UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction |
(I.R.S. Employer |
(Address of principal executive offices, including zip code)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of August 3, 2020, there were
CSG SYSTEMS INTERNATIONAL, INC.
FORM 10-Q for the Quarter Ended June 30, 2020
INDEX
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Page No. |
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Part I - FINANCIAL INFORMATION |
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Item 1. |
Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019 (Unaudited) |
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Notes to Condensed Consolidated Financial Statements (Unaudited) |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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Part II - OTHER INFORMATION |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 6. |
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2
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED
(in thousands, except per share amounts)
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June 30, |
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December 31, |
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2020 |
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2019 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Short-term investments |
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Total cash, cash equivalents and short-term investments |
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Settlement assets |
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Trade accounts receivable: |
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Billed, net of allowance of $ |
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Unbilled |
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Income taxes receivable |
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Other current assets |
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Total current assets |
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Non-current assets: |
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Property and equipment, net of depreciation of $ |
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Operating lease right-of-use assets |
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Software, net of amortization of $ |
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Goodwill |
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Acquired client contracts, net of amortization of $ |
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Client contract costs, net of amortization of $ |
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Deferred income taxes |
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Other assets |
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Total non-current assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current liabilities: |
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Current portion of long-term debt |
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$ |
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$ |
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Operating lease liabilities |
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Client deposits |
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Trade accounts payable |
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Accrued employee compensation |
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Settlement liabilities |
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Deferred revenue |
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Income taxes payable |
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Other current liabilities |
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Total current liabilities |
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Non-current liabilities: |
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Long-term debt, net of unamortized discounts of $ |
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Operating lease liabilities |
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Deferred revenue |
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Income taxes payable |
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Deferred income taxes |
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Other non-current liabilities |
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Total non-current liabilities |
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Total liabilities |
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Stockholders' equity: |
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Preferred stock, par value $ |
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Common stock, par value $ |
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Additional paid-in capital |
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Treasury stock, at cost; |
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Accumulated other comprehensive income (loss): |
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Unrealized gains on short-term investments, net of tax |
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Cumulative foreign currency translation adjustments |
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Accumulated earnings |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
3
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
(in thousands, except per share amounts)
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Quarter Ended |
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Six Months Ended |
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June 30, 2020 |
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June 30, 2019 |
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June 30, 2020 |
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June 30, 2019 |
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Revenue |
$ |
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$ |
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$ |
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$ |
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Cost of revenue (exclusive of depreciation, shown separately below) |
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Other operating expenses: |
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Research and development |
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Selling, general and administrative |
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Depreciation |
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Restructuring and reorganization charges |
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Total operating expenses |
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Operating income |
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Other income (expense): |
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Interest expense |
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( |
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Amortization of original issue discount |
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( |
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Interest and investment income, net |
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Other, net |
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Total other |
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Income before income taxes |
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Income tax provision |
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( |
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( |
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Net income |
$ |
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$ |
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$ |
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$ |
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Weighted-average shares outstanding: |
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Basic |
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Diluted |
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Earnings per common share: |
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Basic |
$ |
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$ |
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$ |
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$ |
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Diluted |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - UNAUDITED
(in thousands)
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Quarter Ended |
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Six Months Ended |
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June 30, 2020 |
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June 30, 2019 |
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June 30, 2020 |
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June 30, 2019 |
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Net income |
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$ |
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$ |
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$ |
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$ |
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Other comprehensive income (loss), net of tax: |
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Foreign currency translation adjustments |
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( |
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( |
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Unrealized holding gains on short-term investments arising during period |
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Other comprehensive income (loss), net of tax |
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( |
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( |
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Total comprehensive income, net of tax |
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$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
5
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - UNAUDITED
(in thousands)
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Shares of Common Stock Outstanding |
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Common Stock |
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Common Stock Warrants |
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Additional Paid-in Capital |
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Treasury Stock |
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Accumulated Other Comprehensive Income (Loss) |
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Accumulated Earnings |
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Total Stockholders' Equity |
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For the Six Months Ended June 30, 2020: |
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BALANCE, January 1, 2020 |
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$ |
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$ |
- |
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$ |
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$ |
( |
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$ |
( |
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$ |
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$ |
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Comprehensive income: |
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Net income |
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- |
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- |
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- |
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- |
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- |
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- |
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Unrealized gain on short-term investments, net of tax |
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- |
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- |
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- |
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- |
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- |
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( |
) |
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- |
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Foreign currency translation adjustments |
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- |
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- |
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- |
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- |
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- |
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( |
) |
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- |
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Total comprehensive income |
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Repurchase of common stock |
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( |
) |
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( |
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- |
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( |
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( |
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- |
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- |
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( |
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Issuance of common stock pursuant to employee stock purchase plan |
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- |
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- |
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- |
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- |
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- |
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Issuance of restricted common stock pursuant to stock-based compensation plans |
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- |
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( |
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- |
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- |
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- |
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- |
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Cancellation of restricted common stock issued pursuant to stock-based compensation plans |
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( |
) |
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- |
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- |
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- |
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- |
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- |
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- |
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- |
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Stock-based compensation expense |
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- |
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- |
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- |
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Dividends |
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- |
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- |
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- |
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- |
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- |
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- |
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( |
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( |
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BALANCE, March 31, 2020 |
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- |
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( |
