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FOR IMMEDIATE RELEASEPRESS RELEASECSG SYSTEMS INTERNATIONAL REPORTS RECORD REVENUES FORFOURTH QUARTER 2020DENVER--(February 3, 2021) — CSG (NASDAQ: CSGS), the trusted partner to simplify the complexity ofbusiness transformation in the digital age, today reported results for the quarter and year ended December 31,2020.Financial Results: Fourth quarter 2020 financial results: Total revenue was 260.5 million and total non-GAAP adjusted revenue was 243.2 million. GAAP operating income was 23.7 million, or 9.1% of total revenue, and non-GAAP operating incomewas 43.0 million, or 17.7% of non-GAAP adjusted revenue. GAAP earnings per diluted share (EPS) was 0.41 and non-GAAP EPS was 0.90. Cash flows from operations were 57.3 million, with non-GAAP free cash flow of 52.1 million.Full year 2020 financial results: Total revenue was 990.5 million and non-GAAP adjusted revenue was 922.9 million. GAAP operating income was 105.6 million, or 10.7% of total revenue, and non-GAAP operating incomewas 154.9 million, or 16.8% of non-GAAP adjusted revenue. GAAP EPS was 1.82 and non-GAAP EPS was 3.12. Cash flows from operations were 173.0 million, with non-GAAP free cash flow of 143.6 million.Shareholder Returns: On November 16, 2020, CSG declared its quarterly cash dividend of 0.235 per share of common stock, or atotal of approximately 8 million, to shareholders, bringing total 2020 dividends to approximately 31 million. In February 2021, CSG’s Board of Directors approved an approximately 6% increase in CSG’s cash dividend,with quarterly payments of 0.25 per share of common stock to be paid in March 2021. During the quarter and full year 2020, CSG repurchased under its stock repurchase program, approximately334,000 shares of its common stock for approximately 14 million and approximately 624,000 shares of itscommon stock for approximately 26 million, respectively.
CSG Systems International, Inc.February 3, 2021Page 2“As challenging as 2020 was, CSG is fortunate to have a strong, resilient business model that generates goodrecurring cash flows and high revenue and earnings visibility”, said Brian Shepherd, president and chief executiveofficer of CSG. “We are pleased to announce that our 2020 financial performance finished at the high end of ourguidance ranges, despite the challenges of the pandemic. Our strong fourth quarter finish in 2020 wasunderpinned by the strength of our customer base as CSG continues to be a trusted technology provider thathelps our clients better acquire, monetize, engage and retain their customers. Looking ahead, we remain wellpositioned to lengthen and strengthen our relationships with existing customers, accelerate our growth anddiversify our revenue base.”Financial Overview (unaudited)(in thousands, except per share amounts and percentages):GAAP Results:Revenue .Operating Income .Operating Margin Percentage .EPS .Non-GAAP Results:Adjusted Revenue .Operating Income .Adjusted Operating MarginPercentage .EPS .Quarter Ended December 31,Percent20202019Changed 260,487 254,74723,67530,2589.1 %11.9 % 0.41 0.70 243,24842,987 236,90741,54017.7 %0.90 17.5 %0.98Year Ended December 31,Percent20202019Changed2 % 990,533 996,810(22 %) 105,556126,10910.7 %12.7 %(41 %) 1.82 2.553 % 922,8623 % 154,887(8 %) (1 %)(16 %)(29 %) 927,696165,70216.8 %3.12 17.9 %3.53(1 %)(7 %)(12 %)For additional information and reconciliations regarding CSG’s use of non-GAAP financial measures, please referto the attached Exhibit 2 and the Investor Relations section of CSG’s website at csgi.com.Results of OperationsGAAP Results: Total revenue for the fourth quarter of 2020 was 260.5 million, a 2% increase when compared torevenue of 254.7 million for the fourth quarter of 2019, and a 7% increase when compared to revenue of 244.1million for the third quarter of 2020. These increases in revenue can be mainly attributed to a strong quarter ofmanaged services, software, and professional services revenue. The fourth quarter marks the second quarter ofsequential revenue growth, reflecting stabilization in sales and implementation cycles and a rebound inprocessing volumes that were negatively impacted in the first half of 2020 as a result of the COVID-19 pandemic.Total revenue for the full year 2020 was 990.5 million, a 1% decrease when compared to revenue of 996.8million for the full year 2019. This decrease is primarily due to the pricing adjustments associated with the fiveyear Comcast extension effective January 1, 2020, as well as foreign currency headwinds, offset by the strongfourth quarter revenue discussed above, and year-over-year growth in revenue management solutions.
