CSG Systems International Inc Q2 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Maggie Nolan - William Blair & Co. LLC. - Analyst : I had a question about the near-term headwinds that you called out, in particular on some of your top client accounts. Have those headwinds gotten incrementally worse than you expected last quarter? What is the impact to Q2 versus what you're expecting maybe in Q3 or Q4? And how long do you expect these headwinds to persist?

Question: Maggie Nolan - William Blair & Co. LLC. - Analyst : And then as you think about your near-term aspiration of getting to an 18% to 20% margin, is there additional investments in cost savings programs or optimization that needs to happen in the near term before you start to see some benefit that would get you to that level? Or how are you thinking about the main levers to get you there over a maybe two-year period?

Question: Tarun Garg - Jefferies LLC - Analyst : This is Tarun on for George. Just a quick question regarding M&A. Any changes relative to last quarter in terms of the environment or plans and how you plan to approach that? Thanks.

Question: Shlomo Rosenbaum - Stifel, Nicolaus & Co., Inc. - Analyst : I do have two questions, really. One, the margin expansion is going pretty well and faster than planned, and you have that target. I just want to follow up back on the question that was started off with, which is what is driving the margin expansion? And can you point out some, maybe more, some specific examples of how you're going to get to that 18 to 20? It's a nice target. It's decently above where you've been only several years ago and you're not, the leverage, you should get some operating leverage. But it sounds like there's a lot more of an efficiency focus and maybe you could just give us some examples so that we can understand exactly what's going on?

Question: Shlomo Rosenbaum - Stifel, Nicolaus & Co., Inc. - Analyst : And then the domestic business in terms of revenue geographically, continued to do well. EMEA revenue declined a pretty decent amount sequentially. Maybe you could give us a little bit of detail as to what's going on in EMEA?

Question: Dan Bergstrom - RBC Capital Markets, LLC - Analyst : So it was nice to see the new industry verticals at 31% of revenue versus 30% last quarter. You mentioned aspiring to 35% at the start of the prepared remarks. Any thoughts around timing of that 30% target? Seems like the percentage is moving up about 100 bps a quarter. Is that a realistic way to think around timing and progression to that 35% number?

Question: Dan Bergstrom - RBC Capital Markets, LLC - Analyst : Then sticking with the verticals, any update around channel partners in those additional verticals? I think we're about a year into investments there. How's the new logo pipeline looking for partners?

Question: Nehal Chokshi - Northland Securities, Inc. - Analyst : Big news on the operating margin raise. That's great. And how you mentioned that the mix shift to SaaS is a driver to the counter '25 margin expansion being discussed. What is the mature operating margin of your SaaS business? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 07, 2024 / 9:00PM, CSGS.OQ - Q2 2024 CSG Systems International Inc Earnings Call

Question: Nehal Chokshi - Northland Securities, Inc. - Analyst : What about the operating margin portion?

Question: Nehal Chokshi - Northland Securities, Inc. - Analyst : So in that context then, 18% to 20%, this is more of a milepost as opposed to the long-term potential -- long-term expectation. Is that fair?

Question: Nehal Chokshi - Northland Securities, Inc. - Analyst : And then I do have another question. With the incremental buyback capacity that you've announced, but you did have plenty of capacity left on the existing buyback, are you trying to signal that your projected pace of share backs are going to materially hasten here?

Question: Matthew Harrigan - The Benchmark Co. LLC - Analyst : What is the beauty of Xponent in this environment is you can really show, I think, fairly readily to existing customers, and maybe new customers are somewhat lesser at really what the quantifiable impacts are on customer retention and cost efficiency on the customer journey and all that. And given that that's a priority, I mean, is there just sort of natural inertia on your corporate clients spending any money, even though you can demonstrate that the ROI is really high and if that's something you think they'll be able to work out over a period of time? What are the real hurdles on the selling process for Xponent and new customers, and then layering that more capabilities for existing customers? Thank you.

Question: Matthew Harrigan - The Benchmark Co. LLC - Analyst : And then you had a question on M&A earlier and you also went into it and extent on your commentary, and certainly, I understand the relative hurdle rates compared to buying back your own stock. But are you seeing any loosening of multiples? Are you seeing the likelihood of more for selling on the part of some smaller entrepreneurial companies who might not have had the access to capital that they had even 12 or 18 months ago? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 07, 2024 / 9:00PM, CSGS.OQ - Q2 2024 CSG Systems International Inc Earnings Call

Question: Matthew Harrigan - The Benchmark Co. LLC - Analyst : You still have all those Nutcracker engineers sitting in Dubai now presumably. Okay, great. Thanks, Brian.

Question: Michael Berg - Wells Fargo Securities LLC - Analyst : I want to double click on the dynamics happening within Comcast and Charter. Those are both healthy points in the quarter. You mentioned specifically expansion in new areas of business and that the Comcast renewal may get pulled forward here. So maybe you could just help us understand some more nuance of those new areas of the business. What areas of business are still left to capture at both Comcast and Charter? And any more details you can share on the Comcast renewal? Thank you.