Good afternoon. My name is Christian, and I'll be your conference operator today. At this time, I would like to welcome everyone to the CSG Systems International, Inc. Q2 2021 Earnings Call. . Presenters, you may begin your conference.

Thank you, operator, and thanks to everyone for joining us. Like last quarter, we will be working from a slide deck, which can be found on the Investor Relations section of our website. Please take a moment to locate these slides. Today's discussion will contain a number of forward-looking statements. These include, but are not limited to statements regarding our projected financial results, our ability to meet our clients' needs through our products, services and performance, and our ability to successfully integrate and manage acquired businesses in order to achieve their expected strategic, operating and financial goals. While these risks reflect our best current judgment, they are subject to risks and uncertainties that could cause our actual results to differ materially. Please note that these forward-looking statements reflect our opinions only as of the date of this call, and we undertake no obligation to revise or publicly release any revision to these forward-looking statements in light of new or future events. In addition to factors noted during this call, a more comprehensive discussion of our risk factors can be found in today's press release, as well as our most recently filed 10-K and 10-Q, which are all available in the Investor Relations section of our website. Also, we will discuss certain financial information that is not prepared in accordance with GAAP. We believe that these non-GAAP financial measures, when reviewed in conjunction with our GAAP financial measures, provide investors with greater transparency to the information used by our management team in our financial and operational decision-making. For more information regarding our use of non-GAAP financial measures, we refer you to today's earnings release and non-GAAP reconciliation tables on our website, which will also be furnished to the SEC on Form 8-K. With me today on the phone are Brian Sheppard, Chief Executive Officer; and Raleigh John's Chief Financial Officer. With that, I'd like to now turn the call over to Brian.

Thanks, John. For those accessing the slides for today's earnings call, please follow along, starting on Slide 4. Over the last three quarters, I have highlighted how CSG will win big in the market and consistently outperform by investing in our culture, investing in our talent, and investing in our future-ready software platforms. These investments, combined with our customer-obsessed values are the foundation upon which our accelerated business momentum is being built. As I meet with talented CSG teams globally, the energy and competitive intensity are evident. CSGers all around the world are turbocharging our growth and diversifying our revenue into higher growth industry verticals, including financial services, healthcare, retail, government and more. As we walk through our results today, I hope you will see why we absolutely believe that our best quarters and years are ahead of us. With this as the backdrop, we are very pleased to report that Q2 2021 was another strong quarter. We delivered 6.2% year-over-year top line revenue growth, which was substantially all driven by organic sales growth. As a result of this strong performance and the execution of our inorganic growth strategy as we closed both the Tango Telecom and Kitewheel strategic acquisitions, we are raising all guidance metrics for 2021. Put simply, CSG has never been healthier. Our future outlook has never been more encouraging and our accelerated growth and revenue diversification has never been more real. With that summary, please turn to Slide 5 to see how we are performing against six strategic priorities. First, we told you that CSG would more than double our long-term organic revenue growth rate and our results prove we are delivering on this commitment. In Q2, CSG delivered $255 million in total revenue, which represents 6.2% year-over-year growth, substantially all coming from organic revenue growth.…

Thanks Brian. As Brian highlighted, we're off to a strong start in 2021. Given our first half financial performance, we are pleased to raise our 2021 financial guidance targets across the Board. So let's first start by walking through our second quarter financial results, and then I'll share a little more detail about our enhanced 2021 outlook. Turning to Slide 9. We generated $255 million of revenue and $238 million of non-GAAP adjusted revenue during the second quarter. This result represents 6.2% year-over-year growth, substantially all of which was organic. On a year-to-date basis, both our revenue and adjusted revenue were up approximately 5% year-over-year. The year-over-year increase in revenue and adjusted revenue was driven primarily by the continued growth of CSG's revenue management solutions, where we serve many of the largest CSPs in the world. We also had some favorable foreign currency movements of approximately $4 million that contributed to our revenue growth for the second quarter. While our revenue growth was primarily organic, inorganic growth through acquisitions is an important component of our overall growth strategy aimed at advancing our diversification into faster growth, new industry verticals, and increasing our leadership position in other core markets. Over the past few months, you've seen us execute on that strategy as we closed multiple new acquisitions, including Tango Telecom and Kitewheel. As we accelerate our inorganic growth in the quarters ahead, we will remain disciplined by focusing on strategic, financial and cultural fit with an appropriate risk return profile for each acquisition we close. Moving on to the bottom of the slide. Our second quarter non-GAAP operating income was $40 million or 16.7% of non-GAAP adjusted revenue, as compared to $31 million or 15.6% in the same prior year period. This year-over-year increase was primarily related to current year revenue…

Your first question is from Tom Roderick from Stifel. Your line is open.

Thanks for taking my question. So Brian, let me start with you. I mean, 6% growth is a number we're not necessarily used to seeing around these parts. That's great to see the acceleration. And I guess I couldn't help but notice some of your commentary regarding end of the year renewals not necessarily signaling sort of a typical downturn or peel back onto the revenue profile. So, I think that's quite a certain combination of optimism that's really encouraging. I would love to hear a little bit more behind that as you think into the midterm and long term, what gives you sort of that confidence? Maybe you could even start with the 300,000 additive subs coming from Charter as the evidence of share gains, but getting away from just the quarter itself, talk about some of that midterm confidence and maybe you could read in that Charter data point. That would be great. Thanks.

