CSG Systems International Inc Q3 2024 Earnings Call Transcript

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

Question: Greg Burns - Sidoti - Analyst : Good afternoon. Hey Greg. Hi. Just when we look at the Comcasts Renewal, the fact that you're able to get it done without any price concessions up front and actual have actually have price escalators baked in, in, in four years. Are you providing more services like what, what was contemplated in that? Is it more services on your end being provided or does that contemplate maybe the number of subscribers declining over time and you know, they're, they're moving down maybe tiers in terms of the, the level of service you're providing. So, there's a little bit of a wash there in terms of what you're going to be providing perspectively if you could give us any more, more color on the, the dynamics that drove the, the structure of the deal.

Question: Greg Burns - Sidoti - Analyst : Great. And then just in terms of the, maybe a little bit of a near term slow down, you mentioned in the core, core business, can you just talk about maybe what, what the pipeline looks like, you know, your view on kind of maybe what's driving that in the near term, what the pipeline looks like and your confidence and maybe growth re accelerating at some point next year. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 06, 2024 / 10:00PM, CSGS.OQ - Q3 2024 CSG Systems International Inc Earnings Call

Question: Greg Burns - Sidoti - Analyst : Great. Thank you.

Question: Dan Bergstrom - RBC capital markets - Analyst : Yeah, on the Con Comcast contract renewal. Just any thoughts around the timing of the renewal, maybe if you could share, you know, what are some factors that enabled you to announce it now versus say, you know, six months from now, a year from now.

Question: Dan Bergstrom - RBC capital markets - Analyst : That's helpful. Thank you. And then anything to point out around international trends this quarter seemed like Europe was maybe a little stronger relative to last quarter. APAC, maybe a little softer relative to last quarter. Just anything to point out in those geographies.

Question: Dan Bergstrom - RBC capital markets - Analyst : Thank you.

Question: Salim Rosenbaum - Stifel - Analyst : Hi. Thank you very much. I'm going to focus just a little on some of the tactical stuff this quarter next quarter. Just there, there's a decent revenue step up even at the, at the low end of the range in the, in the next quarter in Q4,24. And I was wondering if, you know, it's the same thing for EBI and Ebida, is there anything that slipped from Q3 into Q4? Is there something that you just have specific visibility into over there? If you can just give us a little, you know, insight as to where it is? I know there's normally like an 8 million step up or something like that. And here we're looking at something like, you know, closer to 20 million, I think.

Question: Salim Rosenbaum - Stifel - Analyst : Okay. And then just the, this really nice increase quentry on the adjusted gross margin. Is that a revenue mix type of thing? Is there something, was there particularly high revenue on that non-recurring Comcast, stuff that you were talking about? I was just wondering if you can, can discuss that a little bit.

Question: Bret Fitzgerald - Kendra Fitzgerald - Analyst : Hi, this is Thomas and calling for Brett. Thank you for taking my question just to you know, piggyback on, on the last question a little bit with the top line guidance. Remaining flat. I guess can you point to anything specifically you're seeing in Q4 or I guess can you provide more details on the specific factors you guys are mentioning that are contributing to the margin expansion, whether it be through AI or cost optimization? That gives you the confidence to increase the adjusted operating income and adjusted EPS guidance. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 06, 2024 / 10:00PM, CSGS.OQ - Q3 2024 CSG Systems International Inc Earnings Call

Question: Bret Fitzgerald - Kendra Fitzgerald - Analyst : Perfect. Thank God. Thanks guys. And then just one more if I may. Congrats on the extension with Comcast, I guess. What specific opportunities do you see over the next six years to expand within that relationship?

Question: Bret Fitzgerald - Kendra Fitzgerald - Analyst : Great. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 06, 2024 / 10:00PM, CSGS.OQ - Q3 2024 CSG Systems International Inc Earnings Call

Question: George Notter - Jeffrey - Analyst : Hi guys. Thanks very much. I, I have a question on the CX and Payments businesses. I think in the past you guys have talked about them in the context of a rule of 40 businesses. I guess I'm curious if that's still the case. And then also I saw from the presentation, I think the two businesses in aggregate are, I guess I should be careful here. Your, your, your non cable, non telco business is about 30% of sales. And I think year-to-date is what the presentation references. I assume that's also true for Q3. Any insight there would be great.

Question: George Notter - Jeffrey - Analyst : Got it. And then just as a quick follow on there, can you just remind me of the M&A contribution in these businesses? I think ICG pay and then I think you had another acquisition in the insurance vertical. But can you remind me how much revenue comes from those deals in 2024?

Question: George Notter - Jeffrey - Analyst : In, in 24? Okay, great. How much? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 06, 2024 / 10:00PM, CSGS.OQ - Q3 2024 CSG Systems International Inc Earnings Call

Question: George Notter - Jeffrey - Analyst : I got it. Okay. Got it. And then I think both those deals are around mid year in terms of when you close them. So you know, loosely if we can scale it up for next year, another probably you know, 68 million bucks I would imagine in terms of next year's contribution.

Question: George Notter - Jeffrey - Analyst : Far off. Okay, super. Thanks guys. Appreciate it.

Question: Matthew Harrigan - Benchmark - Analyst : Oh, thank you. I guess this is more or less the tertiary, piggyback off. Slow those questions on the margins and efficiencies and I'm sure that you, you're not going to hire, Elon Musk after your, as your efficiencies are after he lays off 80% of the federal workforce. But, do you give any, more specificity on your cost composition, you know, in terms of labor and such? And also it seems like there's such a high level of familiarity between yourselves and Comcast and Charter. I'm sure they understand the economics of your business and to some extent any of those long term contracts, they're probably somewhat of a gaining function on your, on your margin increases. You know, given that that's still a heavy chunk of revenues. But is it natural to think that, you know, as that, as you hopefully go even beyond 35 and Expo and it really continues to grow, you're just going to see a pretty continual reset, upward, reset on that, on that margin increase even if it's always, gated somewhat by the great relationships you have with Comcast and Charter.

Question: Matthew Harrigan - Benchmark - Analyst : Great. Thanks, Brian.

Question: Nehal Chokshi - Northland capital markets - Analyst : Yeah, thank you. Hey, all the non non Comcast wins signed in the quarter and then separately year-to-date. Can you give a sense as far as what's the annual contract value of these signed? I I recognize that a lot of these are to ramp over the future quarters. So just getting a sense of what that annual contract value is and just why it will drive towards the midpoint of your long term Growth.

Question: Nehal Chokshi - Northland capital markets - Analyst : Okay. And then hi you're you're raising adjusted a bit for a calendar 24 but not free cash flow. Walk us through. Why? That is. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 06, 2024 / 10:00PM, CSGS.OQ - Q3 2024 CSG Systems International Inc Earnings Call

Question: Nehal Chokshi - Northland capital markets - Analyst : Got it understood. Thank you.

Question: Maggie Nolan - William Blair - Analyst : Thank you on the increase in margin guidance. None of the levers that you outlined were necessarily incremental to what you've spoken about in the past. So, is there any more detail you can share with us on what specifically surprised you to the upside to allow you to increase guidance and maybe what is the, the magnitude of each of those lovers in the future that would drive you into that 18% to 20% range?

Question: Maggie Nolan - William Blair - Analyst : Thank you. And then as you think about further diversifying the revenue base, the other vertical in particular are customers within that vertical coming to you and asking for a vertical specific knowledge or offerings or solutions? And do you have the ability to kind of tailor that as you attempt to continue to scale those benchmarks?