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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2024

OR

 

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 0-27512

CSG SYSTEMS INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Delaware

47-0783182

(State or other jurisdiction
of incorporation or organization)

(I.R.S. Employer
Identification No.)

 

169 Inverness Dr W, Suite 300

Englewood, Colorado 80112

(Address of principal executive offices, including zip code)

(303) 200-2000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, Par Value $0.01 Per Share

 

CSGS

 

NASDAQ Stock Market LLC

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. Yes ☒ No ☐

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). Yes ☒ No ☐

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.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

 

 

 

 

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 ☐ No

As of November 5, 2024, there were 29,092,661 shares of the registrant’s common stock outstanding.

 


 

CSG SYSTEMS INTERNATIONAL, INC.

FORM 10-Q for the Quarter Ended September 30, 2024

INDEX

Page No.

 

 

 

Part I - FINANCIAL INFORMATION

 

 

 

 

Item 1.

 

Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023 (Unaudited)

3

 

 

 

Condensed Consolidated Statements of Income for the Quarters and Nine Months Ended September 30, 2024 and 2023 (Unaudited)

4

 

 

 

Condensed Consolidated Statements of Comprehensive Income for the Quarters and Nine Months Ended September 30, 2024 and 2023 (Unaudited)

5

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the Quarters and Nine Months Ended September 30, 2024 and 2023 (Unaudited)

6

 

 

 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2024 and 2023 (Unaudited)

8

 

 

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

9

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

17

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

27

 

 

 

Item 4.

Controls and Procedures

27

 

 

 

Part II - OTHER INFORMATION

 

 

 

Item 1.

Legal Proceedings

29

 

 

 

Item 1A.

Risk Factors

29

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

29

 

 

 

Item 5.

Other Information

29

 

 

 

Item 6.

Exhibits

29

 

 

 

Exhibit Index

30

 

 

 

 

Signatures

31

 

 

 

2


 

CSG SYSTEMS INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED

(in thousands)

 

 

September 30, 2024

 

 

December 31, 2023

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

118,444

 

 

$

186,264

 

Settlement and merchant reserve assets

 

 

240,755

 

 

 

274,699

 

Trade accounts receivable:

 

 

 

 

 

 

Billed, net of allowance of $4,810 and $5,432

 

 

279,930

 

 

 

267,680

 

Unbilled

 

 

82,585

 

 

82,163

 

Income taxes receivable

 

 

13,992

 

 

 

1,345

 

Other current assets

 

 

51,534

 

 

 

50,075

 

Total current assets

 

 

787,240

 

 

 

862,226

 

Non-current assets:

 

 

 

 

 

 

Property and equipment, net of depreciation of $136,641 and $121,816

 

 

58,353

 

 

 

65,545

 

Operating lease right-of-use assets

 

 

25,842

 

 

 

34,283

 

Software, net of amortization of $168,808 and $157,601

 

 

22,953

 

 

 

14,224

 

Goodwill

 

 

323,449

 

 

 

308,596

 

Acquired customer contracts, net of amortization of $134,742 and $126,469

 

 

42,786

 

 

 

35,879

 

Customer contract costs, net of amortization of $46,641 and $42,094

 

 

60,490

 

 

 

54,421

 

Deferred income taxes

 

 

57,831

 

 

 

57,855

 

Other assets

 

 

8,502

 

 

 

10,017

 

Total non-current assets

 

 

600,206

 

 

 

580,820

 

Total assets

 

$

1,387,446

 

 

$

1,443,046

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Current portion of long-term debt

 

$

7,500

 

 

$

7,500

 

Operating lease liabilities

 

 

14,002

 

 

 

15,946

 

Customer deposits

 

 

37,716

 

 

 

41,035

 

Trade accounts payable

 

 

51,907

 

 

 

46,406

 

Accrued employee compensation

 

 

57,704

 

 

 

84,380

 

Settlement and merchant reserve liabilities

 

 

238,783

 

 

 

273,817

 