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( |
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Comprehensive income: |
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Net income |
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- |
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- |
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- |
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- |
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- |
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- |
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Unrealized gain on short-term investments, net of tax |
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- |
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- |
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- |
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- |
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- |
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- |
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Foreign currency translation adjustments |
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- |
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- |
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- |
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- |
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- |
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- |
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Total comprehensive income |
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Repurchase of common stock |
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( |
) |
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- |
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- |
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( |
) |
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( |
) |
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- |
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- |
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( |
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Issuance of common stock pursuant to employee stock purchase plan |
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- |
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- |
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- |
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- |
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- |
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Issuance of restricted common stock pursuant to stock-based compensation plans |
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- |
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- |
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- |
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- |
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- |
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- |
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- |
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Cancellation of restricted common stock issued pursuant to stock-based compensation plans |
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( |
) |
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- |
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- |
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- |
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- |
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- |
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- |
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- |
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Stock-based compensation expense |
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- |
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- |
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- |
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Dividends |
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- |
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- |
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- |
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- |
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- |
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- |
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( |
) |
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( |
) |
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BALANCE, June 30, 2020 |
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$ |
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$ |
- |
|
$ |
|
|
$ |
( |
) |
$ |
( |
) |
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30, 2019: |
|
|||||||||||||||||||||||
|
BALANCE, January 1, 2019 |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
$ |
( |
) |
$ |
|
|
$ |
|
|
|
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
Unrealized gain on short-term investments, net of tax |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
- |
|
|
|
|
|
Foreign currency translation adjustments |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
- |
|
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of common stock |
|
( |
) |
|
- |
|
|
- |
|
|
( |
) |
|
( |
) |
|
- |
|
|
- |
|
|
( |
) |
|
Issuance of common stock pursuant to employee stock purchase plan |
|
|
|
|
- |
|
|
- |
|
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
Issuance of restricted common stock pursuant to stock-based compensation plans |
|
|
|
|
|
|
|
- |
|
|
( |
) |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
Cancellation of restricted common stock issued pursuant to stock-based compensation plans |
|
( |
) |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
Stock-based compensation expense |
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
( |
) |
|
( |
) |
|
BALANCE, March 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
( |
) |
|
|
|
|
|
|
|
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
Unrealized gain on short-term investments, net of tax |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
- |
|
|
|
|
|
Foreign currency translation adjustments |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
( |
) |
|
- |
|
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of common stock |
|
( |
) |
|
- |
|
|
- |
|
|
( |
) |
|
( |
) |
|
- |
|
|
- |
|
|
( |
) |
|
Issuance of common stock pursuant to employee stock purchase plan |
|
|
|
|
- |
|
|
- |
|
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
Issuance of restricted common stock pursuant to stock-based compensation plans |
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
Cancellation of restricted common stock issued pursuant to stock-based compensation plans |
|
( |
) |
|
( |
) |
|
- |
|
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
Stock-based compensation expense |
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
( |
) |
|
( |
) |
|
BALANCE, June 30, 2019 |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
$ |
( |
) |
$ |
|
|
$ |
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(in thousands)
|
|
Six Months Ended |
|
|
|||||
|
|
June 30, 2020 |
|
|
June 30, 2019 |
|
|
||
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
Net income |
$ |
|
|
|
$ |
|
|
|
|
Adjustments to reconcile net income to net cash provided by operating activities- |
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
|
|
|
|
|
|
|
Amortization |
|
|
|
|
|
|
|
|
|
Amortization of original issue discount |
|
|
|
|
|
|
|
|
|
Asset impairment |
|
|
|
|
|
|
|
|
|
Gain on short-term investments and other |
|
( |
) |
|
|
( |
) |
|
|
Deferred income taxes |
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities, net of acquired amounts: |
|
|
|
|
|
|
|
|
|
Trade accounts receivable, net |
|
( |
) |
|
|
( |
) |
|
|
Other current and non-current assets and liabilities |
|
( |
) |
|
|
( |
) |
|
|
Income taxes payable/receivable |
|
|
|
|
|
( |
) |
|
|
Trade accounts payable and accrued liabilities |
|
( |
) |
|
|
( |
) |
|
|
Deferred revenue |
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
Purchases of software, property and equipment |
|
( |
) |
|
|
( |
) |
|
|
Purchases of short-term investments |
|
( |
) |
|
|
( |
) |
|
|
Proceeds from sale/maturity of short-term investments |
|
|
|
|
|
|
|
|
|
Acquisition of and investments in business, net of cash acquired |
|
( |
) |
|
|
( |
) |
|
|
Net cash used in investing activities |
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock |
|
|
|
|
|
|
|
|
|
Payment of cash dividends |
|
( |
) |
|
|
( |
) |
|
|
Repurchase of common stock |
|
( |
) |
|
|
( |
) |
|
|
Payments on long-term debt |
|
( |
) |
|
|
( |
) |
|
|
Net cash used in financing activities |
|
( |
) |
|
|
( |
) |
|
|
Effect of exchange rate fluctuations on cash |
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of period |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
|
|
|
Cash paid during the period for- |
|
|
|
|
|
|
|
|
|
Interest |
$ |
|
|
|
$ |
|
|
|
|
Income taxes |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
CSG SYSTEMS INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. GENERAL
We have prepared the accompanying unaudited condensed consolidated financial statements as of June 30, 2020 and December 31, 2019, and for the quarters and six months ended June 30, 2020 and 2019, in accordance with accounting principles generally accepted in the United States of America (“U.S.”) (“GAAP”) for interim financial information, and pursuant to the instructions to Form 10-Q and the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of our management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of our financial position and operating results have been included. The unaudited Condensed Consolidated Financial Statements (the “Financial Statements”) should be read in conjunction with the Consolidated Financial Statements and notes thereto, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), contained in our Annual Report on Form 10-K for the year ended December 31, 2019 (our “2019 10-K”), filed with the SEC. The results of operations for the quarter and six months ended June 30, 2020 are not necessarily indicative of the expected results for the entire year ending December 31, 2020.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates in Preparation of Financial Statements. The preparation of the accompanying Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of our Financial Statements, and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.
Revenue. The majority of our future revenue is related to our revenue management solution client contracts that include variable consideration dependent upon a series of monthly volumes and/or daily usage of services and have contractual terms ending from
The nature, amount, timing, and uncertainty of our revenue and how revenue and cash flows are affected by economic factors is most appropriately depicted by geographic region (using the location of the client as the basis of attributing revenue to the individual regions) as follows (in thousands):
|
|
|
Quarter Ended |
|
|
Six Months Ended |
|
|
||||||||||
|
|
|
June 30, |
|
|
June 30, |
|
|
||||||||||
|
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
|
||||
|
Americas (principally the U.S.) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
Europe, Middle East, and Africa |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia Pacific |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Deferred revenue recognized during the quarter and six months ended June 30, 2020 was $
Cash and Cash Equivalents. We consider all highly liquid investments with original maturities of three months or less at the date of the purchase to be cash equivalents. As of June 30, 2020 and December 31, 2019, our cash equivalents consist primarily of institutional money market funds, commercial paper, and time deposits held at major banks.
As of June 30, 2020 and December 31, 2019, we had $
8
Short-term Investments and Other Financial Instruments. Our financial instruments as of June 30, 2020 and December 31, 2019 include cash and cash equivalents, short-term investments, accounts receivable, accounts payable, and debt. Because of their short maturities, the carrying amounts of cash equivalents, accounts receivable, and accounts payable approximate their fair value.
Our short-term investments and certain of our cash equivalents are considered “available-for-sale” and are reported at fair value in our Balance Sheets, with unrealized gains and losses, net of the related income tax effect, excluded from earnings and reported in a separate component of stockholders’ equity. Realized and unrealized gains and losses were not material in any period presented.
Primarily all short-term investments held by us as of June 30, 2020 and December 31, 2019 have contractual maturities of less than
Our short-term investments as of June 30, 2020 and December 31, 2019 were $
The following table represents the fair value hierarchy based upon three levels of inputs, of which Levels 1 and 2 are considered observable and Level 3 is unobservable, for our financial assets measured at fair value (in thousands):
|
|
|
June 30, 2020 |
|
|
December 31, 2019 |
|
||||||||||||||||||
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Total |
|
||||||
|
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
Commercial paper |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Short-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Asset-backed securities |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Valuation inputs used to measure the fair values of our money market funds and corporate equity securities were derived from quoted market prices. The fair values of all other financial instruments are based upon pricing provided by third-party pricing services. These prices were derived from observable market inputs.
We have chosen not to measure our debt at fair value, with changes recognized in earnings each reporting period. The following table indicates the carrying value (par value for convertible debt) and estimated fair value of our debt as of the indicated periods (in thousands):
|
|
|
June 30, 2020 |
|
|
December 31, 2019 |
|
||||||||||
|
|
|
Carrying |
|
|
Fair |
|
|
Carrying |
|
|
Fair |
|
||||
|
|
|
Value |
|
|
Value |
|
|
Value |
|
|
Value |
|
||||
|
2018 Credit Agreement (carrying value including current maturities) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
2016 Convertible debt (par value) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The fair value for our credit agreement was estimated using a discounted cash flow methodology, while the fair value for our convertible debt was estimated based upon quoted market prices or recent sales activity, both of which are considered Level 2 inputs.
Equity Method Investment. As of June 30, 2020, we held an
9
3. LONG-LIVED ASSETS
Goodwill.
|
|
|
|
|
|
|
January 1, 2020 balance |
|
$ |
|
|
|
Tekzenit, Inc. acquisition |
|
|
|
|
|
Adjustments related to prior acquisitions |
|
|
( |
) |
|
Effects of changes in foreign currency exchange rates |
|
|
( |
) |
|
June 30, 2020 balance |
|
$ |
|
|
See Note 5 for discussion regarding the Tekzenit, Inc. acquisition.
Other Intangible Assets. Our other intangible assets subject to ongoing amortization consist primarily of acquired client contracts and software.
|
|
|
June 30, 2020 |
|
|
December 31, 2019 |
|
||||||||||||||||||
|
|
|
Gross |
|
|
|
|
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
|
|
|
||
|
|
|
Carrying |
|
|
Accumulated |
|
|
Net |
|
|
Carrying |
|
|
Accumulated |
|
|
Net |
|
||||||
|
|
|
Amount |
|
|
Amortization |
|
|
Amount |
|
|
Amount |
|
|
Amortization |
|
|
Amount |
|
||||||
|
Acquired client contracts |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Software |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Total intangible assets |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
The total amortization expense related to other intangible assets for the second quarters of 2020 and 2019 were $
Client Contract Costs.
