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CSG SYSTEMS INTERNATIONAL INC (CSGS)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered modest top-line growth with strong profitability: revenue $297.1M (+2.3% YoY), non-GAAP operating margin 20.1% (+280 bps YoY), and non-GAAP EPS $1.16 (+13.7% YoY) .
  • Wall Street consensus was exceeded: revenue beat by ~$29.6M and EPS beat by ~$0.11; adjusted EBITDA was above company-reported actual in press materials but note definitional differences versus S&P . S&P estimates: EPS $1.0475*, revenue $267.5M*, EBITDA $59.6M*.
  • Guidance raised for the second straight quarter: FY25 non-GAAP adjusted operating margin to 18.6–19.0% (from 18.4–18.8%), adjusted EBITDA to $261–$272M, and adjusted FCF to $120–$150M; revenue and EPS ranges reiterated .
  • Catalysts: margin expansion, guidance lift, and strategic wins/extensions (Orange Business, Liberty Puerto Rico), plus shareholder returns (dividend $0.32, ongoing buybacks) .

What Went Well and What Went Wrong

  • What Went Well

    • Profitability expansion: H1 non-GAAP operating margin reached 19.5% (+250 bps YoY), reflecting cost efficiency and SaaS mix shift; CEO: “relentlessly unlocking efficiency gains” .
    • Guidance raised again: margin, adjusted EBITDA, and adjusted FCF; CFO emphasized strong H2 cadence (Q4 > Q3) and a tax-rate tailwind supporting FCF .
    • Strategic wins/extensions: Orange Business (enterprise CPQ across >25 countries) and Liberty Puerto Rico (integrated billing), diversifying verticals and underlining CX/payments momentum .

  • What Went Wrong

    • GAAP EPS down YoY: $0.44 vs $0.48, driven by higher effective tax rate due to earn-out compensation valuation allowance .
    • Cash from operations declined YoY in Q2: $37.3M vs $43.1M, despite record first-half adjusted FCF; CFO flagged FX headwinds impacting EPS conversion .
    • Revenue growth modest and sequentially softer: Q2 revenue $297.1M vs $299.5M in Q1; macro caution elongating sales cycles and a small LATAM contract termination ($1.4M H1 revenue) .

Financial Results

Sequential comparison (oldest → newest)

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$316.7 $299.5 $297.1
GAAP Operating Margin %13.4% 9.8% 10.0%
Non-GAAP Adjusted Operating Margin %20.1% 19.0% 20.1%
GAAP EPS ($)$1.21 $0.57 $0.44
Non-GAAP EPS ($)$1.65 $1.14 $1.16
Adjusted EBITDA ($USD Millions)$71.9 $64.3 $68.0
Cash from Operations ($USD Millions)$82.5 $11.5 $37.3
Adjusted Free Cash Flow ($USD Millions)$76.6 $7.1 $39.6

Year-over-year comparison (Q2 2024 → Q2 2025)

MetricQ2 2024Q2 2025
Revenue ($USD Millions)$290.3 $297.1
GAAP Operating Margin %8.8% 10.0%
Non-GAAP Adjusted Operating Margin %17.3% 20.1%
GAAP EPS ($)$0.48 $0.44
Non-GAAP EPS ($)$1.02 $1.16
Adjusted EBITDA ($USD Millions)$60.1 $68.0
Cash from Operations ($USD Millions)$43.1 $37.3
Adjusted Free Cash Flow ($USD Millions)$38.8 $39.6

Estimates vs actuals (Q2 2025)

MetricS&P ConsensusActualOutcome
Primary EPS ($)1.0475*1.16 Bold beat
Revenue ($USD Millions)267.5*297.1 Bold beat
EBITDA ($USD Millions)59.6*68.0 Bold beat (definitions may differ)

Values retrieved from S&P Global*.

Segment Breakdown

Revenue by Vertical (% of total; oldest → newest)

VerticalQ4 2024Q1 2025Q2 2025
Broadband/Cable/Satellite51% 50% 51%
Telecommunications20% 17% 18%
All other29% 33% 31%

Revenue by Geography (% of total; oldest → newest)

GeographyQ4 2024Q1 2025Q2 2025
Americas84% 87% 85%
EMEA10% 9% 11%
Asia Pacific6% 4% 4%

Significant Customers (10%+; amounts and %; oldest → newest)

CustomerQ4 2024 Amount ($M)Q4 2024 %Q1 2025 Amount ($M)Q1 2025 %Q2 2025 Amount ($M)Q2 2025 %
Charter59.733 19% 57.602 19% 57.667 19%
Comcast58.935 19% 52.759 18% 51.415 17%

KPIs

KPIQ1 2025Q2 2025
Payments merchant base135,000 142,000 (+14% YoY)
H1 non-GAAP operating margin19.0% 19.5%
Top-2 customer concentration37% of Q1 revenue 36% of H1 revenue

