CSG Systems International, Inc.

on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one a second time. Thank you. And I would now like to turn the conference over to John Ray, Senior Vice President of Finance. You may begin.

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 8K. With me today on the phone are Brian Shepherd, Chief Executive Officer, and Hai Tran, Chief Financial Officer. With that, I'd like to now turn the call over to Brian.

Thanks, John. Hi, everyone. Welcome to the call as we begin on slide four. Q1 was an excellent start to 2025. We delivered .0% non-GAAP operating margin in the quarter, a 240 basis point improvement compared to .6% in Q1 2024. Based on the confidence we have from our 90% plus revenue visibility, our success selling higher gross margin SAS deals, and our consistent ability to unlock greater operating efficiencies, we are pleased to raise our 2025 full year profitability and non-GAAP EPS targets that Hai will cover in more detail. We diversified CSC's revenue even more with 33% of Q1 revenue coming from big faster growing industry verticals outside of cable and telecom led by our data-driven CX, monetization and payment solutions. This is a new quarterly record for CSC up from 30% in the first quarter last year. Our top two customers, Charter and Comcast, now represent 37% of total Q1 revenue down from 49% of revenue in 2017. The great news is that this significant improvement in CSC's revenue concentration is not because the revenue we earn from our top two customers is declining. In fact, we've grown the annual revenue at Charter and Comcast by approximately 76 million from 2017 to 2024, representing a .6% compound annual growth rate. And yet the revenue concentration from our big two customers has significantly improved because the other parts of our business are growing revenue even faster, a trend that we believe will continue in the years ahead. We reported our best first quarter non-GAAP adjusted free cashflow performance since 2018, generating $7 million of non-GAAP adjusted free cashflow in Q1, a huge improvement over the negative $34 million free cash outflow in Q1 2024. And as promised, we rewarded shareholders with even more dividends and more buybacks. We announced a 7% annual dividend increase in Q1 for the 12th consecutive year, and we paid 9 million in dividends and repurchased $22 million worth of CSC shares in the first quarter. We hope these results prove the great operating discipline is becoming a trademark of Team CSC that investors can bank on. Flight five highlights the three long-term value creation commitments that the CSC leadership team and board of directors will hold ourselves accountable to deliver. First, CSC aspires to deliver 2% to 6% pure organic revenue growth and to diversify revenue from bigger, faster growing new industry verticals to greater than 35% of total CSC revenue by 2026. For 2025, we're reiterating our original full year 2025 revenue guidance range with a midpoint of $1.23 billion in revenue, which would result in approximately .7% revenue growth, even in the face of more macroeconomic uncertainty. Second, we are committed to consistently expanding non-GAAP adjusted operating margin with a long-term range of 18% to 20% without impeding our ability to deliver mid-single digit annual organic revenue growth most quarters in years. And we expect this improving profitability to convert nicely into strong double digit adjusted free cashflow growth in both 2025 and 2026 with the midpoint of our 2025 guidance range sitting at $130 million, which would represent approximately 15% year over year growth in free cashflow. Third, we are also committed to excellent shareholder capital returns year in, year out, as evidenced by the over $570 million worth of capital returned to shareholders since 2020. And specifically for 2025, we committed to return more than $100 million in share repurchases and dividends combined, which we are well on our way towards achieving with $32 million of capital returned to shareholders in Q1. On slide six, investors can see the exciting revenue growth coming from big new verticals. As a reminder, CSG targets industry verticals that have high recurring customer relationships powered by complex subscription and consumption based business models because the business problems and customer pain points are surprisingly similar. With CSG's integrated workflow solutions, our customers sell, monetize and engage better as we help them simplify their complex monetization and customer engagement processes. The highly sticky mission critical nature of our SaaS solutions is also why we enter most years with 90% or greater revenue visibility. And it's why the vast majority of our customers stay with CSG for decades, thereby reducing the risk for us and our investors, even in times of greater market volatility. This also explains why we announced so many fantastic new sales wins, including in 2024 with leading brands like Comcast, Formula One, Walgreens, NRC Health, Telanor, Denmark, Lise and Norway, One New Zealand, Zane Sudan and many others. CSG's global sales and -to-market teams continue this momentum with more good sales wins in the first quarter. I'm excited to announce that we extended our 30 year relationship with MediaCom, the fifth largest cable provider in the United States. MediaCom employs an arsenal of integrated CSG solutions, trusting us to manage their billing, product catalog, order management and provisioning activities, process secure payments with our cloud-based payments platform, optimize their dispatch and field tech ops functions and digitally engage with customers in intuitive and personal ways to reduce call center volumes with CSG Exponents. I'm also excited to announce that with this extension, MediaCom will continue to leverage CSG BillExplainer.ai, our leading edge AI driven solution to help eliminate bill confusion and irrelevant customer engagement to create a clear and engaging customer journey. We