|
|
|
June 30, 2020 |
|
|
December 31, 2019 |
|
||||||||||||||||||
|
|
|
Gross |
|
|
|
|
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
|
|
|
||
|
|
|
Carrying |
|
|
Accumulated |
|
|
Net |
|
|
Carrying |
|
|
Accumulated |
|
|
Net |
|
||||||
|
|
|
Amount |
|
|
Amortization |
|
|
Amount |
|
|
Amount |
|
|
Amortization |
|
|
Amount |
|
||||||
|
Client contract costs |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
During the second quarter of 2020, we recorded an impairment charge of $
The total amortization expense related to client contract costs for the second quarters of 2020 and 2019 were $
10
4. DEBT
Our long-term debt, as of June 30, 2020 and December 31, 2019, was as follows (in thousands):
|
|
|
June 30, |
|
|
December 31, |
|
|||
|
|
|
2020 |
|
|
2019 |
|
|||
|
2018 Credit Agreement: |
|
|
|
|
|
|
|
|
|
|
Term loan, due , interest at adjusted LIBOR plus |
|
$ |
|
|
|
$ |
|
|
|
|
Less – deferred financing costs |
|
|
( |
) |
|
|
( |
) |
|
|
2018 term loan, net of unamortized discounts |
|
|
|
|
|
|
|
|
|
|
$ |
|
— |
|
|
— |
|
|||
|
Convertible Notes: |
|
|
|
|
|
|
|
|
|
|
2016 Convertible Notes – Senior convertible notes; due |
|
|
|
|
|
|
|
|
|
|
Less – unamortized original issue discount |
|
|
( |
) |
|
|
( |
) |
|
|
Less – deferred financing costs |
|
|
( |
) |
|
|
( |
) |
|
|
2016 Convertible Notes, net of unamortized discounts |
|
|
|
|
|
|
|
|
|
|
Total debt, net of unamortized discounts |
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt, net of unamortized discounts |
|
|
( |
) |
|
|
( |
) |
|
|
Long-term debt, net of unamortized discounts |
|
$ |
|
|
|
$ |
|
|
|
2018 Credit Agreement
During the six months ended June 30, 2020, we made $
The interest rates under the 2018 Credit Agreement are based upon our choice of an adjusted LIBOR rate plus an applicable margin of
2016 Convertible Notes
Upon conversion of the 2016 Convertible Notes, we will settle our conversion obligation by paying or delivering, as the case may be, cash, shares of our common stock, or a combination thereof, at our election. It is our current intent and policy to settle our conversion obligations as follows: (i) pay cash for
The 2016 Convertible Notes will be convertible at the option of the note holders upon the satisfaction of specified conditions and during certain periods. During the period from, and including, December 15, 2021 to the close of business on the business day immediately preceding March 15, 2022 and on or after December 15, 2035, holders may convert all or any portion of their 2016 Convertible Notes at the conversion rate then in effect at any time regardless of these conditions.
As a result of our quarterly dividend in June 2020 (see Note 8), the previous conversion rate for the 2016 Convertible Notes of
11
Holders may require us to repurchase the 2016 Convertible Notes for cash on each of March 15, 2022, March 15, 2026, and March 15, 2031, or upon the occurrence of a fundamental change (as defined in the 2016 Convertible Notes Indenture) in each case at a purchase price equal to the principal amount thereof plus accrued and unpaid interest.
We may redeem for cash all or part of the 2016 Convertible Notes if the last reported sale price of our common stock has been at least
As of June 30, 2020, none of the conversion features have been achieved, and thus, the 2016 Convertible Notes are not convertible by the holders.
5. ACQUISITION
On
The preliminary estimated fair values of assets acquired primarily include goodwill of $
6. COMMITMENTS, GUARANTEES AND CONTINGENCIES
Warranties. We generally warrant that our solutions and related offerings will conform to published specifications, or to specifications provided in an individual client arrangement, as applicable. The typical warranty period is
Solution and Services Indemnifications. Our arrangements with our clients generally include an indemnification provision that will indemnify and defend a client in actions brought against the client that claim our products and/or services infringe upon a copyright, trade secret, or valid patent. Historically, we have not incurred any significant costs related to such indemnification claims, and as a result, do not maintain a reserve for such exposure.
Claims for Company Non-performance. Our arrangements with our clients typically cap our liability for breach to a specified amount of the direct damages incurred by the client resulting from the breach. From time-to-time, these arrangements may also include provisions for possible liquidated damages or other financial remedies for our non-performance, or in the case of certain of our outsourced customer care and billing solutions, provisions for damages related to service level performance requirements. The service level performance requirements typically relate to system availability and timeliness of service delivery. As of June 30, 2020, we believe we have adequate reserves, based on our historical experience, to cover any reasonably anticipated exposure as a result of our nonperformance for any past or current arrangements with our clients.
12
Indemnifications Related to Officers and the Board of Directors. We have agreed to indemnify members of our Board of Directors (the “Board”) and certain of our officers if they are named or threatened to be named as a party to any proceeding by reason of the fact that they acted in such capacity. We maintain directors’ and officers’ (D&O) insurance coverage to protect against such losses. We have not historically incurred any losses related to these types of indemnifications, and are not aware of any pending or threatened actions or claims against any officer or member of our Board. As a result, we have not recorded any liabilities related to such indemnifications as of June 30, 2020. In addition, as a result of the insurance policy coverage, we believe these indemnification agreements are not significant to our results of operations.
Legal Proceedings. From time-to-time, we are involved in litigation relating to claims arising out of our operations in the normal course of business.
7. EARNINGS PER COMMON SHARE
Basic and diluted earnings per common share (“EPS”) amounts are presented on the face of the accompanying Income Statements.
No reconciliation of the basic and diluted EPS numerators is necessary as net income is used as the numerators for all periods presented.
|
|
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Quarter Ended |
|
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Six Months Ended |
|
||||||||||
|
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
||||
|
Basic weighted-average common shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive effect of restricted common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive effect of Stock Warrants |
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
Diluted weighted-average common shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Convertible Notes have a dilutive effect only in those quarterly periods in which our average stock price exceeds the current effective conversion price (see Note 4).
The stock warrants have a dilutive effect only in those quarterly periods in which our average stock price exceeds the exercise price of $
Potentially dilutive common shares related to non-participating unvested restricted stock excluded from the computation of diluted EPS, as the effect was antidilutive, were not material in any period presented.
8. STOCKHOLDERS’ EQUITY AND EQUITY COMPENSATION PLANS
Stock Repurchase Program. We currently have a stock repurchase program, approved by our Board, authorizing us to repurchase our common stock from time-to-time as market and business conditions warrant (the “Stock Repurchase Program”). During the second quarters of 2020 and 2019 we repurchased approximately
As of June 30, 2020, the total remaining number of shares available for repurchase under the Stock Repurchase Program totaled
Stock Repurchases for Tax Withholdings. In addition to the above-mentioned stock repurchases, during the second quarters of 2020 and 2019 we repurchased and then cancelled approximately
13
Stock Incentive Plan. In May 2020, our stockholders approved an increase of
Cash Dividends. During the second quarter of 2020, the Board approved a quarterly cash dividend of $
Warrants. In 2014, in conjunction with the execution of an amendment to our current agreement with Comcast Corporation (“Comcast”), we issued stock warrants (the “Warrant Agreement”) for the right to purchase up to
As of June 30, 2020,
Stock-Based Awards.
|
|
Quarter Ended |
|
|
Six Months Ended |
|
|
||||||||||
|
|
June 30, 2020 |
|
|
June 30, 2020 |
|
|
||||||||||
|
|
Shares |
|
|
Weighted- Average Grant Date Fair Value |
|
|
Shares |
|
|
Weighted- Average Grant Date Fair Value |
|
|
||||
|
Unvested awards, beginning |
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
Awards granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards forfeited/cancelled |
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
Awards vested |
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
Unvested awards, ending |
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
Included in the awards granted during the six months ended June 30, 2020 are performance-based awards for
The other restricted common stock shares granted during the six months ended June 30, 2020 are primarily time-based awards, which vest annually over
We recorded stock-based compensation expense for the second quarters of 2020 and 2019 of $
14
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The information contained in this MD&A should be read in conjunction with the Financial Statements and Notes thereto included in this Form 10-Q and the audited consolidated financial statements and notes thereto in our 2019 10-K.
Forward-Looking Statements
This report contains a number of forward-looking statements relative to our future plans and our expectations concerning our business and the industries we serve. These forward-looking statements are based on assumptions about a number of important factors, and involve risks and uncertainties that could cause actual results to differ materially from estimates contained in the forward-looking statements. Some of the risks that are foreseen by management are outlined within Part II Item 1A. Risk Factors of this report and in Part I Item 1A. Risk Factors of our 2019 10-K. Readers are strongly encouraged to review those sections closely in conjunction with MD&A.
