currency exchange rates. We have not historically entered into derivatives or other financial instruments for trading or speculative purposes.
Interest Rate Risk
Long-Term Debt. The interest rate on our 2023 Convertible Notes is fixed, and thus, as it relates to our convertible debt borrowings, we are not exposed to changes in interest rates.
The interest rates on our 2021 Credit Agreement are based upon an adjusted SOFR rate (including a 0.10% credit spread adjustment) plus an applicable margin, or an ABR plus an applicable margin. See Note 4 to our Financial Statements for further details related to our long-term debt.
A hypothetical adverse change of 10% in the September 30, 2024 adjusted SOFR rate would not have a material impact upon our results of operations.
Market Risk
Cash and Cash Equivalents. Our cash and cash equivalents as of September 30, 2024 and December 31, 2023 were $118.4 million and $186.3 million, respectively. Certain of our cash balances are swept into overnight money market accounts on a daily basis, and at times, any excess funds are invested in low-risk, somewhat longer term, cash equivalent instruments. Our cash equivalents are invested primarily in institutional money market funds held at major banks. We have minimal market risk for our cash and cash equivalents due to the relatively short maturities of the instruments.
Settlement and Merchant Reserve Assets. We are exposed to market risk associated with cash held on behalf of our merchants related to our payment processing services. As of September 30, 2024 and December 31, 2023, we had $240.8 million and $274.7 million, respectively, of cash collected on behalf of our merchants. The cash is held in accounts with various major financial institutions in the U.S. and Canada in an amount equal to at least 100% of the aggregate amount owed to our merchants. These balances can significantly fluctuate between periods due to activity at the end of the period and the day in which the period ends. Certain settlement assets are swept into overnight money market accounts on a daily basis.
Long-Term Debt. The fair value of our convertible debt is exposed to market risk. We do not carry our convertible debt at fair value but present the fair value for disclosure purposes (see Note 2 to our Financial Statements). Generally, the fair value of our convertible debt is impacted by changes in interest rates and changes in the price and volatility of our common stock. As of September 30, 2024, the fair value of the 2023 Convertible Notes was estimated at $426.0 million, using quoted market prices.
Foreign Currency Exchange Rate Risk
Due to foreign operations around the world, our financial statements are exposed to foreign currency exchange risk due to the fluctuations in the value of currencies in which we conduct business. Our principal currency exposures include the British Pound, Euro, Australian Dollar, Saudi Riyal, and South African Rand. While we attempt to maximize natural hedges by incurring expenses in the same currency in which we contract revenue, the related expenses for that revenue could be in one or more differing currencies than the revenue stream. In particular, if the U.S. Dollar were to strengthen it would reduce the reported amount of our foreign-denominated cash, cash equivalents, trade receivables, revenue, and expenses that we translate into U.S. Dollars and report in our consolidated financial statements for, and as of the end of, each reporting period.
During the nine months ended September 30, 2024, we generated approximately 90% of our revenue in U.S. dollars. We expect that, in the foreseeable future, we will continue to generate a very large percentage of our revenue in U.S. dollars.
We have analyzed our foreign currency exposure as of September 30, 2024. A hypothetical adverse change of 10% in the September 30, 2024 exchange rates would not have had a material impact upon our results of operations.
Item 4. Controls and Procedures
(a) Disclosure Controls and Procedures
As required by Rule 13a-15(b), our management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), conducted an evaluation as of the end of the period covered by this report of the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e). Based on that evaluation, the CEO and CFO concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.
27
(b) Internal Control Over Financial Reporting
As required by Rule 13a-15(d), our management, including the CEO and CFO, also conducted an evaluation of our internal control over financial reporting, as defined by Rule 13a-15(f), to determine whether any changes occurred during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation, the CEO and CFO concluded that there has been no such change during the quarter covered by this report.
28
CSG SYSTEMS INTERNATIONAL, INC.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
From time-to-time, we are involved in litigation relating to claims arising out of our operations in the normal course of business. In the opinion of our management, we are not presently a party to any material pending or threatened legal proceedings.
Item 1A. Risk Factors
A discussion of our risk factors can be found in Item 1A. Risk Factors in our 2023 10-K. There were no material changes to the risk factors disclosed in our 2023 10-K during the third quarter of 2024.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table presents information with respect to purchases of our common stock made during the third quarter of 2024 by CSG Systems International, Inc. or any “affiliated purchaser” of CSG Systems International, Inc., as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended.
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Period |
|
Total |
|
|
Average |
|
|
Total Number of |
|
|
Maximum Dollar Value of |
|
||||
July 1 - July 31 |
|
|
77,932 |
|
|
$ |
43.21 |
|
|
|
77,000 |
|
|
$ |
73,135,900 |
|
August 1 - August 31 (3) |
|
|
78,726 |
|
|
|
46.50 |
|
|
|
77,000 |
|
|
|
169,553,935 |
|
September 1 - September 30 |
|
|
159,695 |
|
|
|
47.31 |
|
|
|
158,947 |
|
|
|
162,034,521 |
|
Total |
|
|
316,353 |
|
|
$ |
46.10 |
|
|
|
312,947 |
|
|
|
|
|
Item 3. Defaults Upon Senior Securities
None
Item 4. Mine Safety Disclosures
None
Item 5. Other Information
(c) Rule 10b5-1 Trading Plans
During the third quarter of 2024, none of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act)
Item 6. Exhibits
The Exhibits filed or incorporated by reference herewith are as specified in the Exhibit Index.
29
CSG SYSTEMS INTERNATIONAL, INC.
EXHIBIT INDEX
Exhibit |
|
Description |
10.27Z* |
||
31.01 |
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
31.02 |
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
32.01 |
||
101.INS |
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
|
101.SCH |
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |
|
104 |
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
|
|
* Portions of the exhibit have been omitted pursuant to SEC rules regarding confidential information.
30
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Dated: November 7, 2024
CSG SYSTEMS INTERNATIONAL, INC. |
/s/ Brian A. Shepherd |
Brian A. Shepherd |
President and Chief Executive Officer |
(Principal Executive Officer) |
/s/ Hai Tran |
Hai Tran |
Executive Vice President and Chief Financial Officer |
(Principal Financial Officer) |
/s/ Lori J. Szwanek |
Lori J. Szwanek |
Chief Accounting Officer |
(Principal Accounting Officer) |
31