Deferred revenue

 

 

62,797

 

 

 

54,199

 

Income taxes payable

 

 

937

 

 

 

4,104

 

Other current liabilities

 

 

28,163

 

 

 

33,449

 

Total current liabilities

 

 

499,509

 

 

 

560,836

 

Non-current liabilities:

 

 

 

 

 

 

Long-term debt, net of unamortized discounts of $13,014 and $15,628

 

 

531,986

 

 

 

534,997

 

Operating lease liabilities

 

 

24,427

 

 

 

34,360

 

Deferred revenue

 

 

22,968

 

 

 

23,447

 

Income taxes payable

 

 

2,684

 

 

 

3,041

 

Deferred income taxes

 

 

120

 

 

 

123

 

Other non-current liabilities

 

 

17,341

 

 

 

12,916

 

Total non-current liabilities

 

 

599,526

 

 

 

608,884

 

    Total liabilities

 

 

1,099,035

 

 

 

1,169,720

 

Stockholders' equity:

 

 

 

 

 

 

Preferred stock, par value $.01 per share; 10,000 shares authorized; zero shares issued and
     outstanding

 

 

-

 

 

 

-

 

Common stock, par value $.01 per share; 100,000 shares authorized; 29,292 and 29,541 shares
     outstanding

 

 

717

 

 

 

713

 

Additional paid-in capital

 

 

509,294

 

 

 

490,947

 

Treasury stock, at cost; 41,115 and 40,398 shares

 

 

(1,170,118

)

 

 

(1,136,055

)

Accumulated other comprehensive income (loss):

 

 

 

 

 

 

Unrealized gain on short-term investments, net of tax

 

 

-

 

 

 

1

 

Cumulative foreign currency translation adjustments

 

 

(45,562

)

 

 

(50,414

)

Accumulated earnings

 

 

994,080

 

 

 

968,134

 

Total stockholders' equity

 

 

288,411

 

 

 

273,326

 

Total liabilities and stockholders' equity

 

$

1,387,446

 

 

$

1,443,046

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3


 

CSG SYSTEMS INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED

(in thousands, except per share amounts)

 

Quarter Ended

 

 

Nine Months Ended

 

 

 

September 30, 2024

 

 

September 30, 2023

 

 

September 30, 2024

 

 

September 30, 2023

 

 

Revenue

$

295,143

 

 

$

286,868

 

 

$

880,596

 

 

$

871,934

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue (exclusive of depreciation, shown separately below)

 

149,487

 

 

 

152,734

 

 

 

460,266

 

 

 

458,897

 

 

Other operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

41,665

 

 

 

35,292

 

 

 

116,171

 

 

 

107,401

 

 

Selling, general and administrative

 

63,913

 

 

 

59,097

 

 

 

186,794

 

 

 

180,930

 

 

Depreciation

 

5,313

 

 

 

5,862

 

 

 

16,286

 

 

 

17,155

 

 

Restructuring and reorganization charges

 

2,943

 

 

 

1,152

 

 

 

12,040

 

 

 

8,421

 

 

Total operating expenses

 

263,321

 

 

 

254,137

 

 

 

791,557

 

 

 

772,804

 

 

Operating income

 

31,822

 

 

 

32,731

 

 

 

89,039

 

 

 

99,130

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

(7,778

)

 

 

(8,036

)

 

 

(22,982

)

 

 

(23,092

)

 

Interest income

 

1,922

 

 

 

1,175

 

 

 

6,641

 

 

 

2,516

 

 

Other, net

 

(2,187

)

 

 

813

 

 

 

(1,455

)

 

 

(3,047

)

 

Total other

 

(8,043

)

 

 

(6,048

)

 

 

(17,796

)

 

 

(23,623

)

 

Income before income taxes

 

23,779

 

 

 

26,683

 

 

71,243

 

 

 

75,507

 

 

Income tax provision

 

(4,691

)

 

 

(7,989

)

 

 

(18,859

)

 

 

(21,931

)