look forward to continuing to help MediaCom increase long-term customer loyalty and mitigate call center costs. In April, we announced a fantastic expansion with Liberty Latin America, a long-standing CSG customer and one of the leading communication companies in the region. Liberty Latin America chose CSG to streamline its wholesale business and unify operations across 21 countries and multiple lines of business. CSG's digital wholesale suite will optimize their wholesale rating, charging and settlement processes by reducing operational costs and simplifying the management of their B2B partner agreements and business relationships. We want an excellent extension with PLDT, the Philippines largest fully integrated telecom company. Team CSG will continue to help PLDT enhance its wireless customer experience by delivering smart invoicing solutions that streamline the billing operation and enable more personalized and transparent billing communications. We're proud to help PLDT strengthen their customer retention as a result of their enhanced subscriber experience. In financial services, we've expanded our relationship with JP Morgan Chase as CSG solutions will now help improve their cardholder overdraft experience. This is another great example of our sales team growing CSG's share of wallet with existing customers. After helping JP Morgan Chase improve its fraud alert cardholder experience with our data-driven CSG exponent suite, we were able to identify other areas to help them be even easier to do business with and lower their cost to serve. We closed an exciting new win with North Texas Tolling Authority. NPTA selected CSG to provide data-driven customer experience solutions to streamline communications with drivers who use their toll roads. This win further diversifies CSG's presence in the tolling and transportation industry and comes on the heels of another exciting tolling win we announced in Q4 2024 with the Oklahoma Turnpike Authority. CSG is highly focused on bringing greater value to toll road operators all across the US with opportunities to expand our tolling presence globally over time. Payments also continues to contribute nicely to our revenue diversification success and our revenue growth, where we grew our payments merchant base 13% year over year to 135,000 merchants in Q1. We continue to see good business performance and growth in payments. Moving to slide seven, the CSG management team and board are fully committed to turbo charging our profitability and free cashflow well beyond our good Q1 results. We will hold ourselves accountable to become a more asset light SaaS company where we generate much greater profit and cashflow from every dollar we invest. While we have relatively low annual capex spend ranging from $20 million to $30 million, we aspire to reduce our working capital needs and fixed asset levels going forward with the same discipline that we've applied to our profit improvement efforts. With the consistency that we have expanded non-GAAP adjusted operating margin from .6% in 2022 to .2% in 2023 to .1% in 2024, with the midpoint of our revised 2025 guidance now sitting at 18.6%. Looking ahead, we absolutely believe there's a clear pathway for CSG to achieve at or above the upper end of our 18 to 20% non-GAAP adjusted operating margin over the next several years, with an aspiration to operate in the 19% to 20% range for 2026. And we are seeing similar improvements in adjusted EBITDA margin, where we grew our adjusted EBITDA margin 220 basis points to .7% in Q1 year over year, a trend we expect to continue, which is represented in our revised 2025 guidance. As we work hard to achieve all these improved operating results, one of the metrics we care most about is seeing this better profitability convert nicely into strong double digit non-GAAP adjusted free cashflow growth in both 2025 and 2026. Turning to slide eight, CSG has a strong healthy balance sheet, a proven ability to unlock shareholder value with disciplined M&A, and a commitment to being an excellent, offensive and defensive choice for investors looking for relative safety in today's turbulent markets. We believe CSG stock price represents an excellent buy for investors and for CSG. So we will stay balanced and disciplined as we focus on any strategic or financial move that the board of directors and management believe will deliver excellent value for shareholders. With respect to M&A, we are very pleased with the two smaller, highly accretive acquisitions closed in 2024. We were able to acquire both companies at highly attractive multiples with both small tuck-in deals, adding highly profitable, high recurring revenue for CSG. We continue to actively search for, vet and potentially close more value creating M&A deals in 2025. As I wrap up my opening remarks, we are excited about our good Q1 start as we stay laser focused on making 2025 a year of breakthrough results that can become the springboard for even bigger growth heading into 2026 and beyond. As we pursue every creative new idea that can help us elevate our performance and accelerate our results, the foundations of our success remain constant. CSG has an unwavering commitment to being a humble, culture first, diverse global leader. CSG will hold ourselves accountable to world-class operating discipline with a relentless drive to constantly learn and get better. CSG will co-create a class-style game of value with customers all around the world as we help them sell, monetize and engage better with our integrated domain specific CSG workflow solutions. CSG will put our money where our mouth is by tightly linking management compensation to the business and financial commitments we make to our shareholders. And CSGers all around the world will stay hungry and obsessed because we know growth oriented relentlessness is an essential ingredient to creating sustained value regardless of the obstacles standing in our way. With that, I will turn it over to Hai for more details.