CSG Systems International, Inc.February 3, 2021Page 3GAAP operating income for the fourth quarter of 2020 was 23.7 million, or 9.1% of total revenue, compared to 30.3 million, or 11.9% of total revenue, for the fourth quarter of 2019, and 28.9 million, or 11.9% of totalrevenue, for the third quarter of 2020. GAAP operating income for the full year 2020 was 105.6 million, or 10.7%of total revenue, compared to 126.1 million, or 12.7% of total revenue, for the full year 2019. GAAP operatingincome for the fourth quarter of 2020 was negatively impacted by executive transition costs of 11.2 million. Fullyear 2020 operating income was also negatively impacted by executive transition costs of 13.0 million and lowerrevenue. Additionally, GAAP operating income for the full year 2020 includes the benefit of lower employeerelated costs, off-set to a certain extent by the write-off of approximately 10 million of deferred contract costsresulting from the discontinuance of a project implementation during the second quarter.GAAP EPS for the fourth quarter of 2020 was 0.41, as compared to 0.70 for the fourth quarter of 2019, and 0.42 for the third quarter of 2020. GAAP EPS for the full year 2020 was 1.82, compared to 2.55 for the fullyear 2019. The year-over-year decreases in GAAP EPS can be mainly attributed to the lower operating income,discussed above, and a lower effective income tax rate in 2019 due to Comcast’s exercise of 0.4 million vestedcommon stock warrants that resulted in the recognition of an approximately 4 million net income tax benefit inthe fourth quarter of 2019.Non-GAAP Results: Non-GAAP adjusted revenue for the fourth quarter of 2020 was 243.2 million, a 3%increase when compared to non-GAAP adjusted revenue of 236.9 million for the fourth quarter of 2019, and a7% increase when compared to 227.7 million for the third quarter of 2020. Total non-GAAP adjusted revenue forthe full year 2020 was 922.9 million, a 1% decrease when compared to 927.7 million for the full year 2019. Thefluctuations in non-GAAP adjusted revenue between periods are primarily due to the factors discussed above.Non-GAAP operating income for the fourth quarter of 2020 was 43.0 million, or 17.7% of total non-GAAPadjusted revenue, compared to 41.5 million, or 17.5% of total non-GAAP adjusted revenue for the fourth quarterof 2019, and 39.1 million, or 17.2% of total non-GAAP adjusted revenue for the third quarter of 2020. NonGAAP operating income for the full year 2020 was 154.9 million, or 16.8% of total non-GAAP adjusted revenue,compared to 165.7 million, or 17.9% of total non-GAAP adjusted revenue for the full year 2019. The full yearover-year decrease in non-GAAP operating income is reflective of the approximately 10 million write-off ofdeferred contract costs and lower revenue, discussed above, off-set to a certain extent by lower employee relatedcosts.Non-GAAP EPS for the fourth quarter of 2020 was 0.90 compared to 0.98 for the fourth quarter of 2019, and 0.76 for the third quarter of 2020. Non-GAAP EPS for the full year 2020 was 3.12 compared to 3.53 for thefull year 2019. The year-over-year decreases in non-GAAP EPS are primarily due to the lower 2019 non-GAAPeffective income tax rate, with the full year non-GAAP EPS also impacted by lower non-GAAP operating incomediscussed above.
CSG Systems International, Inc.February 3, 2021Page 4Balance Sheet and Cash FlowsCash, cash equivalents and short-term investments as of December 31, 2020 were 240.3 million compared to 212.1 million as of September 30, 2020 and 182.7 million as of December 31, 2019. CSG had net cash flowsfrom operations for the fourth quarters ended December 31, 2020 and 2019 of 57.3 million and 43.5 million,respectively, and had non-GAAP free cash flow of 52.1 million and 33.9 million, respectively. For the yearended December 31, 2020 and 2019, CSG generated net cash flows from operations of 173.0 million and 151.1 million, respectively, and had non-GAAP free cash flow of 143.6 million and 113.8 million, respectively.Summary of 2021 Financial GuidanceCSG’s financial guidance for the full year 2021 is as follows:GAAP Measures:Revenue .Operating Margin Percentage .EPS .Cash Flows from Operating Activities .Non-GAAP Measures:Adjusted Revenue .Adjusted Operating Margin Percentage .EPS . 995 - 1,035 million12.2% - 12.7% 2.30 - 2.53 135 - 155 million 922 - 954 million16.25% - 16.75% 3.02 - 3.24For additional information and reconciliations regarding CSG’s use of non-GAAP financial measures, please referto the attached Exhibit 2 and the Investor Relations section of CSG’s website at csgi.com.Conference CallCSG will host a conference call on Wednesday, February 3, 2021 at 5:00 p.m. EST, to discuss CSG’s fourthquarter and full year results for 2020. The call will be carried live and archived on the Internet. A link to theconference call is available at http://ir.csgi.com. In addition, to reach the conference by phone, call 800-437-2398and ask the operator for the CSG Systems International conference call.Additional InformationFor information about CSG, please visit CSG’s web site at csgi.com. Additional information can be found in theInvestor Relations section of the website.About CSGFor more than 35 years, CSG has simplified the complexity of business, delivering innovative customerengagement solutions that help companies acquire, monetize, engage and retain customers. Operating acrossmore than 120 countries worldwide, CSG manages billions of critical customer interactions annually, and itsaward-winning suite of software and services allow companies across dozens of industries to tackle their biggestbusiness challenges and thrive in an ever-changing marketplace. CSG is the trusted partner for driving digitalinnovation for hundreds of leading global brands, including AT&T, Charter Communications, Comcast, DISH,Eastlink, Formula One, Maximus, MTN and Telstra. To learn more, visit our website at csgi.com and connect withus on LinkedIn, Twitter and Facebook.