 

Net income

$

19,088

 

 

$

18,694

 

 

$

52,384

 

 

$

53,576

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

28,362

 

 

 

30,097

 

 

 

28,475

 

 

 

30,381

 

 

Diluted

 

28,468

 

 

 

30,284

 

 

 

28,621

 

 

 

30,540

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.67

 

 

$

0.62

 

 

$

1.84

 

 

$

1.76

 

 

Diluted

 

0.67

 

 

 

0.62

 

 

 

1.83

 

 

 

1.75

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4


 

CSG SYSTEMS INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - UNAUDITED

(in thousands)

 

 

Quarter Ended

 

 

Nine Months Ended

 

 

 

 

September 30, 2024

 

 

September 30, 2023

 

 

September 30, 2024

 

 

September 30, 2023

 

 

Net income

 

$

19,088

 

 

$

18,694

 

 

$

52,384

 

 

$

53,576

 

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

10,067

 

 

 

(6,495

)

 

 

4,851

 

 

 

(1,943

)

 

Other comprehensive income (loss), net of tax

 

 

10,067

 

 

 

(6,495

)

 

 

4,851

 

 

 

(1,943

)

 

Total comprehensive income, net of tax

 

$

29,155

 

 

$

12,199

 

 

$

57,235

 

 

$

51,633

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

5


 

CSG SYSTEMS INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - UNAUDITED

(in thousands)

 

 

Shares of Common Stock Outstanding

 

Common Stock

 

Additional Paid-in Capital

 

Treasury Stock

 

Accumulated Other Comprehensive Income (Loss)

 

Accumulated Earnings

 

Total Stockholders' Equity

 

For the Nine Months Ended September 30, 2024:

 

BALANCE, January 1, 2024

 

29,541

 

$

713

 

$

490,947

 

$

(1,136,055

)

$

(50,413

)

$

968,134

 

$

273,326

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Net income

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

19,467

 

 

 

     Foreign currency translation adjustments

 

-

 

 

-

 

 

-

 

 

-

 

 

(4,975

)

 

-

 

 

 

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

14,492

 

Repurchase of common stock

 

(344

)

 

(2

)

 

(8,538

)

 

(9,683

)

 

-

 

 

-

 

 

(18,223

)

Issuance of common stock pursuant to employee stock
      purchase plan

 

20

 

 

-

 

 

866

 

 

-

 

 

-

 

 

-

 

 

866

 

Issuance of restricted common stock pursuant to
      stock-based compensation plans

 

573

 

 

6

 

 

(6

)

 

-

 

 

-

 

 

-

 

 

-

 

Cancellation of restricted common stock issued
      pursuant to stock-based compensation plans

 

(11

)

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Stock-based compensation expense

 

-

 

 

-

 

 

7,736

 

 

-

 

 

-

 

 

-

 

 

7,736

 

Dividends

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(8,857

)

 

(8,857

)

BALANCE, March 31, 2024

 

29,779

 

 

717

 

 

491,005

 

 

(1,145,738

)

 

(55,388

)

 

978,744

 

 

269,340

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Net income

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

13,829

 

 

 

     Foreign currency translation adjustments

 

-

 

 

-

 

 

-

 

 

-

 

 

(241

)

 

-

 

 

 

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

13,588

 

Repurchase of common stock

 

(228

)

 

-

 

 

(397

)

 

(9,804

)

 

-

 

 

-

 

 

(10,201

)

Issuance of common stock pursuant to employee stock
      purchase plan

 

20

 

 

-

 

 

752

 

 

-

 

 

-

 

 

-

 

 

752

 

Issuance of restricted common stock pursuant to
      stock-based compensation plans

 

90

 

 

1

 

 

(1

)

 

-

 

 

-

 

 

-

 

 

-

 

Cancellation of restricted common stock issued
      pursuant to stock-based compensation plans

 

(70

)

 

(1

)

 

1

 

 

-

 

 

-

 

 

-

 

 

-

 