Thanks, Brian. Let's walk through our Q1 2025 financial results and then I'll wrap up with some key conclusions. Starting on slide 10, we generated $299 million of revenue versus the $295 million we generated last year and represents the highest first quarter revenue in our company's history. From a phasing perspective, our Q1 results came in slightly better than we had expected and benefited from a couple million dollars of revenue we had anticipated coming in later in the year. Looking ahead, we now expect to grow revenue in 2025 between 2% and 3%. Moving on, our Q1 2025 non-GAAP operating income was $51 million or a non-GAAP adjusted operating margin of 19% as compared to $45 million or .6% in the prior year period. Similarly, our non-GAAP adjusted EBITDA was $64 million for the first quarter or .7% of revenue excluding transaction fees as compared to $58 million or .5% in the prior year period. We are excited to see non-GAAP adjusted EBITDA improve over 200 basis points in Q1 of 2025. And we believe we have a clear path to exceed 25% non-GAAP adjusted EBITDA margins in the coming years. Our margin expansion is being driven by our increasing success in selling sticky SAS revenue solutions combined with operating leverage enhancing initiatives that include improved procurement, increased productivity and process re-engineering. Specifically, we were able to grow Q1 non-GAAP adjusted operating income and non-GAAP adjusted EBITDA at 15% and 11% respectively against the prior year period. We expect to maintain a higher profitability metric as we have taken significant cost efficiency actions to optimize our capacity and better align CSG's resources to areas of our business that would deliver faster growth. I'll share more on our revised 2025 guidance targets momentarily. Lastly, our Q1 2025 non-GAAP EPS was $1.14, a 13% increase as compared to $1.01 in the prior year period. The increase in non-GAAP EPS is mainly due to the higher non-GAAP adjusted operating income, partially offset by adverse foreign currency movements. As investors can see, Team CSG is delivering on our commitment to consistently grow non-GAAP adjusted EBITDA, non-GAAP adjusted operating margin and non-GAAP EPS much faster than revenue growth in 2025 and 2026. Turning to slide 11, I will go through the balance sheet, our cashflow performance and shareholder returns. Our Q1 2025 cashflow from operations was $11 million as compared to cash used in operations of $29 million in Q1 of the prior year. Further, we had non-GAAP adjusted free cashflow of $7 million in Q1 of 2025 as compared to $34 million of non-GAAP adjusted free cash outflows in Q1 of 2024. This represents our strongest Q1 non-GAAP adjusted free cashflow result in seven years and is driven primarily by our increased operating margins, improvements in our working capital, including changes in our variable incentive compensation and active management of vendor relationships. Moving on, we ended the first quarter of 2025 with $136 million of cash and cash equivalents. That along with our outstanding debt at March 31, 2025 results in $415 million of net debt and our net debt leverage ratio sits at 1.6 times adjusted EBITDA. Further, we have $610 million in liquidity as of the end of the quarter. I'm also pleased to share that in March, we entered into a new five-year revolving credit facility. With this transaction, we were able to consolidate our term loan and revolver into one highly flexible and capital efficient $600 million revolving credit facility. This transaction had multiple benefits, including our ability to secure borrowing rates identical to our former 2021 credit facility terms and overall covenant light package and greater flexibility with 100% revolving line of credit structure. Turning the page, I'll revisit our 2025 guidance targets. In summary, we are raising profitability and non-GAAP EPS targets. Further, we still expect approximately 48% of our revenue to be generated in the first half of 2025 and the remaining 52% in the second half. We continue to see strong demand for our solutions and we intend to capitalize on those opportunities to realize both near-term and longer-term growth with timing being our biggest challenge and not underlying demand. We remain committed to our two to 6% long-term annual revenue growth range with the expectation to be at the midpoint of higher in most years. As part of our commitment, I wanna highlight CSG's focus on sticky high quality recurring revenue that continues to support our improved margin expansion and non-GAAP adjusted free cash flow growth. Wrapping up, we love what we see in our business powered by our operating discipline, R&D innovation and ongoing sales wins. CSG will continue to relentlessly prioritize every investment we make and stay very disciplined in the allocation of resources and the use of capital. Innovation, including how we leverage the transformative power of AI across CSG and an adherence to a risk reward framework with continuous learning are key cornerstones of how we have and will continue to grow top and bottom results even faster. CSG is well positioned with a strong sales pipeline and a high quality recurring revenue customer base. We remain committed to accelerating and diversifying our revenue growth, which may include closing and integrating discipline, value adding acquisitions. We believe this approach combined with our consistent capital distribution will serve our shareholders well. With that, I will turn it over to the operator to facilitate the question and answer session.