CSG Systems International, Inc.February 3, 2021Page 5Forward-Looking StatementsThis news release contains forward-looking statements as defined under the Securities Act of 1933, as amended,that are based on assumptions about a number of important factors and involve risks and uncertainties that couldcause actual results to differ materially from what appears in this news release. Some of these key factorsinclude, but are not limited to the following items: CSG’s business may be disrupted and its results of operations and cash flows adversely affected by theCOVID-19 pandemic; CSG derives over forty percent of its revenue from its two largest clients; Continued market acceptance of CSG’s products and services; CSG’s ability to continuously develop and enhance products in a timely, cost-effective, technically advancedand competitive manner; CSG’s ability to deliver its solutions in a timely fashion within budget, particularly large and complex softwareimplementations; CSG’s dependency on the global telecommunications industry, and in particular, the North Americantelecommunications industry; CSG’s ability to meet its financial expectations; Increasing competition in CSG’s market from companies of greater size and with broader presence; CSG’s ability to successfully integrate and manage acquired businesses or assets to achieve expectedstrategic, operating and financial goals; CSG’s ability to protect its intellectual property rights; CSG’s ability to maintain a reliable, secure computing environment; CSG’s ability to conduct business in the international marketplace; CSG’s ability to comply with applicable U.S. and International laws and regulations; and Fluctuations in credit market conditions, general global economic and political conditions, and foreigncurrency exchange rates.This list is not exhaustive, and readers are encouraged to review the additional risks and important factorsdescribed in CSG’s reports on Forms 10-K and 10-Q and other filings made with the SEC.For more information, contact:John Rea, Investor Relations(210) 687-4409E-mail: john.rea@csgi.com
CSG Systems International, Inc.February 3, 2021Page 6CSG SYSTEMS INTERNATIONAL, INC.CONDENSED CONSOLIDATED BALANCE SHEETS-UNAUDITED(in thousands, except per share amounts)ASSETSCurrent assets:Cash and cash equivalents .Short-term investments .Total cash, cash equivalents and short-term investments .Settlement assets .Trade accounts receivable:Billed, net of allowance of 3,628 and 3,735 .Unbilled .Income taxes receivable .Other current assets .Total current assets.Non-current assets:Property and equipment, net of depreciation of 105,073 and 98,029 .Operating lease right-of-use assets .Software, net of amortization of 139,836 and 125,437 .Goodwill .Acquired client contracts, net of amortization of 105,778 and 93,767 .Client contract costs, net of amortization of 39,893 and 31,526 .Deferred income taxes .Other assets .Total non-current assets .Total assets .LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Current portion of long-term debt .Operating lease liabilities .Client deposits .Trade accounts payable.Accrued employee compensation .Settlement liabilities .Deferred revenue .Income taxes payable .Other current liabilities .Total current liabilities .Non-current liabilities:Long-term debt, net of unamortized discounts of 5,346 and 10,053.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 .01 per share; 10,000 shares authorized; zero shares issued andoutstanding .Common stock, par value .01 per share; 100,000 shares authorized; 32,713 and 32,891shares outstanding .Additional paid-in capital .Treasury stock, at cost; 35,980 and 35,356 shares.Accumulated other comprehensive income (loss):Unrealized gains on short-term investments, net of tax .Cumulative foreign currency translation adjustments .Accumulated earnings .Total stockholders' equity .Total liabilities and stockholders' equity.December 31,2020December 31,2019 420,015 75886,368--700470,557(894,126 )696454,663(867,817 )13(31,151 )876,402422,3951,332,00016(39,519 )848,623396,6621,283,030
