CSG Systems International, Inc.

Good day and welcome to the CSG System International Third Quarter 2020 earnings announcement. All participants are in a listen-only mode. A question and answer session will follow today's presentation and instructions will be provided at that time. Today's conference is being recorded. At this time, I'd like to turn the conference over to Ms. Liz Bower, Senior Vice President, Chief Communication and Investor Relations Officer. Please go ahead, ma'am.

Thank you, Operator, and thanks to everyone for joining us. Today's discussion will contain a number of forward-looking statements. These will include, but are not limited to, statements regarding our projected financial results, our ability to meet our customers' needs to 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 statements 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, 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 earning 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 Brett Gries, Chief Executive Officer, Raleigh Johns, Chief Financial Officer, and Brian Shepherd, our Executive Vice President and future CEO beginning January 1st. With that, I'd now like to turn the call over to Brett.

Thank you, Liz, and thank you all for joining us today. It goes without saying that we at CSG are hoping that you, your family, friends, and loved ones are safe and well. While much time and energy has been focused on the negative impacts of the pandemic, as well as social injustices, we are focused on the good that has come out of these issues and how we can use it to continue to grow and improve. To elaborate, we have seen our employees rally around one another and our customers, finding new ways to connect and collaborate, whether that be through virtual workshops, proofs of concepts, or ideation sessions. It also includes creative problem solving by helping our clients to overcome supply shortages by sending headsets to our customer service agents' homes when they move to a work-from-home environment, even though we don't sell headsets. And we have been and continue to be diligent and consistent in putting the health and safety of our employees first in all that we do. Finally, we're taking more substantial steps towards creating a more diverse and inclusive environment with the hiring of our first Diversity and Inclusion Officer, who begins on December 2nd. Obviously, one person is not responsible for creating this environment alone. However, with this dedicated focus and expertise, we believe that we can and will do better going forward. We believe these actions are what create a sustainable, differentiated company. And again, just like I shared last quarter, while CSG is not immune from the impact of this pandemic, we are so fortunate compared to many with a predictable, resilient business that provides lots of visibility. Raleigh will review the financial results in more detail, but I'd like to call out a few key highlights. Our third quarter adjusted revenue was $228 million, up 2% from last quarter. Non-GAAP earnings per share were 76 cents. Our adjusted operating margin for the first nine months of the year is 16.5%, in line with our long-term target range. And our operating free cash flow metrics continues to be strong with $116 million in operating cash flow and $91 million in free cash flow being generated in the first three quarters of the year. In short, we feel very good about our performance thus far in 2020 and our ability to continue to meet the non-GAAP financial expectations we set out in May, as well as increase our cash flow guidance for the remainder of the year. So now let me share with you some highlights from the various parts of the business. First, we continue to see strength in our North American cable and satellite business. Recently, we enabled one of our large cable and satellite clients to rate traffic for its newly acquired wireless subscribers, which are being serviced on another network. In addition, in October, we surpassed over $1 billion in payments being processed through our kiosk solutions. These volumes demonstrate that customers want to be able to pay, add, or upgrade their service through a host of different channels. We've also seen some positive activity with our streaming and OTT customers as consumers move quickly towards digital consumption in all aspects of life, with digital over-the-top entertainment growing exponentially. For example, one of our longtime AscendOn clients, NBC, or Middle East Broadcasting Group, has seen almost a seven-fold increase in its subscribers in just the past year. In addition, a major global mass media and entertainment conglomerate is also using our AscendOn solution again this year to enable its gifting of its streaming service in several international locations just in time for the holiday season. Second, we continue to see positive signs in our global wireless and wireless line markets, in spite of a slight slowdown in some activities, whether that be implementations or sales cycles as a result of the pandemic. Last quarter, we discussed the fact that our sales pipeline is stronger than it has ever been since I've been at the company. What leads me to say that is the absolute revenue dollars associated with our pipeline, the average size of the opportunities, and the stage in the sales cycle that these opportunities are in. Net-net, we have larger size opportunities in our pipeline that are in more advanced stages of discussions with Tier 1 and Tier 2 service providers around the world, and we like our chances. Third, we continue to strengthen and lengthen our relationships with several customers, including Inmarsat. Inmarsat is a leader in providing global mobile satellite communications on land, sea, and air. This past quarter, Inmarsat signed a multi-year managed services deal to provide core operational and support to upgrade several billing, rating, mediation, and other third-party applications and migrate these to a cloud operating model. This win deeply embeds CSG and Inmarsat's business across all four of their satellite verticals. government, aviation, maritime, and enterprise. Next, companies around the world continue to look for ways to communicate with their customers in more personalized and relevant ways. And as important, through their communications channel of choice, whether that be text, voice, email, or other channels. For example, our customer engagement team expanded yet again our footprint with JPMorgan Chase. This past quarter, we inked a deal with the collections area of Chase to help support the expected growth in collections due to the financial impacts of COVID-19. With our solution, Chase will be able to cross-reference and align customer accounts, allowing them to give customers a consolidated, improved, and streamlined collection experience. In addition, our solution will help them improve collection rates, lower the number of overall touchpoints with the customer, and the cost to service that customer. We are pleased with our continued efforts to land and expand our presence within this organization. Finally, the volumes from our payment solutions have stabilized, but we have not yet fully recovered to the processing levels that we were at before the pandemic. It is important to remind everyone that we have not experienced the severe declines that other global payments providers have, thanks to the markets that we serve, which includes governmental agencies, early education services, retail, and small to medium businesses. All in all, I'm pleased with the progress that we're making, in particular in a year in which there have been so many obstacles. We are executing well across a broad set of metrics. We are adding new logos from a diverse set of clients ranging from wireless to healthcare to retail to technology. We are diversifying our revenue from the new verticals while at the same time growing our revenue from the cable market. We are widening our business mode by lengthening and strengthening our relationships with existing customers and earning more of their business. In addition, we are continuously evolving our cost structure to stay competitive in the market. And last but not least, we are distributing capital to shareholders while investing in new initiatives and acquisitions to drive longer-term top-line growth. In summary, we are delivering even in these very challenging times. Before I close out, as most of you know, I will be leaving CSG at the end of the year and handing the reins to Brian Shepherd, who I recruited in 2016 to join our leadership team. I brought Brian in to help me further our growth mindset and ambitions. He, along with a very talented team of leaders throughout the company, had delivered. I'm proud of what we have built, and I'm confident that our customers, employees, shareholders, and communities in which we operate will benefit from Brian's leadership. In addition, I'd like to take this opportunity to thank our investors and analysts for your continued interest in our company. Over the years, we've had some constructive conversations that have helped us to understand how you look at our business and what you believe is best for creating long-term value. Finally, I'd like to thank our clients for their trust in us and thank our talented and dedicated employees across the globe who are committed to helping our clients and our company achieve greatness. With that, I'll turn it over to Brian to say a few words.