Thank you. And we will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one a second time. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. To be able to take as many questions as possible, we ask that you please limit yourself to one question and one follow-up. Again, it is star one if you would like to join the queue. And our first question comes from the line of Dan Bergstrom with RBC Capital Markets. Your line is open.

Hey, thanks for taking my questions. Any thoughts you could share as far as what you're hearing from customers around the end of the quarter? Anything to note around those last couple of weeks, we've heard different views across software so far as to whether it was a normal close or there was some elevated uncertainty. And then maybe could you talk to the tone of business through the first months of the new quarter here?

Yeah, sure. Thanks, Dan. Appreciate the question. I wouldn't say there's anything unique in Q1 or the first month of this quarter. I think just the global macroeconomic uncertainty in general that's been around for a couple of quarters, we see that continuing. And so what we see in most industry verticals are some belt tightening. And therefore, any solution that can actually improve experience can help drive cross-seller upsell on their half or cut their operating costs. It has a short ROI payback. You're seeing those deals still move through, even with some of that, I just say the heightened concern that most customers and most companies are operating with today. I think the second thing that we see is if there's a strategic longer-term transformation on the horizon that can really move the business and put it in a better competitive position, we still see those bigger deals coming to the market. We still see deals getting signed as we've announced a bunch of those. But I would say people are thoughtful and they're measuring two or three times before they move forward with those bigger transformations. But we see them. It's just they're being thoughtful. Hi, anything else you'd add to that?

And Mr. Transline did disconnect.

All right.

Thanks.

We'll just ask a follow-up then on the margin side. Really impressive here in the first quarter. I appreciate the added color and the script around guidance. The presentation pointed to constantly optimizing and reinventing how you do business around the expense side. Maybe, Brian, could you take a step back and maybe expand on those concepts a bit? And then talk to your philosophy around constantly optimizing costs?

Yeah, I love that question. You're going to hear us just talk nonstop for every quarter to come about operating discipline. And one of the things I'm most proud of is the way the CSG teams are taking a hard look at everything we do. Anything that doesn't add value to a customer and doesn't add value to our business and our shareholders, then stop doing it or reinvent it. That's everything from AI. That's looking at just good old-fashioned operational improvement. We talk about these quarter turns of the wrench. I think you're seeing CSG now starts to do half turns of the wrench. And I think we're just getting started on the ability to continue to expand our EBITDA and our OP margin. But it's not just the efficiency. It's also taking a look, you know, using innovation. You see, as our margins go up, you actually see R&D growing at a much faster rate because we believe as a mission-critical technology company, innovation has to be the foundation, both to ensure the existing platforms and the future platforms we build will be there for our customers today, five years from now and 10 years from now. And so I think this investment in innovation and squeezing less productive spend and redirecting it to a more value-added use, I think that's something I'm pretty pleased that's come a long way in the last two years. And then part of it, part of the margin expansion has nothing to do with operational efficiency. It has to do with our revenue mix shift that Hai talks a lot about. We're just, as we sell more SaaS higher gross margin deals, as we diversify into other faster-growing industry verticals, that's also just giving us operating leverage across the business. You're seeing that at the gross margin line as well as at the operating margin in EBITDA line and the free cash flow. The part that I am most excited about is what I think we could do with free cash flow. And I think we're finally now starting to see the improved profitability really convert into free cash flow. And we've got a real focus on becoming more asset-light and generating double-digit returns through 2026. Stay tuned for what happens after 2026, but we don't want that music to stop.