CSG Systems International, Inc.February 3, 2021Page 7CSG SYSTEMS INTERNATIONAL, INC.CONDENSED CONSOLIDATED STATEMENTS OF INCOME-UNAUDITED(in thousands, except per share amounts)Quarter EndedDecember 31, December 31,20202019Revenue . Cost of revenue (exclusive of depreciation, shown separatelybelow).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 .Amortization of original issue discount .Interest and investment income, net .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.260,487 Year EndedDecember 31, December 31,20202019254,747 4191,32921,4224,834870,701126,109(15,500 )(2,983 )1,244(2,961 )(20,200 )85,356(26,645 )58,711 (17,748 )(2,819 )1,785(1,604 )(20,386 )105,723(22,953 )82,770(3,606 )(762 )158223(3,987 )19,688(6,423 )13,265 (4,300 )(720 )457(1,481 )(6,044 )24,214(1,633 )22,581 31,83232,22531,96732,4430.420.41 0.71 0.70 32,01032,2781.831.82996,81032,05132,465 2.582.55
CSG Systems International, Inc.February 3, 2021Page 8CSG SYSTEMS INTERNATIONAL, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS-UNAUDITED(in thousands)Cash flows from operating activities:Net income. Adjustments to reconcile net income to net cash provided by operating activitiesDepreciation .Amortization .Amortization of original issue discount .Asset impairment.Gain on short-term investments and other .Deferred income taxes .Stock-based compensation .Subtotal .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 .Year EndedDecember 31,December 31,2020201958,711 82,77022,92643,9472,98311,030(123 )(1,033 )25,237163,67821,42245,7002,819438(364 )(77 )19,919172,62714,659(10,688 )5,405(5,752 )5,718173,020(4,015 )(17,727 )4,771(10,317 )5,737151,076Cash flows from investing activities:Purchases of software, property and equipment.Purchases of short-term investments.Proceeds from sale/maturity of short-term investments .Acquisition of and investments in business, net of cash acquired .Net cash used in investing activities .(29,397 )(81,824 )56,454(11,491 )(66,258 )(37,319 )(54,258 )52,135(17,194 )(56,636 )Cash flows from financing activities:Proceeds from issuance of common stock .Payment of cash dividends .Repurchase of common stock .Exercise of common stock warrants .Payments on long-term debt .Net cash used in financing activities .Effect of exchange rate fluctuations on cash .2,523(31,056 )(38,123 )(10,313 )(76,969 )2,3582,227(29,126 )(30,918 )(12,911 )(7,500 )(78,228 )1,059Net increase in cash and cash equivalents .32,15117,271Cash and cash equivalents, beginning of period .Cash and cash equivalents, end of period . 156,548188,699Supplemental disclosures of cash flow information:Cash paid during the period forInterest . Income taxes .13,68122,431 139,277156,54816,06418,358
CSG Systems International, Inc.February 3, 2021Page 9EXHIBIT 1CSG SYSTEMS INTERNATIONAL, INC.SUPPLEMENTAL REVENUE ANALYSISRevenue by Significant Customers: 10% or more of RevenueComcast . Charter .Comcast .Charter . Quarter EndedDecember 31, 2020% ofAmountRevenue54,84554,12121 %21 %Year EndedDecember 31, 2020% ofAmountRevenue213,290209,400 22 % 21 %Quarter EndedSeptember 30, 2020% ofAmountRevenue52,48353,20222 %22 % Quarter EndedDecember 31, 2019% ofAmountRevenue60,04950,61724 %20 %Year EndedDecember 31, 2019% ofAmountRevenue228,962194,99423 %20 %Revenue by VerticalBroadband/Cable/Satellite .Telecommunications .All other .Total revenue .Broadband/Cable/Satellite .Telecommunications .All other .Total revenue .Quarter EndedDecember 31,2020Quarter EndedSeptember 30,2020Year EndedDecember 31,2020Year EndedDecember 31,2019Quarter EndedDecember 31,2020Quarter EndedSeptember 30,2020Year EndedDecember 31,2020Year EndedDecember 31,201956 %22 %22 %100 %58 %19 %23 %100 %59 %18 %23 %100 %Quarter EndedDecember 31,201959 %19 %22 %100 %58 %19 %23 %100 %Revenue by GeographyAmericas .Europe, Middle East and Africa .Asia Pacific .Total revenue .Americas .Europe, Middle East and Africa .Asia Pacific .Total revenue .
FOR IMMEDIATE RELEASE . PRESS RELEASE CSG SYSTEMS INTERNATIONAL REPORTS RECORD REVENUES FOR FOURTH QUARTER 2020 . DENVER--(February 3, 2021) — CSG (NASDAQ: CSGS), the trusted partner to simplify the complexity of business transformation in the digital age, today reported results for the quarter and year ended December 31,