Stock-based compensation expense

 

-

 

 

-

 

 

8,635

 

 

-

 

 

-

 

 

-

 

 

8,635

 

Dividends

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(8,785

)

 

(8,785

)

BALANCE, June 30, 2024

 

29,591

 

 

717

 

 

499,995

 

 

(1,155,542

)

 

(55,629

)

 

983,788

 

 

273,329

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Net income

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

19,088

 

 

 

     Foreign currency translation adjustments

 

-

 

 

-

 

 

-

 

 

-

 

 

10,067

 

 

-

 

 

 

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

29,155

 

Repurchase of common stock

 

(317

)

 

-

 

 

(151

)

 

(14,576

)

 

-

 

 

-

 

 

(14,727

)

Issuance of common stock pursuant to employee stock
      purchase plan

 

19

 

 

-

 

 

798

 

 

-

 

 

-

 

 

-

 

 

798

 

Issuance of restricted common stock pursuant to
      stock-based compensation plans

 

22

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Cancellation of restricted common stock issued
      pursuant to stock-based compensation plans

 

(23

)

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Stock-based compensation expense

 

-

 

 

-

 

 

8,652

 

 

-

 

 

-

 

 

-

 

 

8,652

 

Dividends

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(8,796

)

 

(8,796

)

BALANCE, September 30, 2024

 

29,292

 

$

717

 

$

509,294

 

$

(1,170,118

)

$

(45,562

)

$

994,080

 

$

288,411

 

 

6


 

 

 

Shares of Common Stock Outstanding

 

Common Stock

 

Additional Paid-in Capital

 

Treasury Stock

 

Accumulated Other Comprehensive Income (Loss)

 

Accumulated Earnings

 

Total Stockholders' Equity

 

For the Nine Months Ended September 30, 2023:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE, January 1, 2023

 

31,269

 

$

708

 

$

495,189

 

$

(1,018,034

)

$

(58,829

)

$

936,215

 

$

355,249

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Net income

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

20,928

 

 

 

     Foreign currency translation adjustments

 

-

 

 

-

 

 

-

 

 

-

 

 

2,843

 

 

-

 

 

 

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

23,771

 

Repurchase of common stock

 

(166

)

 

(2

)

 

(9,304

)

 

-

 

 

-

 

 

-

 

 

(9,306

)

Issuance of common stock pursuant to employee stock
      purchase plan

 

19

 

 

-

 

 

893

 

 

-

 

 

-

 

 

-

 

 

893

 

Issuance of restricted common stock pursuant to
      stock-based compensation plans

 

574

 

 

6

 

 

(6

)

 

-

 

 

-

 

 

-

 

 

-

 

Cancellation of restricted common stock issued
      pursuant to stock-based compensation plans

 

(18

)

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Stock-based compensation expense

 

-

 

 

-

 

 

6,412

 

 

-

 

 

-

 

 

-

 

 

6,412

 

Dividends

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(8,796

)

 

(8,796

)

BALANCE, March 31, 2023

 

31,678

 

 

712

 

 

493,184

 

 

(1,018,034

)

 

(55,986

)

 

948,347

 

 

368,223

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Net income

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

13,954

 

 

 

     Foreign currency translation adjustments

 

-

 

 

-

 

 

-

 

 

-

 

 

1,709

 

 

-

 

 

 

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

15,663

 

Repurchase of common stock

 

(2

)

 

-

 

 

(112

)

 

-

 

 

-

 

 

-

 

 

(112

)

Issuance of common stock pursuant to employee stock
      purchase plan

 

18

 

 

-

 

 

771

 

 

-

 

 

-

 

 

-

 

 

771

 

Issuance of restricted common stock pursuant to
      stock-based compensation plans

 

64

 

 

1

 

 

(1

)

 

-

 

 

-

 

 

-

 

 

-

 

Cancellation of restricted common stock issued
      pursuant to stock-based compensation plans

 

(7

)

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Stock-based compensation expense

 

-

 

 

-

 

 