Thank you.

Thanks, Dan.

And your next question comes from the line of Greg Burns with Fidoti & Company. Your line is open.

Good evening. Can you just talk about the revenue trends at Charter and Comcast? It looks like Charter, or sorry, Comcast was flat year over year, but down sequentially. Maybe that's just a seasonality thing, and Charter was down a little bit year over year and quarter over quarter. So maybe if we could just talk about what's driving that and the general demand dynamics within the cable market.

Sure. Hi, Greg. Hope you're doing well. I think there's a couple of things. I think if you look at... What we've tended to see with our big two is you look at that trend that we shared in the script, that we've seen a compounded annual growth rate of about .6% going back from 2017 to now. Over the medium to longer term, we still see and believe that you could kind of see annual growth in that range. There's price escalators built into the contracts. There's new solutions and new landmass we could sell and help them with. And so you will get some quarterly fluctuation. As we've talked a lot about, we really don't... Our revenue is driven very little by the number of broadband ads or total ads they have. So therefore, that headwind I would say that they faced isn't really impacting us much. The one around Q1 I would call out that you asked about was the reminder, we want a really exciting new deal with Comcast in a new area of billing outside the core triple play. That, I think we gave insights last year that that drove about $10 million of one-time revenue that will make the comp comparison on growth from 2024 and 2025 look a little questionable. The second thing is that fantastic six-year renewal we did with Comcast. The only thing we did give was no price increase in 2025. And so therefore, we won't get the benefit this year of a price increase at Comcast, but as part of that fantastic six-year deal we did. So I think a couple of those things are what's driving a little bit of the -over-quarter comp that you asked about.

All right, great. Thank you. Thanks, Greg.

And your next question comes from the line of Matthew Harrigan with Benchmark. Your line is open.

Thank you and congratulations on the guidance. I'm curious on the M&A side as you look to be more active and maybe some larger assets get dislodged. I know every circumstance is a little unique and sometimes it is syncretic, but what are you really looking for? Is it IP? Is it channels? Is it incremental market share right out of the box? And generally, what sort of disparity are you seeing in the parent, seller versus buyer multiples when you layer in synergies? I know some of it's on the revenue side and it's realized over time and it's tricky, but just kind of general thoughts more specifically on your ideal M&A candidate. I know probably different companies have different possibilities. And then secondly, also on the thing one and thing two, otherwise known as Charter and Comcast, you've seen some divergence in results. I mean, Charter, I think it's done a better job on bundling and pricing sometimes, even though there's a lot of commonalities on the product. OK, but it feels like broadband is just becoming more of a more of a unified category between mobile and and and fixed line. And the walls are breaking down. It feels like there's even more maybe of an imperative for these companies to have unified billing on a competitive vantage point. So those are my my two quick questions, I guess, fairly broad. Thank you.