Company Overview
We are one of the world’s leading providers of revenue management, customer experience, and payment solutions that enable a growing list of companies around the world to monetize relationships with their customers in an era of rapid change and digital transformation. We leverage more than 35 years of experience to deliver innovative customer engagement solutions that help our clients acquire, monetize, engage, and retain their customers. Our diverse worldwide workforce draws from real-world knowledge and extensive expertise to design and implement business solutions that make our clients’ hardest decisions simpler so that they can focus on delivering differentiated and real-time experiences to their customers.
We offer revenue management, customer experience, and payment solutions for every stage of the customer lifecycle so service providers can deliver an outstanding customer experience that adapts to their customers’ rapidly changing demands. Our proven solutions are built on a combination of on-premise, public and private cloud platforms, either customized or pre-integrated, as well as managed services models that adapt to fit our clients’ unique business needs and enable the transformative change required to create personalized experiences that drive loyalty and retention.
We focus our research and development (“R&D”) and acquisition investments on expanding our offerings in a timely and efficient manner to address the complex, transformative needs of service providers. Our scalable, modular, and flexible solutions combined with our domain expertise and our ability to effectively migrate clients to our solutions, provide the industry with proven solutions to improve their profitability and consumers’ experiences. We have specifically architected our solutions to offer service providers a phased, incremental approach to transforming their businesses, thereby reducing the business interruption risk associated with this evolution.
We generate our revenue primarily from the global communications markets; however, we serve an expanding group of clients in other markets including financial services, healthcare, media and entertainment companies, and government entities. A summary of our revenue by industry for the indicated periods was as follows:
|
|
|
Quarter Ended |
|
|
|||||||||
|
|
|
June 30, 2020 |
|
|
March 31, 2020 |
|
|
June 30, 2019 |
|
|
|||
|
Broadband/Cable/Satellite |
|
|
60 |
% |
|
|
58 |
% |
|
|
58 |
% |
|
|
Telecommunications |
|
|
18 |
% |
|
|
17 |
% |
|
|
19 |
% |
|
|
Other |
|
|
22 |
% |
|
|
25 |
% |
|
|
23 |
% |
|
|
Total revenue |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
Revenue by geographic regions for the indicated periods was as follows:
|
|
|
Quarter Ended |
|
|
|||||||||
|
|
|
June 30, 2020 |
|
|
March 31, 2020 |
|
|
June 30, 2019 |
|
|
|||
|
Americas (principally the U.S.) |
|
|
87 |
% |
|
|
88 |
% |
|
|
87 |
% |
|
|
Europe, Middle East, and Africa |
|
|
9 |
% |
|
|
9 |
% |
|
|
9 |
% |
|
|
Asia Pacific |
|
|
4 |
% |
|
|
3 |
% |
|
|
4 |
% |
|
|
Total revenue |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
We are a S&P Small Cap 600 company.
15
Impact of COVID-19
In March 2020, the World Health Organization declared a global pandemic related to the rapidly spreading coronavirus (COVID-19) outbreak which has led to a global health emergency. This outbreak has negatively affected the U.S. and the global economy, created a significant disruption of the financial markets, disrupted global supply chains, and has resulted in mandated closures, orders to shelter-in-place, and significant travel restrictions. While we have taken measures to protect the health and safety of our employees, to include work from home options for those employees whom are able to conduct business from home and significantly reduced travel, we are still conducting business as usual and are working with our clients to minimize any potential disruption. At this time, we do not believe that our work from home options and limited staffing in select office locations have adversely impacted our internal controls, financial reporting systems, or our operations.
The full extent of the impact of the COVID-19 pandemic on our business, operations, and financial results will depend on numerous evolving factors that we may not be able to accurately predict. See Part II Item 1A. Risk Factors of this report for additional details. While the outbreak did not negatively impact our operating results for the first quarter of 2020, we began to realize these impacts to revenue during the second quarter of 2020 as we began to experience extended sales and implementation cycles related to our revenue management and customer experience solutions, as well as processing volume reductions. In addition, we are also experiencing some revenue headwinds as a result of continued foreign currency fluctuations. We anticipate that these impacts to revenue will continue for the remainder of 2020, or until economic conditions improve. We will continue to diligently monitor and manage our expense levels in line with our anticipated revenue profile for the remainder of 2020.
As we continue to manage our business in this uncertain environment, our priorities will remain the health and safety of our employees, providing our clients with world-class services and solutions, and prudently managing our liquidity to ensure our continued financial strength. As of June 30, 2020, we had approximately $171 million in cash, cash equivalents and short-term investments, and an additional $200 million available to borrow under our revolving credit facility. Given our financial strength, we expect to be able to maintain adequate liquidity as we manage through the current environment, though we cannot reasonably estimate the duration and severity of this global pandemic or its ultimate impact on the global economy and our business results.
Management Overview of Quarterly Results
Second Quarter Highlights. A summary of our results of operations for the second quarter of 2020, when compared to the second quarter of 2019, is as follows (in thousands, except per share amounts and percentages):
|
|
|
Quarter Ended |
|
|
|||||
|
|
|
June 30, 2020 |
|
|
June 30, 2019 |
|
|
||
|
Revenue |
|
$ |
240,321 |
|
|
$ |
245,856 |
|
|
|
Transaction fees (1) |
|
|
15,695 |
|
|
|
17,778 |
|
|
|
Operating Results: |
|
|
|
|
|
|
|
|
|
|
Operating income |
|
$ |
19,775 |
|
|
$ |
30,338 |
|
|
|
Operating income margin |
|
|
8.2 |
% |
|
|
12.3 |
% |
|
|
Diluted EPS |
|
$ |
0.32 |
|
|
$ |
0.60 |
|
|
|
Supplemental Data: |
|
|
|
|
|
|
|
|
|
|
Restructuring and reorganization charges |
|
$ |
2,497 |
|
|
$ |
1,826 |
|
|
|
Acquisition-related costs: |
|
|
|
|
|
|
|
|
|
|
Amortization of acquired intangible assets |
|
|
3,033 |
|
|
|
3,174 |
|
|
|
Transaction-related costs |
|
|
73 |
|
|
|
- |
|
|
|
Stock-based compensation (2) |
|
|
5,255 |
|
|
|
4,807 |
|
|
|
Amortization of OID |
|
|
740 |
|
|
|
700 |
|
|
|
|
(1) |
Transaction fees are primarily comprised of interchange and other payment-related fees that we pay, in conjunction with the delivery of service to clients under our payment services contracts, to third-party payment processors and financial institutions. Because we control the integrated service provided under our payment services client contracts, these transaction fees are presented gross, and not netted against revenue. |
|
|
(2) |
Stock-based compensation included in the table above excludes amounts that have been recorded in restructuring and reorganization charges. |
Revenue. Revenue for the second quarter of 2020 was $240.3 million, a 2% decrease when compared to revenue of $245.9 million for the second quarter of 2019, with the decrease primarily attributed to extended sales and implementation cycles and processing volume reductions as a result of the impact of the COVID-19 pandemic, discussed above, as well as foreign currency headwinds.
16
Operating Results. Operating income for the second quarter of 2020 was $19.8 million, or an 8.2% operating margin percentage, compared to $30.3 million, or a 12.3% operating margin percentage for the second quarter of 2019. The decrease in operating income is primarily due to an approximately $10 million impairment charge recorded in the second quarter of 2020 for the write-off of capitalized client contract costs related to a discontinued project implementation.
Diluted EPS. Diluted EPS for the second quarter of 2020 was $0.32 compared to $0.60 for the second quarter of 2019, with the decrease mainly attributed the impairment charge, discussed above.
Cash and Cash Flows. As of June 30, 2020, we had cash, cash equivalents and short-term investments of $171.2 million, as compared to $131.3 million as of March 31, 2020 and $182.7 million as of December 31, 2019. Our cash flows from operating activities for the quarter ended June 30, 2020 were $57.7 million. See the Liquidity section below for further discussion of our cash flows.
Significant Client Relationships
Client Concentration. A large percentage of our historical revenue have been generated from our two largest clients, which are Comcast and Charter Corporation Inc. (“Charter”).