7,644

 

 

-

 

 

-

 

 

-

 

 

7,644

 

Dividends

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(8,878

)

 

(8,878

)

BALANCE, June 30, 2023

 

31,751

 

 

713

 

 

501,486

 

 

(1,018,034

)

 

(54,277

)

 

953,423

 

 

383,311

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Net income

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

18,694

 

 

 

     Foreign currency translation adjustments

 

-

 

 

-

 

 

-

 

 

-

 

 

(6,495

)

 

-

 

 

 

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

12,199

 

Repurchase of common stock

 

(1,994

)

 

-

 

 

(144

)

 

(107,863

)

 

-

 

 

-

 

 

(108,007

)

Issuance of common stock pursuant to employee stock
      purchase plan

 

20

 

 

-

 

 

877

 

 

-

 

 

-

 

 

-

 

 

877

 

Issuance of restricted common stock pursuant to
      stock-based compensation plans

 

12

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Cancellation of restricted common stock issued
      pursuant to stock-based compensation plans

 

(63

)

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Stock-based compensation expense

 

-

 

 

-

 

 

7,197

 

 

-

 

 

-

 

 

-

 

 

7,197

 

Purchase of capped call transactions (net of tax)

 

-

 

 

-

 

 

(26,353

)

 

-

 

 

-

 

 

-

 

 

(26,353

)

Dividends

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(8,733

)

 

(8,733

)

BALANCE, September 30, 2023

 

29,726

 

$

713

 

$

483,063

 

$

(1,125,897

)

$

(60,772

)

$

963,384

 

$

260,491

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

7


 

CSG SYSTEMS INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

(in thousands)

 

Nine Months Ended

 

 

 

September 30, 2024

 

 

September 30, 2023

 

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

$

52,384

 

 

$

53,576

 

 

Adjustments to reconcile net income to net cash provided by operating activities-

 

 

 

 

 

 

Depreciation

 

16,724

 

 

 

17,549

 

 

Amortization

 

37,467

 

 

 

34,543

 

 

Asset impairment

 

-

 

 

 

1,689

 

 

Gain on lease modifications

 

-

 

 

 

(4,349

)

 

Unrealized foreign currency transaction (gain) loss, net

 

225

 

 

 

(442

)

 

Deferred income taxes

 

(189

)

 

 

(12,504

)

 

Stock-based compensation

 

25,023

 

 

 

21,253

 

 

Changes in operating assets and liabilities, net of acquired amounts:

 

 

 

 

 

 

Trade accounts receivable, net

 

(7,873

)

 

 

(33,351

)

 

Other current and non-current assets and liabilities

 

(12,771

)

 

 

(11,449

)

 

Income taxes payable/receivable

 

(16,194

)

 

 

(4,650

)

 

Trade accounts payable and accrued liabilities

 

(48,658

)

 

 

(24,158

)

 

Deferred revenue

 

7,075

 

 

 

14,658

 

 

Net cash provided by operating activities

 

53,213

 

 

 

52,365

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of software, property, and equipment

 

(16,528

)

 

 

(22,940

)

 

Proceeds from sale/maturity of short-term investments

 

-

 

 

 

71

 

 

Business combinations, net of cash and settlement assets acquired of $46,432 and zero

 

17,293

 

 

 

-

 

 

Net cash provided by (used in) investing activities

 

765

 

 

 

(22,869

)

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from issuance of common stock

 

2,416

 

 

 

2,541

 

 

Payment of cash dividends

 

(26,598

)

 

 

(26,231

)

 

Repurchase of common stock

 

(42,439

)

 

 

(116,418

)

 

Deferred acquisition payments

 

(2,488

)

 

 

(3,220

)

 

Proceeds from long-term debt

 

15,000

 

 

 

470,000

 

 

Payments on long-term debt

 

(20,625

)

 

 

(310,625

)

 

Purchase of capped call transactions related to convertible notes

 

-

 

 

 

(34,298

)

 

Payments of deferred financing costs

 