Tom, hope you're doing well. Great questions. So first, it's really across the board. We've been talking for several quarters about the health, the size, the shape, the strength of our sales pipeline and a huge gratitude to all of our global sales and P&L leaders around the world. We just continue to execute well on our organic sales, both in our core cable and telecom CSP space, but also in these new higher growth industry verticals. So, that really is what's fueling and driving this but we also like the strategic acquisitions that we're closing that we think also become additive. So in the core, we continue to grow in cable. We continue to grow and win more in global telecom all around the world with our platforms, and that's really what's fueling this ongoing growth, and it just builds on itself. So, we understand that we want to double, more than double our growth rate and it comes with great organic sales. In the cable business, you asked specifically about Charter. I'll maybe just digress for a minute. It's fantastic to see the health and the strength of our customers. We've seen great results coming from the cable space. We've seen DISH announce big wins. We've seen our global customer base continue to do big things in the market. So, we've got a strong, healthy customer base, and we just work damn hard every day to bring them more value, to be easier to do business with and to be their provider of choice. So, we are very proud to continue to grow with Charter. We're always excited when we can pick up subscribers, convert them on to our platform and displace competitors, and we think if we serve them better than any of their other vendors and partners that net-net, we're going to pick up more business. And so as we think about these renewals with our big two, but also with just customers all around the world in multiple verticals, we focus on bringing them value, bringing them more agility, helping them become more digital and in the process, we think we can actually expand the business we do within, as we also bring them good value. And so that is our focus. Our focus is to sign good renewals and absolutely, we expect Q3, Q4 to grow. We also expect and hold ourselves accountable to grow in 2022 and beyond, even with these renewals.

Outstanding. That's great. I wanted to ask you a question about Kitewheel. The notion of omni-channel orchestration is a bit of a mouthful but I wanted to hear a little bit more sort of in terms of how that plays out on the customer journey side. Is it strictly meant to be on the marketing front? Is this something that can be woven into inbound customer care? And Rollie, a question for you. I apologize if you addressed it, but what is the inorganic contribution relative to the rest of the U.S. guidance from Kitewheel and Tango?

So Rollie, why don't you hit the second part of Tom's question on the guidance and what's included in that and what you want to share, and then I'll address the strategic question that Tom raised.

Perfect. Yes Tom, if you look at our guidance range, if you look at the midpoint, we're raising midpoints by about $15 million. I'd say half of that is - about half of that's coming from organic growth. The other half is inorganic for the remainder of the year.

Great. Thanks. Perfect.

And then on the strategic question, Tom, I mean, we are very excited about this acquisition. We think it opens up and expands our offering in our integrated full-stack suite in a $10 billion market. That's got huge upside in terms of addressable market that we can go after. So, you asked what part it really is, think about more transactional engagement. So, from the time that it's less around marketing and sales, and it's more when a consumer is looking at packages and offers when they sign up for service, when they activate the service, when they get educated on the service offering, on the billing and the other things, when they have a customer inquiry. What we do from an end-to-end standpoint is we've always had great engagement channels but with this journey orchestration and analytics, we can actually help these large customers and brands look at the individual consumer experience that we're providing throughout that whole engagement of that life cycle, and we can provide insights in real-time to help them provide the channel of choice, provide the information that the consumer is looking for, provide proactive or predictive offers or education to either give the consumer or the enterprise customer, a better experience or to make it easier for them to find the information or the activity they're looking for and to do it in a much more cost-effective way. So, it really is around transactional engagement across the channel of choice. Some consumers may prefer a text notification. Others may want a phone call. Others may want an email. Some people still might like a printed statement. And so we make it easy for them to get what they want, when they want in a cost-effective efficient way, and that's what really excites us and the ability sell this to our large cable and wireless customers all around the world, but also to expand into all those other industry verticals. And it's that combination of growing and staying healthy in our core CSP and moving into all these other high-growth verticals that is also fueling the revenue growth and transformation of CSG.

Yes. That's fantastic. Thanks for the details. I'll jump back in the queue but that's really, really helpful. Congratulations.

Yes. Thanks very much, Tom.

All right. There are no further questions at this time. Mr. Brian Shepherd, I'll turn the call over back to you. My apologies, sir. We have a follow-up question from Tom Roderick from Stifel.

I can call back right now, this is great. So, I do have one more question for you, Rollie. Just in terms of the cash flows that there was a change there that you made relative to I guess, it was settlement charges, earnout charges, but the settlement fees that were sort of reclassified, can you just go into what that was? And did that have any impact on moving the guidance for your free cash flows for the year or is that irrelevant relative to that was reclassified?

Yes. I'll start with the last part of the question. Not relevant, no impact. Essentially, what we did was we took a rework at the settlement assets and merchant reserves. And the fact that, that is actually cash held by us, although it's in our mind, it's restricted and it's aligned with settlement obligations. So, because of the fact that it is actually cash held by us, the guidance would say it was probably more appropriate to include in our cash, cash equivalents and restricted cash. So really, it's a reclassification within the statement of cash flows. At the end of the day, no impact on or very minimal impact on historical presentation of cash flow from operations. It was one of the things where we saw there was a lot of diversity in practice, and I think just based on the nature of the cash flows, it was prudent for us to include those on our stable cash flows.

And there are no further questions at this time. Mr. Brian Shepherd, I'll turn the call over back to you.

No, I'll just say thanks for joining the call. We're proud of the first half results that team CSG delivered, but we're laser-focused on delivering fantastic Q3 and Q4 and building momentum for the growth we expect to deliver in 2022. So, thank you for joining today.

This concludes today’s conference call. Thank you for your participation. You may now disconnect.