Revenue from these clients for the indicated periods were as follows (in thousands, except percentages):
|
|
|
Quarter Ended |
|
|||||||||||||||||||||
|
|
|
June 30, 2020 |
|
|
March 31, 2020 |
|
|
June 30, 2019 |
|
|||||||||||||||
|
|
|
Amount |
|
|
% of Revenue |
|
|
Amount |
|
|
% of Revenue |
|
|
Amount |
|
|
% of Revenue |
|
||||||
|
Comcast |
|
$ |
53,282 |
|
|
|
22 |
% |
|
$ |
52,679 |
|
|
|
21 |
% |
|
$ |
55,439 |
|
|
|
23 |
% |
|
Charter |
|
|
51,364 |
|
|
|
21 |
% |
|
|
50,712 |
|
|
|
21 |
% |
|
|
48,455 |
|
|
|
20 |
% |
The percentages of net billed accounts receivable balances attributable to our largest clients as of the indicated dates were as follows:
|
|
|
As of |
|
|||||||||
|
|
|
June 30, |
|
|
March 31, |
|
|
June 30, |
|
|||
|
|
|
2020 |
|
|
2020 |
|
|
2019 |
|
|||
|
Comcast |
|
|
20 |
% |
|
|
20 |
% |
|
|
22 |
% |
|
Charter |
|
|
31 |
% |
|
|
30 |
% |
|
|
29 |
% |
See our 2019 10-K for additional discussion of our business relationships and contractual terms with Comcast and Charter.
Risk of Client Concentration. We expect to continue to generate a significant percentage of our future revenue from our largest clients mentioned above. There are inherent risks whenever a large percentage of total revenue are concentrated with a limited number of clients. Should a significant client: (i) terminate or fail to renew their contracts with us, in whole or in part, for any reason; (ii) significantly reduce the number of customer accounts processed on our solutions, the price paid for our services, or the scope of services that we provide; or (iii) experience significant financial or operating difficulties, it could have a material adverse effect on our financial condition and results of operations.
Critical Accounting Policies
The preparation of our Financial Statements in conformity with U.S. GAAP requires us to select appropriate accounting policies, and to make judgments and estimates affecting the application of those accounting policies. In applying our accounting policies, different business conditions or the use of different assumptions may result in materially different amounts reported in our Financial Statements.
We have identified the most critical accounting policies that affect our financial position and the results of our operations. Those critical accounting policies were determined by considering the accounting policies that involve the most complex or subjective decisions or assessments. The most critical accounting policies identified relate to the following items: (i) revenue recognition; (ii) impairment assessments of long-lived assets; (iii) income taxes; and (iv) loss contingencies. These critical accounting policies, as well as our other significant accounting policies, are discussed in our 2019 10-K.
17
Results of Operations
Revenue. Total revenue for the: (i) second quarter of 2020 was $240.3 million, a 2% decrease when compared to $245.9 million for the second quarter of 2019; and (ii) six months ended June 30, 2020 was $485.9 million, a 1% decrease when compared to $490.6 million for the six months ended June 30, 2019. These decreases are mainly attributed to the extended sales and implementation cycles related to our revenue management and customer experience solutions as well as processing volume reductions at certain payment solutions clients as a result of the impact of the COVID-19 pandemic, as well as foreign currency headwinds. The year-over-year decreases also reflect pricing adjustments associated with the five-year Comcast extension effective January 1, 2020, discussed in our 2019 Form 10-K; however, this was offset mainly by the year-over-year growth in our revenue management solutions.
We use the location of the client as the basis of attributing revenue to individual countries. Revenue by geographic regions for the second quarters and six months ended June 30, 2020 and 2019 were as follows (in thousands):
|
|
|
Quarter Ended |
|
|
Six Months Ended |
|
|
||||||||||
|
|
|
June 30, |
|
|
June 30, |
|
|
||||||||||
|
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
|
||||
|
Americas (principally the U.S.) |
|
$ |
209,926 |
|
|
$ |
214,390 |
|
|
$ |
426,923 |
|
|
$ |
425,120 |
|
|
|
Europe, Middle East, and Africa |
|
|
22,134 |
|
|
|
22,606 |
|
|
|
43,166 |
|
|
|
47,232 |
|
|
|
Asia Pacific |
|
|
8,261 |
|
|
|
8,860 |
|
|
|
15,849 |
|
|
|
18,297 |
|
|
|
Total revenue |
|
$ |
240,321 |
|
|
$ |
245,856 |
|
|
$ |
485,938 |
|
|
$ |
490,649 |
|
|
Total Operating Expenses. Our operating expenses for the: (i) second quarter of 2020 were $220.5 million, a 2% increase when compared to $215.5 million for the second quarter of 2019; and (ii) six months ended June 30, 2020 were $433.0 million, a 1% increase when compared to $428.2 million for the six months ended June 30, 2019. These increases in operating expenses are primarily due to an approximately $10 million impairment charge discussed above, offset to a certain degree by lower employee-related costs and transaction fees, reflective of the lower revenue.
The components of total expenses are discussed in more detail below.
Cost of Revenue (Exclusive of Depreciation). The cost of revenue for the: (i) second quarter of 2020 was $138.2 million, a 4% increase when compared to $132.2 million for the second quarter of 2019; and (ii) six months ended June 30, 2020 was $269.4 million, a 3% increase when compared to $261.2 million for the six months ended June 30, 2019. These increases can be mainly attributed to the approximately $10 million impairment charge, discussed above, offset to a certain degree by lower employee-related costs and transaction fees, reflective of the lower revenue. Total cost of revenue as a percentage of revenue for the: (i) second quarters of 2020 and 2019 was 57.5% and 53.8%, respectively; and (ii) six months ended June 30, 2020 were 55.4% and 53.2%, respectively.
R&D Expense. R&D expense for the (i) second quarter of 2020 decreased 5% to $29.3 million, from $30.6 million for the second quarter of 2019; and (ii) six months ended June 30, 2020 was $59.6 million, a 6% decrease when compared to $63.2 million for the six months ended June 30, 2019. The decrease in R&D expense is mainly attributed to lower employee-related costs, to include personnel and the related costs previously assigned to R&D projects being reassigned to cost of revenue projects. As a percentage of total revenue, R&D expense for the second quarters of 2020 and 2019 were 12.2% and 12.5%, respectively.
Our R&D efforts are focused on the continued evolution of our solutions that enable service providers worldwide to provide a more personalized customer experience while introducing new digital products and services. This includes the continued investment in our cloud-based solutions.
Selling, General and Administrative (“SG&A”) Expense. SG&A expense for the: (i) second quarter of 2020 was $45.0 million, a slight decrease from $45.4 million for the second quarter of 2019; and (ii) six months ended June 30, 2020 decreased 2% to $89.4 million, from $91.3 million for the six months ended June 30, 2019. These decreases can be primarily attributed to lower employee-related costs. Our SG&A costs as a percentage of total revenue for the second quarters of 2020 and 2019 were 18.7% and 18.5%, respectively.
Depreciation. Depreciation expense for the: (i) second quarter of 2020 was $5.6 million, a slight increase from the $5.4 million for the second quarter of 2019; and (ii) six months ended June 30, 2020 was $11.2 million, a 6% increase when compared to $10.6 million for the six months ended June 30, 2019. These increases can be primarily attributed to the increased level of capital expenditures on items such as technology, security, infrastructure, and modernization of equipment.
Operating Income. Operating income for the: (i) second quarter of 2020 was $19.8 million, or 8.2% of total revenue, compared to $30.3 million, or 12.3% of total revenue for the second quarter of 2019; and (ii) six months ended June 30, 2020 was $52.9 million, or 10.9% of total revenue, compared to $62.4 million, or 12.7% of total revenue for the six months ended June 30, 2019. These decreases in operating income can be mainly attributed to the impairment charge, discussed above.
18
Other, Net. Other expense for the: (i) second quarter of 2020 was $1.0 million, compared to other income of $1.3 million for the second quarter of 2019; and (ii) six months ended June 30, 2020 was $1.1 million, compared to $0.2 million for the six months ended June 30, 2019, with the amounts mainly attributed to foreign currency losses.
Income Tax Provision. The effective income tax rates for the second quarters and six months ended June 30, 2020 and 2019 were as follows:
|
Quarter Ended |
|
|
Six Months Ended |
|
|
||||||||||
|
June 30, |
|
|
June 30, |
|
|
||||||||||
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
|
||||
|
|
27 |
% |
|
|
28 |
% |
|
|
26 |
% |
|
|
27 |
% |
|
Our estimated full year 2020 effective income tax rate is approximately 27%.