-

 

 

 

(13,518

)

 

Payments on financing obligations

 

(2,191

)

 

 

-

 

 

Settlement and merchant reserve activity

 

(79,606

)

 

 

(46,196

)

 

Net cash used in financing activities

 

(156,531

)

 

 

(77,965

)

 

Effect of exchange rate fluctuations on cash, cash equivalents, and restricted cash

 

(337

)

 

 

(448

)

 

 

 

 

 

 

 

 

Net decrease in cash, cash equivalents, and restricted cash

 

(102,890

)

 

 

(48,917

)

 

 

 

 

 

 

 

 

Cash, cash equivalents, and restricted cash, beginning of period

 

463,876

 

 

 

389,018

 

 

Cash, cash equivalents, and restricted cash, end of period

$

360,986

 

 

$

340,101

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

Cash paid during the period for-

 

 

 

 

 

 

Interest

$

24,592

 

 

$

21,772

 

 

Income taxes

 

35,292

 

 

 

39,136

 

 

 

 

 

 

 

 

 

Non-cash investing and financing activities-

 

 

 

 

 

 

Software, property, and equipment included in current and noncurrent liabilities

 

9,830

 

 

 

-

 

 

 

 

 

 

 

 

 

Reconciliation of cash, cash equivalents, and restricted cash:

 

 

 

 

 

 

Cash and cash equivalents

$

118,444

 

 

$

146,730

 

 

Settlement and merchant reserve assets

 

240,755

 

 

 

193,371

 

 

Restricted cash included in current and non-current assets

 

1,787

 

 

 

-

 

 

Total cash, cash equivalents, and restricted cash

$

360,986

 

 

$

340,101

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

8


 

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 September 30, 2024 and December 31, 2023, and for the quarters and nine months ended September 30, 2024 and 2023, 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, 2023 (our “2023 10-K”), filed with the SEC. The results of operations for the quarter and nine months ended September 30, 2024 are not necessarily indicative of the expected results for the entire year ending December 31, 2024.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates in Preparation of Financial Statements. The preparation of our Financial Statements requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of 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 customer contracts for our SaaS and related solutions that include variable consideration dependent upon a series of monthly volumes and/or daily usage of services and have contractual terms ending from 2024 through 2036. Our customer contracts may include guaranteed minimums and fixed monthly or annual fees. As of September 30, 2024, our aggregate amount of the transaction price allocated to the remaining performance obligations was approximately $1.3 billion, which is made up of fixed fee consideration and guaranteed minimums expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied). We expect to recognize over 70% of this amount by the end of 2026, with the remaining amount recognized by the end of 2036. We have excluded from this amount variable consideration expected to be recognized in the future related to performance obligations that are unsatisfied.

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 revenue type, geographic region, and customer vertical.

Revenue by type for the quarters and nine months ended September 30, 2024 and 2023 was as follows (in thousands):

 

 

 

Quarter Ended

 

 

Nine Months Ended

 

 

 

September 30, 2024

 

 

September 30, 2023

 

 

September 30, 2024

 

 

September 30, 2023

 

SaaS and related solutions

 

$

263,701

 

 

$

250,777

 

 

$

788,054

 

 

$

764,253

 

Software and services

 

 

19,705

 

 

 

23,578

 

 

 

56,780

 

 

 

73,235

 

Maintenance

 

 

11,737

 

 

 

12,513

 

 

 

35,762

 

 

 

34,446

 

Total revenue

 

$

295,143

 

 

$

286,868

 

 

$

880,596

 

 

$

871,934

 

 

We use the location of the customer as the basis of attributing revenue to geographic regions. Revenue by geographic region for the quarters and nine months ended September 30, 2024 and 2023, as a percentage of our total revenue, was as follows:

 

 

 

Quarter Ended

 

 

Nine Months Ended

 

 

 

September 30, 2024

 

 

September 30, 2023

 

 

September 30, 2024

 

 

September 30, 2023

 

Americas (principally the U.S.)