No, thanks so much, Matt. Appreciate it. On the M&A side, there's a couple great aspects we can dig into first. We feel zero pressure to do any deal. This concept of operating discipline is going to just drive us through. And yet we do see kind of the market of M&A as active as it's ever been. We see good deals with pricing coming down that could make for very value creating opportunities. And yet you're going to see a state very disciplined with no pressure to do a deal, just to do a deal. Maybe to give a little more color on what we're looking at is we really see in this world where across industry vertical, one of the things that really drives sustained growth and sustained profit expansion and cash generation is the ability to provide a end to end integrated domain specific solution that includes things like product catalog, order management, monetization, digital CX, integrated customer engagement. And so we love that sticky integrated aspect of it. And so we have an opportunity. We want to spend two thirds of our M&A capital buying companies better than us. SAS technologies and verticals that focus where we do, which is simplified complex customer engagement and monetization. When we find assets like that with good gross margins, good double digital organic growth, good profitability that can actually accelerate what we're doing and have high attach rate with cross sell. We would love the opportunity to buy companies like that inside our core markets or increasingly in some of these other industry vertical. And we think that could be a fantastic opportunity that can extend the good performance we've been having the last couple of years. But on the on the one third side, we also see scale of portfolio expansion deals that could be, you know, trade highly accretive on a pre synergy basis, integrate into our portfolio, get sold by our global sales teams in telecom or cable in the core. And on a post energy basis, we could print money with those acquisitions. We also see we refer to those more as scale and portfolio expansion. And we see a number of opportunities that could come up. It could be quite attractive for our shareholders. So we're really looking at both those sets of opportunities to deploy capital in the way that's smart, that's very well risk adjusted and that could really accelerate on top of the double digital organic growth that we're seeing. So that's on the M&A side. And we could we could dig into that more if we wanted to. On the big two, I think we've been talking a little bit first. We love and are honored to serve both charter and Comcast and everything they're doing. They are the two fastest growing wireless companies in the US market. And we think that'll continue. They base some headwinds on the broadband. And I think they're both taking their own approaches on how they'll respond. I talked several quarters about I never, never underestimate the competitive response of either Comcast or Charter when they're faced with some market challenges and headwinds. So we love what's going on. And what we do is we just try to stay mission critical, deliver every day for them and bring them innovative ideas that could maybe improve their converged experience, help them lower costs so that they could get even more aggressive on their pricing and their customer acquisition, because that's good for them. And it would be good for us. And so I think you'll continue to see probably slightly different but strong competitive responses from both those companies in the coming quarters and years ahead. And see if she's going to try to be helpful to their efforts in that.

And since you clearly have a purview even outside the US, if that's the right word on on telecom, I would think that even if you look at Europe or Africa or India, you're seeing more of an imperative on companies to kind of break down the walls on the separate billing for broadband and mobile. I know you can't be too specific on Charter and Comcast, but it just feels like it's that's ever more of an imperative. And how how tricky is it? I mean, how fast could you do that? I mean, based on what you're doing in Africa, for instance, I would think you could probably do that, implement that pretty fast because you certainly have the experience internationally.

I mean, obviously, what we've seen in markets outside the US, where I think there was much more price pressure and intense competition across cable and wireless, that drove a level of maybe reinventing a more radical reinvention of business process. It doesn't start with a tech stack. If you want to radically reduce your costs, having, you know, an easier digital experience. And so what we saw in other markets is them simplifying their business process, driving a converged experience, exactly like you're talking about, that therefore enabled a lower cost tech stack to actually be part of the winning strategy for a lot of these operators. That's been a core tenet in both consumer wireless and enterprise wireless. That's caused a big part of our growth in that part of the market. I think that pressure now is clearly finally come to the US market. We see that with T-Mobile and Verizon and AT&T getting the lion's share of the broadband ads. You see that in the US market with Comcast and Charter being the fastest growing wireless by a landslide. And so therefore, I think being more intentional about simplifying business process and product offers, simplifying the pricing and lowering the cost to serve, we think is fundamental to winning big in the US market or in the global markets. And we're trying to do our part. So obviously, we have our view that a converged experience on broadband and wireless could drive significant consumer benefits and significant cost saving advantage. When some of our customers may decide to take advantage of that, that's clearly their decision. We're just trying to bring them ideas and solutions.

Great. Thanks, Brian. Thanks, Matt.

And your next question comes from the line of Michael Berg with Wells Fargo. Your line is open.

Hi, thanks for taking my question. I just want to dig in a little bit differently on the telco angle. There is a look through some weakness in that vertical there. Is that strictly a function of a charter degradation here in Q1? I'm just digging to both the dynamics of the weakness in charter and telco and that relationship there. Thanks.

Yeah. How have you joined? Do you want to talk anything about the telco side?

Yeah, no, I mean, it isn't specific to charter. It is generally speaking, you know, the part and parcel of the natural cycles that we're seeing across the board. You know, as Brian said, the global telco business has undergone a multi-year transformation and continues to undergo a multi-year transformation that's highly competitive. And we are battling for our fair share of that business and when we're winning a number of opportunities. But what we are seeing and one of the reasons we pointed to kind of that two to 3% growth rate is the normal anxiety given the uncertainty in the marketplace that does slow down from the decision making, but nothing abnormal with regards to what we're seeing in that global telco business, except maybe an extension of the decision making.