Liquidity
Cash and Liquidity
As of June 30, 2020, our principal sources of liquidity included cash, cash equivalents and short-term investments of $171.2 million, as compared to $131.3 million as of March 31, 2020, and $182.7 million as of December 31, 2019. We generally invest our excess cash balances in low-risk, short-term investments to limit our exposure to market and credit risks.
As part of our 2018 Credit Agreement, we have a $200 million senior secured revolving loan facility with a syndicate of financial institutions that expires in March 2023. As of June 30, 2020, there were no borrowings outstanding on the 2018 Revolver. The 2018 Credit Agreement contains customary affirmative covenants and financial covenants. As of June 30, 2020, and the date of this filing, we believe that we are in compliance with the provisions of the 2018 Credit Agreement.
Our cash, cash equivalents, and short-term investment balances as of the end of the indicated periods were located in the following geographical regions (in thousands):
|
|
|
June 30, |
|
|
December 31, |
|
||
|
|
|
2020 |
|
|
2019 |
|
||
|
Americas (principally the U.S.) |
|
$ |
119,639 |
|
|
$ |
125,309 |
|
|
Europe, Middle East and Africa |
|
|
42,439 |
|
|
|
50,477 |
|
|
Asia Pacific |
|
|
9,124 |
|
|
|
6,871 |
|
|
Total cash, equivalents and short-term investments |
|
$ |
171,202 |
|
|
$ |
182,657 |
|
We generally have ready access to substantially all of our cash, cash equivalents, and short-term investment balances, but may face limitations on moving cash out of certain foreign jurisdictions due to currency controls. As of June 30, 2020, we had $2.1 million of cash restricted as to use primarily to collateralize outstanding letters of credit.
Cash Flows from Operating Activities
We calculate our cash flows from operating activities in accordance with U.S. GAAP, beginning with net income, adding back the impact of non-cash items or non-operating activity (e.g., depreciation, amortization, amortization of OID, impairments, gain/loss from debt extinguishments, deferred income taxes, stock-based compensation, etc.), and then factoring in the impact of changes in operating assets and liabilities. See our 2019 10-K for a description of the primary uses and sources of our cash flows from operating activities.
19
Our 2020 and 2019 net cash flows from operating activities, broken out between operations and changes in operating assets and liabilities, for the indicated quarterly periods are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Net Cash |
|
|
|
|
|
|
|
|
|
Changes in |
|
|
Provided by |
|
||
|
|
|
|
|
|
|
Operating |
|
|
(Used In) Operating |
|
||
|
|
|
|
|
|
|
Assets and |
|
|
Activities – |
|
||
|
|
|
Operations |
|
|
Liabilities |
|
|
Totals |
|
|||
|
Cash Flows from Operating Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
2020: |
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31 |
|
$ |
52,938 |
|
|
$ |
(60,151 |
) |
|
$ |
(7,213 |
) |
|
June 30 |
|
|
41,022 |
|
|
|
16,668 |
|
|
|
57,690 |
|
|
Total |
|
$ |
93,960 |
|
|
$ |
(43,483 |
) |
|
$ |
50,477 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019: |
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31 |
|
$ |
42,003 |
|
|
$ |
(29,177 |
) |
|
$ |
12,826 |
|
|
June 30 |
|
|
46,072 |
|
|
|
(30,469 |
) |
|
|
15,603 |
|
|
Total |
|
$ |
88,075 |
|
|
$ |
(59,646 |
) |
|
$ |
28,429 |
|
Cash flows from operating activities for the first quarters of 2020 and 2019 reflect the negative impacts of the payment of the 2019 and 2018 year-end accrued employee incentive compensation in the first quarter subsequent to the year-end accrual for these items. Additionally, cash flows from operating activities for the first and second quarters of 2020 and 2019 were negatively impacted by the timing of certain recurring key client payments that were delayed and received subsequent to quarter-end, of approximately $33 million and $26 million for the first and second quarters of 2020, respectively, and $14 million and $25 million for the first and second quarters of 2019, respectively.
We believe the above table illustrates our ability to generate recurring quarterly cash flows from our operations, and the importance of managing our working capital items. Variations in our net cash provided by operating activities are generally related to the changes in our operating assets and liabilities (related mostly to fluctuations in timing at quarter-end of client payments and changes in accrued expenses), and generally over longer periods of time, do not significantly impact our cash flows from operations.
Significant fluctuations in key operating assets and liabilities between 2020 and 2019 that impacted our cash flows from operating activities are as follows:
Billed Trade Accounts Receivable
Management of our billed accounts receivable is one of the primary factors in maintaining strong quarterly cash flows from operating activities. Our billed trade accounts receivable balance includes significant billings for several non-revenue items (primarily postage, sales tax, and deferred revenue items). As a result, we evaluate our performance in collecting our accounts receivable through our calculation of days billings outstanding (“DBO”) rather than a typical days sales outstanding (“DSO”) calculation.
Our gross and net billed trade accounts receivable and related allowance for doubtful accounts receivable (“Allowance”) as of the end of the indicated quarterly periods, and the related DBOs for the quarters then ended, are as follows (in thousands, except DBOs):
|
Quarter Ended |
|
Gross |
|
|
Allowance |
|
|
Net Billed |
|
|
DBOs |
|
||||
|
2020: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31 |
|
$ |
264,601 |
|
|
$ |
(3,888 |
) |
|
$ |
260,713 |
|
|
|
72 |
|
|
June 30 |
|
|
248,470 |
|
|
|
(4,057 |
) |
|
|
244,413 |
|
|
|
73 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31 |
|
$ |
247,833 |
|
|
$ |
(2,897 |
) |
|
$ |
244,936 |
|
|
|
65 |
|
|
June 30 |
|
|
268,656 |
|
|
|
(2,861 |
) |
|
|
265,795 |
|
|
|
67 |
|
As of June 30, 2020 and 2019, approximately 93% and 95%, respectively, of our billed accounts receivable balance were less than 60 days past due.
20
The year-over-year increase in DBOs can be directly attributed to the increase key client delays of their recurring payments, as noted above. We may experience future adverse impacts to our DBOs if we experience payment delays, which may be exacerbated as a result of the impact of the COVID-19 pandemic on our clients and their ability to pay in a timely manner. Additionally, as a global company, our ability to invoice certain clients outside of the U.S. may be dependent upon completion of local country billing protocols and processes which may be impacted or delayed due to the global pandemic. While we currently do not expect the impact to our net accounts receivable to be significant, the duration and severity of this global pandemic are still evolving and uncertain.
Accrued Employee Compensation
Accrued employee compensation decreased $31.8 million to $45.7 million as of June 30, 2020, from $77.5 million as of December 31, 2019, due primarily to the payment of the 2019 employee incentive compensation that was fully accrued at December 31, 2019, offset to a certain degree by the accrual for the 2020 employee incentive compensation.
Cash Flows from Investing Activities
Our typical investing activities consist of purchases/sales of short-term investments and purchases of software, property and equipment, which are discussed below. Additionally, during the first quarter of 2020 we acquired Tekzenit for approximately $10 million, which is included in our cash flows from investing activities.
Purchases/Sales of Short-term Investments. For the six months ended June 30, 2020 and 2019, we purchased $35.1 million and $22.5 million, respectively, and sold (or had mature) $34.2 million and $28.8 million, respectively, of short-term investments. We continually evaluate the appropriate mix of our investment of excess cash balances between cash equivalents and short-term investments in order to maximize our investment returns and liquidity, and will likely purchase and sell additional short-term investments in the future.
Software, Property and Equipment. Our capital expenditures for the six months ended June 30, 2020 and 2019 for software, property and equipment were $14.3 million and $17.9 million, respectively, and consisted principally of investments in: (i) statement production equipment; (ii) computer hardware, software, and related equipment; and (iii) facilities and internal infrastructure items.
Cash Flows from Financing Activities
Our financing activities typically consist of activities associated with our common stock and our long-term debt.
Cash Dividends Paid on Common Stock. During the six months ended June 30, 2020 and 2019, the Board approved dividends totaling $15.5 million and $14.7 million, respectively, and made dividend payments of $15.9 million and $14.8 million, respectively, through June 30, 2020 and 2019, with the differences attributed to unvested incentive shares that are paid upon vesting.
