Summary
CSG Systems International closed its fiscal 2021 third quarter with revenue of $263.2 million, up 7.8% from $244.1 million in the prior-year quarter. The top line also rose on a year-to-date basis, with nine-month revenue of $771.5 million, up 5.7% from $730.0 million. Management attributed the growth to continued expansion of the company's revenue management solutions, and said roughly 90% of the year-over-year increase came from organic growth. Non-GAAP adjusted revenue reached $247.0 million, an 8.5% increase, and the CEO described the period as the best quarterly organic revenue and adjusted revenue growth since the third quarter of 2010.
Profitability improved alongside the top line. GAAP operating income was $32.8 million, up 13.2% from $28.9 million a year earlier, and the operating margin was 12.4%, up from 11.9%. Net income was $16.1 million, up 18.9% from $13.6 million, while diluted EPS rose to $0.50 from $0.42. Those GAAP results carried a notable drag: a $6.2 million non-cash loss, equal to $0.14 per share, tied to the remeasurement of a pre-existing equity stake when CSG took a controlling interest in the mobile money fintech MobileCard. Non-GAAP EPS was $0.88, and non-GAAP operating income was $41.6 million, or 16.8% of adjusted revenue.
Cash generation was the soft spot. Operating cash flow for the quarter was $46.1 million, down 29.4% from $65.3 million in the prior-year quarter, and nine-month operating cash flow of $88.3 million was down 24.0% from $116.1 million. Free cash flow, a non-GAAP measure, was $38.7 million. Capital expenditures fell to $7.4 million from $9.9 million. The balance sheet showed deferred revenue of $64.3 million, up 21.6% from $52.8 million a year earlier, while remaining performance obligations slipped to $900.0 million from $1.0 billion, a 10.0% decline.
The quarter's headline business event was the Charter Communications contract. In October 2021 CSG extended its agreement with its largest client through December 31, 2027, a six-year initial term that management called the largest deal in company history and that covers all 32 million Charter subscribers. During the third quarter, roughly 800,000 Charter customer accounts were migrated onto CSG's Advanced Convergent Platform, following about 300,000 in the second quarter. CSG also extended its DISH Network contract through June 30, 2026. On the capital side, the company refinanced its credit agreement in September 2021, pushing the term to September 2026 and lifting the revolver from $200 million to $450 million. It paid a quarterly dividend of $0.25 per share, about $8 million, and repurchased roughly 143,000 shares for about $7 million.
Guidance was reaffirmed for the full year 2021 and a preliminary outlook was issued for the full year 2022. On a non-GAAP basis, CSG still targets 2021 adjusted revenue of $946 million to $964 million, an adjusted operating margin of 16.5% to 17.0%, adjusted EBITDA of $217 million to $225 million, and free cash flow of $115 million to $125 million. The preliminary 2022 view calls for adjusted revenue of $990 million to $1,020 million.
Risks remain concentrated. CSG derives over 40% of revenue from its two largest customers, Charter at 21% of revenue and Comcast at 20% in the quarter, so any contract loss, account reduction, or financial trouble at either would hurt results. The company also flagged COVID-19 disruption, integration risk from a steady stream of acquisitions (Tango, Kitewheel, Keydok, and DGIT Systems), and competition from larger rivals. The 10-Q notes that the Charter amendment is not expected to materially affect 2021 results, though the revenue impact over time depends on how many accounts convert and when.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2021 | Q2 FY2021 | QoQ | Q3 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $263.2M | $255.1M | +3.2% | $244.1M | +7.8% |
| Gross profit | $128.5M | $122.2M | +5.2% | $113.0M | +13.7% |
| Gross margin | 48.8% | 47.9% | +0.9 pp | 46.3% | +2.5 pp |
| Research & development | $34.4M | $32.8M | +5.0% | $30.4M | +13.0% |
| Sales & marketing | $54.9M | $49.3M | +11.5% | $47.0M | +16.8% |
| Total operating expenses | $230.4M | $223.0M | +3.4% | $215.2M | +7.1% |
| Operating income (loss) | $32.8M | $32.2M | +1.9% | $28.9M | +13.2% |
| Operating margin | 12.4% | 12.6% | -0.2 pp | 11.9% | +0.6 pp |
| Net income (loss) | $16.1M | $19.3M | -16.5% | $13.6M | +18.9% |
| Net margin | 6.1% | 7.6% | -1.4 pp | 5.6% | +0.6 pp |
| Diluted EPS | $0.50 | $0.60 | -$0.10 | $0.42 | +$0.08 |
| Customers | 900 | — | — | — | — |
Risks
A large percentage of historical revenue has been generated by two largest customers, Charter and Comcast, with Charter approximately 21% of revenue. If a significant customer terminates or fails to renew, reduces accounts or price, or experiences financial difficulties, it could have a material adverse effect on financial condition and results of operations.
On November 2, 2021 the company amended its Charter agreement effective January 1, 2022 through December 31, 2027, with modified pricing and a minimum commitment tied to converting remaining Customer Accounts onto ACP over an estimated twelve to eighteen months. Anticipated revenue impact may vary based on actual conversions, timing, and product or service consumption.
Operating cash flow decreased 29.4% to $46.08 million for FY2021 Q3 from $65.27 million for FY2020 Q3, and decreased 24.0% to $88.31 million for FY2021 year to date from $116.13 million for FY2020 year to date. MD&A notes cash flows can be negatively impacted by the timing of recurring key customer payments that are delayed past quarter-end, which may also affect DBOs.
COVID-19 related supply chain issues may increase capital expenditures in the short term as the company forward purchases IT related hardware and other supplies. The full extent of the pandemic's impact on business, operations, and financial results remains uncertain.
The company completed multiple acquisitions in 2021, including Kitewheel, Keydok, and DGIT Systems, and obtained a controlling interest in MobileCard, resulting in a $6.2 million non-cash loss on remeasurement of its pre-existing equity investment in FY2021 Q3. Integration of these businesses and future earn-out payments could affect results.
The 2016 Convertible Notes were reclassified as a current liability and will be convertible at note holders' option from December 15, 2021 through March 15, 2022. If none are converted, called, or put, debt interest cash outlay over the next twelve months is $9.8 million.
SaaS KPIs
All quarters →Non-GAAP Adjusted Operating Margin
Non-GAAP free cash flow
Non-GAAP Adjusted EBITDA
Non-GAAP Operating Income
Non-GAAP Adjusted EBITDA Margin
Total customers
Summary, forecast, risks and KPIs are extracted from CSG SYSTEMS INTERNATIONAL INC's SEC filings for Q3 FY2021 (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 2, 2026.