Summary
CSG opened fiscal 2026 with revenue of $313.7 million for the quarter ended March 31, 2026, up 4.8% from $299.5 million in the first quarter of 2025. GAAP operating income climbed 19.4% to $35.1 million, and the operating margin was 11.2%, up from 9.8%. Net income rose 48.1% to $23.9 million from $16.1 million, and diluted EPS was $0.83 against $0.57. Management tied the top line to continued growth in SaaS and related solutions revenue, which more than offset lower professional services revenue. Software and services revenue slipped to $15.0 million from $18.6 million, while maintenance contributed $11.9 million against $10.9 million. Cost of revenue rose 4.7% to $161.8 million and held at 51.6% of revenue in both periods.
The GAAP result absorbed real merger costs. Transaction-related costs of $9.7 million tied to the NEC deal landed in SG&A, which rose 8.8% to $67.7 million. R&D spending increased 5.1% to $43.0 million. Restructuring and reorganization charges fell to $2.1 million from $7.4 million, a $5.3 million drop that helped operating income alongside the higher revenue. Non-GAAP operating income was $56.9 million, up 10.6%, for a 20.0% adjusted operating margin versus 19.0%. Non-GAAP EPS was $1.37 against $1.14, and adjusted EBITDA was $70.2 million, up from $64.3 million.
Cash generation is the soft spot. Cash flows from operating activities were negative $1.2 million in the first quarter of 2026, down 110.1% from positive $11.5 million a year earlier. Changes in operating assets and liabilities used $52.9 million, compared with $29.2 million in the first quarter of 2025, driven by payment of 2025 year-end employee incentive compensation and $10.9 million of DGIT earn-out payments. Non-GAAP adjusted free cash flow, a separate measure that adds back those earn-out payments, was $8.0 million versus $7.1 million, up 12.9%. Capital expenditures were $1.7 million, down 60.4% from $4.4 million. Cash and cash equivalents ended the quarter at $147.3 million, down from $180.0 million at December 31, 2025.
Backlog and contracting metrics send mixed signals. Remaining performance obligations rose 27.8% to $2.30 billion from $1.80 billion, which points to a solid book of signed work. Current deferred revenue, by contrast, fell 9.9% to $56.5 million from $62.7 million. Concentration remains the structural risk. Charter accounted for 19% of revenue at $58.8 million and Comcast 17% at $52.0 million, and CSG states that roughly forty percent of revenue comes from its two largest customers. The company also carries $18.1 million of receivables on a terminated Latin America implementation contract, split between $1.3 million billed and $16.8 million unbilled, and warns that a collection failure could force an impairment.
The strategic backdrop is the pending acquisition by NEC. Stockholders approved the merger agreement on January 30, 2026, and CSG expects the deal to close by the end of 2026, subject to remaining regulatory approvals and customary closing conditions. About $19 million of acquisition-related costs sit accrued and will be paid at closing, and a termination under specified circumstances would cost $82.0 million. Liquidity looks adequate. The company had $125.0 million outstanding on its $600.0 million revolver at March 31, 2026, leaving $475.0 million available, plus $425.0 million of principal on the 2023 convertible notes. The board declared a quarterly dividend of $0.34 per share, roughly $10 million, while dividend payments totaled $18.5 million in the quarter against $9.5 million a year earlier. Management also guided to a full fiscal year 2026 effective income tax rate of approximately 27%. Note holders face a conversion trigger if the merger closes, and share repurchases have stopped during the pendency of the deal.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2026 | Q4 FY2025 | QoQ | Q1 FY2025 | YoY |
|---|---|---|---|---|---|
| Revenue | $313.7M | $323.1M | -2.9% | $299.5M | +4.8% |
| Gross profit | $151.9M | $161.7M | -6.0% | $145.0M | +4.8% |
| Gross margin | 48.4% | 50.0% | -1.6 pp | 48.4% | +0.0 pp |
| Research & development | $43.0M | $40.0M | +7.6% | $40.9M | +5.1% |
| Sales & marketing | $67.7M | $86.2M | -21.4% | $62.3M | +8.8% |
| Total operating expenses | $278.7M | $294.0M | -5.2% | $270.1M | +3.2% |
| Operating income (loss) | $35.1M | $29.1M | +20.7% | $29.4M | +19.4% |
| Operating margin | 11.2% | 9.0% | +2.2 pp | 9.8% | +1.4 pp |
| Net income (loss) | $23.9M | $7.0M | +241.3% | $16.1M | +48.1% |
| Net margin | 7.6% | 2.2% | +5.5 pp | 5.4% | +2.2 pp |
| Diluted EPS | $0.83 | $0.25 | +$0.58 | $0.57 | +$0.26 |
Risks
The pending merger with NEC, approved by stockholders on January 30, 2026 and expected to close by the end of 2026, remains subject to remaining closing conditions and required regulatory approvals. As of March 31, 2026 the company had approximately $19 million of acquisition-related costs accrued and would owe NEC an $82.0 million termination fee if the agreement is terminated under certain specified circumstances.
Approximately forty percent of revenue comes from the two largest customers. Charter represented 19% and Comcast 17% of revenue in the first quarter of 2026, and the loss, non-renewal, or reduced scope of either relationship could materially harm results.
The company terminated a Latin America master services agreement in July 2025 after the customer renounced its obligations and is pursuing remedies. As of March 31, 2026 it held $18.1 million of related receivables ($1.3 million billed and $16.8 million unbilled), and failure to collect could result in an impairment.
Operating cash flow for the first quarter of 2026 was negative $1.16 million, down $12.63 million or 110.1% versus $11.47 million in the prior-year quarter, driven by unfavorable working capital changes including payment of 2025 accrued employee incentive compensation and the DGIT earn-out.
Merger Agreement covenants restrict the company, outside limited exceptions, from taking certain actions without NEC's prior consent, and management time is being diverted to closing and integration. Pending or completed merger dynamics could also adversely change business relationships and impair financial performance.
Geopolitical and economic uncertainties including war, conflicts, inflation, tariffs and changes in trade policy, supply chain disruptions, and labor shortages could adversely affect the business, and the company states there is no assurance it can fully mitigate the financial and competitive impacts.
SaaS KPIs
All quarters →Non-GAAP Adjusted EBITDA
Non-GAAP Operating Income
Non-GAAP Adjusted Free Cash Flow
Summary, forecast, risks and KPIs are extracted from CSG SYSTEMS INTERNATIONAL INC's SEC filings for Q1 FY2026 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 1, 2026.