Repurchase of Common Stock. During the six months ended June 30, 2020 and 2019, we repurchased approximately 151,000 and 393,000 shares of our common stock, respectively, under the guidelines of our Stock Repurchase Program for $6.8 million and $15.8 million, respectively, and paid $6.9 million and $16.2 million, respectively, through June 30, 2020 and 2019, with the differences attributed to the timing of share settlement.
Outside of our Stock Repurchase Program, during the six months ended June 30, 2020 and 2019, we repurchased from our employees and then cancelled approximately 159,000 and 107,000 shares of our common stock, respectively, for $7.7 million and $4.5 million, respectively, in connection with minimum tax withholding requirements resulting from the vesting of restricted common stock under our stock incentive plans.
Long-term Debt. During the six months ended June 30, 2020 and 2019, we made principal repayments of $4.7 million and $3.8 million, respectively.
See Note 4 to our Financial Statements for additional discussion of our long-term debt.
21
Capital Resources
The following are the key items to consider in assessing our sources and uses of capital resources:
Current Sources of Capital Resources.
|
|
• |
Cash, Cash Equivalents and Short-term Investments. As of June 30, 2020, we had cash, cash equivalents, and short-term investments of $171.2 million, of which approximately 67% is in U.S. dollars and held in the U.S. We have $2.1 million of restricted cash, used primarily to collateralize outstanding letters of credit. For the remainder of the monies denominated in foreign currencies and/or located outside the U.S., we do not anticipate any material amounts being unavailable for use in funding our business. |
|
|
• |
Operating Cash Flows. As described in the Liquidity section above, we believe we have the ability to generate strong cash flows to fund our operating activities and act as a source of funds for our capital resource needs. |
|
|
• |
Revolving Credit Facility. We currently have a $200 million revolving loan facility, our 2018 Revolver. As of June 30, 2020, we had no borrowing outstanding on our 2018 Revolver and had the entire $200 million available to us. Our long-term debt obligations are discussed in more detail in Note 4 to our Financial Statements. |
Uses/Potential Uses of Capital Resources. Below are the key items to consider in assessing our uses/potential uses of capital resources:
|
|
• |
Common Stock Repurchases. We have made repurchases of our common stock in the past under our Stock Repurchase Program. As of June 30, 2020, we had 4.8 million shares authorized for repurchase remaining under our Stock Repurchase Program. Our 2018 Credit Agreement may place certain limitations on our ability to repurchase our common stock. |
Under our Stock Repurchase Program, we may repurchase shares in the open market or in privately negotiated transactions, including through an accelerated stock repurchase plan or under a SEC Rule 10b5-1 plan. The actual timing and amount of future share repurchases will be dependent on then current market conditions and other business-related factors. Our common stock repurchases are discussed in more detail in Note 8 to our Financial Statements.
During the six months ended June 30, 2020, we repurchased approximately 151,000 shares of our common stock for $6.8 million (weighted-average price of $44.99 per share). In early April 2020, we suspended stock repurchases under the Stock Repurchase Plan and terminated our existing SEC Rule 10b5-1 Plan.
Outside of our Stock Repurchase Program, during the six months ended June 30, 2020, we repurchased from our employees and then cancelled approximately 159,000 shares of our common stock for $7.7 million in connection with minimum tax withholding requirements resulting from the vesting of restricted common stock under our stock incentive plans.
|
|
• |
Cash Dividends. During the six months ended June 30, 2020, the Board declared dividends totaling $15.5 million. Going forward, we expect to pay cash dividends each year in March, June, September, and December, with the amount and timing subject to the Board’s approval. |
|
|
• |
Acquisition. The 2018 Forte acquisition purchase agreement includes provisions for $18.8 million of potential future earn-out payments over a four-year measurement period. The earn-out payments are tied to performance-based goals and continued employment by the eligible recipients. As of June 30, 2020, we have made no earn-out payments. |
In January 2020, we acquired certain assets of Tekzenit, Inc. (“Tekzenit”) for a purchase price of approximately $10 million. The purchase agreement includes provisions for additional purchase price payments in the form of earn-out and qualified sales payments for up to $10 million over a three-year measurement period upon meeting certain financial and sales criteria.
These acquisitions were funded from currently available cash. Our acquisition of Tekzenit is discussed in more detail in Note 5 to our Financial Statements. As part of our growth strategy, we are continually evaluating potential business and/or asset acquisitions and investments in market share expansion with our existing and potential new clients and expansion into verticals outside the global communications market.
|
|
• |
Capital Expenditures. During the six months ended June 30, 2020, we spent $14.3 million on capital expenditures. As of June 30, 2020, we had committed to purchase $2.8 million of equipment. |
22
|
|
• |
Stock Warrants. We have issued Stock Warrants with an exercise price of $26.68 per warrant to Comcast as an incentive for Comcast to convert new customer accounts to ACP. Once vested, Comcast may exercise the Stock Warrants and elect either physical delivery of common shares or net share settlement (cashless exercise). Alternatively, the exercise of the Stock Warrants may be settled with cash based solely on our approval, or if Comcast were to beneficially own or control in excess of 19.99% of the common stock or voting of the Company. As of June 30, 2020, approximately 1.0 million Stock Warrants remain issued, none of which are vested. |
The Stock Warrants are discussed in more detail in Note 8 to our Financial Statements.
|
|
• |
Long-Term Debt. As of June 30, 2020, our long-term debt consisted of the following: (i) 2016 Convertible Notes with a par value of $230.0 million; and (ii) 2018 Credit Agreement with term loan borrowings of $132.2 million. |
2016 Convertible Notes
During the next twelve months, there are no scheduled conversion triggers on our 2016 Convertible Notes. As a result, we expect our required debt service cash outlay during the next twelve months for the 2016 Convertible Notes to be limited to interest payments of $9.8 million.
2018 Credit Agreement
Our 2018 Credit Agreement mandatory repayments and the cash interest expense (based upon current interest rates) for the next twelve months is $12.2 million, and $2.3 million, respectively. We have the ability to make prepayments on our 2018 Credit Agreement without penalty.
Our long-term debt obligations are discussed in more detail in Note 4 to our Financial Statements.
In summary, we expect to continue to have material needs for capital resources going forward, as noted above. We believe that our current cash, cash equivalents and short-term investments balances and our 2018 Revolver, together with cash expected to be generated in the future from our current operating activities, will be sufficient to meet our anticipated capital resource requirements for at least the next twelve months. We also believe we could obtain additional capital through other debt sources which may be available to us if deemed appropriate.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market risk is the potential loss arising from adverse changes in market rates and prices. As of June 30, 2020, we are exposed to various market risks, including changes in interest rates, fluctuations and changes in the market value of our cash equivalents and short-term investments, and changes in foreign currency exchange rates. We have not historically entered into derivatives or other financial instruments for trading or speculative purposes.
Interest Rate Risk
Long-Term Debt. The interest rate on our 2016 Convertible Notes is fixed, and thus, as it relates to our convertible debt borrowings, we are not exposed to changes in interest rates.
The interest rates on our 2018 Credit Agreement are based upon an adjusted LIBOR rate plus an applicable margin, or an alternate base rate plus an applicable margin. See Note 4 to our Financial Statements for further details of our long-term debt.
A hypothetical adverse change of 10% in the June 30, 2020 adjusted LIBOR rate would not have had a material impact upon our results of operations.
Market Risk
Cash Equivalents and Short-term Investments. Our cash and cash equivalents as of June 30, 2020 and December 31, 2019 were $144.0 million and $156.5 million, respectively. Certain of our cash balances are “swept” into overnight money market accounts on a daily basis, and at times, any excess funds are invested in low-risk, somewhat longer term, cash equivalent instruments and short-term investments. Our cash equivalents are invested primarily in institutional money market funds, commercial paper, and time deposits held at major banks. We have minimal market risk for our cash and cash equivalents due to the relatively short maturities of the instruments.
Our short-term investments as of June 30, 2020 and December 31, 2019 were $27.2 million and $26.1 million, respectively. Currently, we utilize short-term investments as a means to invest our excess cash only in the U.S. The day-to-day management of our short-term investments is performed by a large financial institution in the U.S., using strict and formal investment guidelines approved
23
by our Board. Under these guidelines, short-term investments are limited to certain acceptable investments with: (i) a maximum maturity; (ii) a maximum concentration and diversification; and (iii) a minimum acceptable credit quality. At this time, we believe we have minimal liquidity risk associated with the short-term investments included in our portfolio.