Yeah. I think maybe the thing I would add on top of that as well, Michael, to your good question is you're also saying it as part of the strategic focus that we believe could enable a big transformation in global telecom, but it's over a little longer time horizon, which is with the big wins we've announced with our SAS AWS platform ascendant in telecom, six or seven fantastic wins in telecom, we're being intentional about selling more of a less services heavy, much more SAS out of the box, lower cost solution with our, our, our SAS billing and quoted order CPQ and our digital CX, because we think the way operators globally really win is going to be taking those radical costs out and adopting newer technologies. Therefore we are purposely shifting and pivoting some to a more, unless services heavy and you're seeing a little bit of a SAS revenue play out in the numbers. We haven't seen any slowdown in telecom. In fact, the opposite, we've announced more wins than ever, but you will also see a little bit of a shift from an on-prem implementation services accounting to more of a SAS that'll play out, I think over the next three to five years.

Super helpful color. Thank you.

Thanks

Michael.

And as a reminder, it is star one, if you would like to ask a question and your next question comes from Nehal Chokhti with Northland Capital Markets. Your line is open.

Yeah, thank you. Couple of questions here. First question is that in the prepared commentary towards the end, how you commented on a strong pipeline, can you give a little bit of characterization as far as what that means numerically? I mean, like, does that mean better growth in at least what you're putting up revenue wise or just, you know, what does strong pipeline mean?

Are you on or did we lose you? Sounds like we lost. Hi, I can take that Nehal and appreciate you joining and appreciate the question. You know, when we look at it, we track, like most companies, we track overall size of the pipeline on a weighted and unweighted basis, both annual contract value and TCB, we track the progression through our six stages of our sales pipeline. We look at where deals are falling out, where we're able to accelerate. We also look at the win rate and the loss rate once we get to stage five and six around it. And overall, I would tell you the overall size of the pipeline is a little bigger than it was this time last year. The shape is healthy. We still see good win rates and progressions through. So when, when high gives color like that, we see the overall size of shape in a very good shape and we should be able to announce good wins in the coming quarters as we just execute that. So from an overall, we don't break out the specifics of that, but that's what I was referring to. And, and we like what we're seeing kind of across the board.

And is that shape skewed towards this and then platform?

Uh, we are seeing, we have seen an increase, uh, with, especially in global telecom in media, and one of the exciting things is actually in financial services where we now, uh, a really exciting deal in Australia on our AWS assistant and platform. Uh, we also see it in quote and order, our CPQ side of the business. We see a strong pipeline, uh, on the, um, in the payments business. And we also like what we're seeing there. There are small, mid and large telecom deals on consumer wireless and enterprise in our mid and late stages of our sales pipeline. So it's kind of across the board on that.

Okay. And then the other question I had was on, uh, classroom operations, definitely much stronger than what we expected. It looks like stronger than consensus. Is it fair to say that it was also stronger than what you guys are expecting?

Uh, I think as I said, we came in in general Q1 due to some timing and just also strong performance came in slightly ahead of our expectations. So we were super pleased, uh, with that. But as we've been talking, we gave, you know, our, we tend to focus a lot on midpoint in the ranges that we give. So with the, you know, going from something like 113 last year to a midpoint of 130, uh, showed strong double digits. So we expect to have a very strong double digit free cashflow year. And yes, we still got off to a slightly better start in Q1. Uh, but yeah, so that was good to see.

And, and, and they all it's John. Maybe just from a phasing perspective, because it was such a, you know, beef versus kind of estimates. We still expect Q1 to be the low point of the year. So this was not the case where we had significant pull forward from other quarters. We still expect it to be the low point of the year and to grow free cashflow from here as we progress through the next three quarters.

That's very, very helpful. Thank you. Congratulations. Thanks.

And there are no further questions at this time. I will now turn the conference back over to Mr. Brian Shepard for closing remarks.

Now, thanks everyone for attending. As you heard, we were proud of the Q1 start, uh, or not satisfied at all. We think team CSG is just getting started on this operating discipline, constantly putting up results that we're proud of. And we think we can do a lot better and we're holding ourselves accountable to ensure we do that in the coming quarters. So, uh, thanks for joining and I look forward to talking to you this time next

And ladies and gentlemen, this concludes today's call and we thank you for your participation. You may now disconnect.