Guidance Changes

MetricPeriodPrevious Guidance (May 7, 2025)Current Guidance (Aug 6, 2025)Change
Revenue ($USD Millions)FY 2025$1,210–$1,250 No change Maintained
Non-GAAP Adjusted Operating Margin %FY 202518.4%–18.8% 18.6%–19.0% Raised
Non-GAAP EPS ($)FY 2025$4.65–$4.90 No change Maintained
Adjusted EBITDA ($USD Millions)FY 2025$258–$269 $261–$272 Raised
Adjusted Free Cash Flow ($USD Millions)FY 2025$110–$150 $120–$150 Raised (midpoint)
Effective Tax Rate (GAAP / Non-GAAP)FY 202528% / 28% 30% / 27% GAAP up; non-GAAP down
Diluted Shares (mm)FY 2025~28 ~28 Maintained
Capex ($USD Millions)FY 2025$20–$30 (Q4 call baseline) $20–$30 (reiterated cadence via CFO) Maintained
Revenue PhasingFY 2025~48% H1 / 52% H2 ~49% H1 / 51% H2; Q4 > Q3 Updated
DividendQ3–Q4 2025$0.32/qtr (Q1 increase) $0.32/qtr (Oct 3 payment approved) Maintained

Earnings Call Themes & Trends

TopicQ4 2024 (Prev-2)Q1 2025 (Prev-1)Q2 2025 (Current)Trend
AI/technology initiativesPragmatic AI embedded in CX; table-stakes use cases; margin tailwinds expected Emphasis on innovation-led margin expansion; 23.7% adj. EBITDA margin in Q1 More bullish on AI impacts to margins and R&D productivity; accelerating path to 28–30% adj. EBITDA long-term Improving
Revenue diversification“All other” ~29% in Q4; strong CX wins 33% outside cable/telco; top-2 concentration 37% H1 32% outside cable/telco; top-2 36%; targets >35% by 2026 Improving
Macro & sales cyclesTough market; organic growth 2–4% guide Persistent caution; 2–3% 2025 revenue growth expectation Continued caution; elongated cycles; reiterating low-single-digit growth Stable/soft
Product/vertical performanceAscendon cloud wins (Telenor, Lyse, Claro); payments/CX “rule of ~30” Payments merchant base +13% YoY; CX momentum Payments merchant base +14% YoY to 142k; Orange Business CPQ; Liberty Puerto Rico Improving
Top customers (Charter/Comcast)Comcast renewal through 2030; Q4 +3% YoY at big two Comcast one-time $10M in 2024 comp; 2025 no price increase; Charter contract to ~2028 Latin American customer termination $1.4M H1; revenue concentration continues to decline Mixed
M&A postureDisciplined; tuck-ins accretive; exploring scale options New $600M revolver supports flexibility Seek domain monetization platforms in new verticals; avoid high-multiple AI targets; pipeline active Stable

Management Commentary

  • CEO: “Team CSG’s very good business results through the first half of the year enabled us to raise our profitability targets for the second consecutive quarter and up our full year non-GAAP adjusted free cash flow target… strategy to become a more asset light SaaS company” .
  • CFO: “Our margin expansion is being driven by improvement in our operating efficiencies and our increasing success in selling sticky SaaS revenue solutions… we are raising our profitability guidance targets” .
  • CEO on AI: “We’re getting more bullish on the impact of what AI could do… to bring much greater value by building it into our products… accelerate R&D” .

Q&A Highlights

  • Macro caution persists; growth expectation remains ~2–3% for 2025; elongated sales cycles but strategic projects continue to close .
  • EBITDA raise did not translate to EPS due to adverse FX revaluation impacts; EPS would have been higher absent FX .
  • Customer consolidation view: long-standing incumbency with Charter/Comcast tends to be favorable; recent Comcast renewal carried no 2025 price increase .
  • Contract termination: Digicel in LATAM ($1.4M H1 revenue) not expected to impact FY25 revenue guidance .
  • Pipeline health: larger transformation deals progressing alongside faster-payback CX/payments deployments; H2 revenue phasing 51%, with Q4 > Q3 .

Estimates Context

  • Q2 2025 EPS and revenue materially beat S&P Global consensus; adjusted EBITDA exceeded consensus, noting definitional differences between “adjusted EBITDA” and S&P standardized EBITDA . S&P estimates: EPS $1.0475*, revenue $267.5M*, EBITDA $59.6M*.
  • Implications: upward revisions likely to FY25 profitability metrics (adj. EBITDA and margin) and FCF midpoint, while revenue trajectory stays at low-single-digit growth given macro commentary .

Values retrieved from S&P Global*.

Key Takeaways for Investors

  • Two consecutive guidance raises on profitability and FCF, with H2 cadence favoring Q4, support a near-term positive narrative on margins and cash generation .
  • Mix shift to higher-margin SaaS plus operating discipline is structurally lifting non-GAAP margins; H1 non-GAAP operating margin 19.5% vs 17.0% a year ago .
  • Strategic wins (Orange Business, Liberty Puerto Rico) and expanding payments/CX merchant base (+14% YoY to 142k) underpin diversification beyond cable/telco .
  • Risks: FX volatility to EPS conversion, modest revenue growth, and elongated decision cycles; GAAP EPS pressured by tax-rate effects tied to earn-out accounting .
  • Shareholder returns remain robust: $0.32 quarterly dividend approved and continued repurchases; liquidity and leverage (net debt ~1.5x adj. EBITDA) are comfortable .
  • Actionable: Position for continued margin/FCF upside; watch FX, tax-rate guidance shifts, and SaaS deal flow; upcoming contract milestones (e.g., Charter extension to 2031 announced post quarter) strengthen long-term revenue visibility .