Settlement Assets. We are exposed to market risk associated with cash held on behalf of our clients related to our payment processing services. As of June 30, 2020 and December 31, 2019, we had $139.2 million and $169.3 million, respectively, of cash collected on behalf of our clients which is held for an established holding period until settlement with the client. The holding period is generally one to four business days depending on the payment model and contractual terms with the client. During the holding period, cash is held in accounts with various major financial institutions in the U.S. in an amount equal to at least 100% of the aggregate amount owed to our clients. These balances can significantly fluctuate between periods due to activity at the end of the period and the day in which the period ends.
Long-Term Debt. The fair value of our convertible debt is exposed to market risk. We do not carry our convertible debt at fair value but present the fair value for disclosure purposes (see Note 2 to our Financial Statements). Generally, the fair value of our convertible debt is impacted by changes in interest rates and changes in the price and volatility of our common stock. As of June 30, 2020, the fair value of the 2016 Convertible Notes was estimated at $238.6 million, using quoted market prices.
Foreign Currency Exchange Rate Risk
Due to foreign operations around the world, our balance sheet and income statement are exposed to foreign currency exchange risk due to the fluctuations in the value of currencies in which we conduct business. While we attempt to maximize natural hedges by incurring expenses in the same currency in which we contract revenue, the related expenses for that revenue could be in one or more differing currencies than the revenue stream.
During the six months ended June 30, 2020, we generated approximately 89% of our revenue in U.S. dollars. We expect that, in the foreseeable future, we will continue to generate a very large percentage of our revenue in U.S. dollars.
As of June 30, 2020 and December 31, 2019, the carrying amounts of our monetary assets and monetary liabilities on the books of our non-U.S. subsidiaries in currencies denominated in a currency other than the functional currency of those non-U.S. subsidiaries are as follows (in thousands, in U.S. dollar equivalents):
|
|
|
June 30, 2020 |
|
|
December 31, 2019 |
|
||||||||||
|
|
|
Monetary |
|
|
Monetary |
|
|
Monetary |
|
|
Monetary |
|
||||
|
|
|
Liabilities |
|
|
Assets |
|
|
Liabilities |
|
|
Assets |
|
||||
|
Pounds sterling |
|
$ |
(43 |
) |
|
$ |
925 |
|
|
$ |
(30 |
) |
|
$ |
1,786 |
|
|
Euro |
|
|
(620 |
) |
|
|
7,323 |
|
|
|
(76 |
) |
|
|
11,284 |
|
|
U.S. Dollar |
|
|
(106 |
) |
|
|
18,826 |
|
|
|
(117 |
) |
|
|
18,890 |
|
|
South African Rand |
|
|
- |
|
|
|
52 |
|
|
|
- |
|
|
|
7,602 |
|
|
Other |
|
|
- |
|
|
|
1,231 |
|
|
|
(6 |
) |
|
|
1,065 |
|
|
Totals |
|
$ |
(769 |
) |
|
$ |
28,357 |
|
|
$ |
(229 |
) |
|
$ |
40,627 |
|
A hypothetical adverse change of 10% in the June 30, 2020 exchange rates would not have had a material impact upon our results of operations based on the monetary assets and liabilities as of June 30, 2020.
Item 4. Controls and Procedures
(a) Disclosure Controls and Procedures
As required by Rule 13a-15(b), our management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), conducted an evaluation as of the end of the period covered by this report of the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e). Based on that evaluation, the CEO and CFO concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.
(b) Internal Control Over Financial Reporting
As required by Rule 13a-15(d), our management, including the CEO and CFO, also conducted an evaluation of our internal control over financial reporting, as defined by Rule 13a-15(f), to determine whether any changes occurred during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation, the CEO and CFO concluded that there has been no such change during the quarter covered by this report.
24
CSG SYSTEMS INTERNATIONAL, INC.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
From time-to-time, we are involved in litigation relating to claims arising out of our operations in the normal course of business. We are not presently a party to any material pending or threatened legal proceedings.
Item 1A. Risk Factors
A discussion of our risk factors can be found in Item 1A. Risk Factors in our 2019 Form 10-K. There were no material changes to the risk factors disclosed in our 2019 Form 10-K during the second quarter of 2020, other than the addition of the following below.
Our Business May be Disrupted and Our Results of Operations and Cash Flows May be Adversely Affected by the Recent Coronavirus (COVID-19) Pandemic.
In March 2020, the World Health Organization declared a global pandemic related to the rapidly spreading coronavirus (COVID-19) outbreak which has led to a global health emergency. This outbreak has adversely affected workforces, clients, economies, and financial markets globally. The significance of the impact on our operations is not yet certain and depends on numerous evolving factors that we may not be able to accurately predict or effectively respond to, including, among others:
|
|
• |
the duration and scope of the pandemic; |
|
|
• |
the effect on global economic activity and the resulting impact on our client’s businesses, their credit and liquidity, and their demand for our solutions and services, as well as their ability to pay; |
|
|
• |
our ability to deliver and implement our solutions in a timely manner, including as a result of supply chain challenges, one or more print and mail facility closures for an extended period, restrictions on travel for our and client personnel, as well as shelter-in-place orders; and |
|
|
• |
actions taken by U.S., foreign, state, and local governments, suppliers, and individuals in response to the outbreak. |
While we have significant sources of cash and liquidity and access to a committed credit line, a prolonged period of generating lower cash from operations could adversely affect our financial condition and the achievement of our strategic objectives.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table presents information with respect to purchases of our common stock made during the second quarter of 2020 by CSG Systems International, Inc. or any “affiliated purchaser” of CSG Systems International, Inc., as defined in Rule 10b-18(a)(3) under the Exchange Act.
|
Period |
|
Total Number of Shares Purchased (1) (2) |
|
|
Average Price Paid Per Share |
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) |
|
|
Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plan or Programs (2) |
|
||||
|
April 1 - April 30 |
|
|
9,821 |
|
|
$ |
41.21 |
|
|
|
9,000 |
|
|
|
4,810,967 |
|
|
May 1 - May 31 |
|
|
321 |
|
|
|
46.79 |
|
|
|
- |
|
|
|
4,810,967 |
|
|
June 1 - June 30 |
|
|
998 |
|
|
|
47.59 |
|
|
|
- |
|
|
|
4,810,967 |
|
|
Total |
|
|
11,140 |
|
|
$ |
41.94 |
|
|
|
9,000 |
|
|
|
|
|
|
|
(1) |
The total number of shares purchased that are not part of the Stock Repurchase Program represents shares purchased and cancelled in connection with stock incentive plans. |
|
|
(2) |
See Note 8 to our Financial Statements for additional information regarding our share repurchases. |
Item 3. Defaults Upon Senior Securities
None
25
Item 4. Mine Safety Disclosures
None
Item 5. Other Information
None
Item 6. Exhibits
The Exhibits filed or incorporated by reference herewith are as specified in the Exhibit Index.
26
CSG SYSTEMS INTERNATIONAL, INC.
INDEX TO EXHIBITS
|
Exhibit |
|
Description |
|
|
|
|
|
10.26AH* |
||
|
10.26AI* |
||
|
10.26AJ* |
||
|
31.01 |
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
31.02 |
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
32.01 |
||
|
101.INS |
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
|
|
101.SCH |
Inline XBRL Taxonomy Extension Schema Document |
|
|
101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
|
101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document |
|
|
101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
104 |
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
|
|
|
|
* |
Portions of the exhibit have been omitted pursuant to SEC rules regarding confidential information. |
27
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Dated: August 6, 2020
|
CSG SYSTEMS INTERNATIONAL, INC. |
|
/s/ Bret C. Griess |
|
Bret C. Griess |
|
President and Chief Executive Officer |
|
(Principal Executive Officer) |
|
/s/ Rolland B. Johns |
|
Rolland B. Johns |
|
Executive Vice President and Chief Financial Officer |
|
(Principal Financial Officer) |
|
/s/ David N. Schaaf |
|
David N. Schaaf |
|
Chief Accounting Officer |
|
(Principal Accounting Officer) |
28