 

 

88

%

 

 

86

%

 

 

88

%

 

 

86

%

Europe, Middle East, and Africa

 

 

9

%

 

 

9

%

 

 

8

%

 

 

10

%

Asia Pacific

 

 

3

%

 

 

5

%

 

 

4

%

 

 

4

%

Total revenue

 

 

100

%

 

 

100

%

 

 

100

%

 

 

100

%

 

9


 

We generate our revenue primarily from the global communications markets; however, we serve an expanding group of customers in other markets including retail, financial services, healthcare, insurance, and government entities. Revenue by customer vertical for the quarters and nine months ended September 30, 2024 and 2023, as a percentage of our total revenue, was as follows:

 

 

 

Quarter Ended

 

 

Nine Months Ended

 

 

 

September 30, 2024

 

 

September 30, 2023

 

 

September 30, 2024

 

 

September 30, 2023

 

Broadband/Cable/Satellite

 

 

53

%

 

 

53

%

 

 

52

%

 

 

53

%

Telecommunications

 

 

18

%

 

 

20

%

 

 

18

%

 

 

20

%

Other

 

 

29

%

 

 

27

%

 

 

30

%

 

 

27

%

Total revenue

 

 

100

%

 

 

100

%

 

 

100

%

 

 

100

%

Deferred revenue recognized during the quarters ended September 30, 2024 and 2023 was $8.6 million and $7.8 million, respectively. Deferred revenue recognized during the nine months ended September 30, 2024 and 2023 was $38.4 million and $39.3 million, respectively.

Cash and Cash Equivalents. We consider all highly liquid investments with original maturities of three months or less as of the date of purchase to be cash equivalents. As of September 30, 2024 and December 31, 2023, our cash equivalents consist primarily of institutional money market funds and time deposits held at major banks. For the cash and cash equivalents denominated in foreign currencies and/or located outside the U.S., we do not anticipate any material amounts being unavailable for use in running our business, but may face limitations on moving cash out of certain foreign jurisdictions due to currency controls and potential negative economic consequences.

Restricted Cash. Restricted cash includes cash that is legally or contractually restricted, as well as our settlement and merchant reserve assets (discussed below). The nature of the restrictions on our settlement and merchant reserve assets consists of contractual restrictions with the merchants and restrictions arising from our policy and intention. It has historically been our policy to segregate settlement and merchant reserve assets from our operating cash balances and our intention is to continue to do so. As of September 30, 2024 and December 31, 2023, we had $1.8 million and $2.9 million, respectively, of restricted cash that mainly serves to collateralize bank and performance guarantees included in other current and non-current assets in our unaudited Condensed Consolidated Balance Sheets (“Balance Sheets” or “Balance Sheet”).

Settlement and Merchant Reserve Assets and Liabilities. Settlement assets and settlement liabilities represent cash collected on behalf of merchants via payments processing services which is held for an established holding period until settlement with the customer. The holding period is generally one to four business days depending on the payment model and contractual terms with the customer. During the holding period, cash is subject to restriction and segregation based on the nature of our custodial relationship with the merchants. Should we fail to remit these funds to our merchants, the merchant's sole recourse for payment would be against us. These rights and obligations are set forth in the contracts between us and the merchants. Settlement assets are held with various major financial institutions and a corresponding liability is recorded for the amounts owed to the customer. At any given time, there may be differences between the cash held and the corresponding liability due to the timing of operating-related cash transfers.

Merchant reserve assets/liabilities represent deposits collected from merchants to mitigate our risk of loss due to nonperformance of settlement obligations initiated by those merchants using our payments processing services, or non-payment by customers for services rendered by us. We perform a credit risk evaluation on each customer based on multiple criteria, which provides the basis for the deposit amount required for each merchant. For the duration of our relationship with each merchant, we hold their reserve deposits with major financial institutions. We hold these funds in separate accounts, which are offset by corresponding liabilities.

The following table summarizes our settlement and merchant reserve assets and liabilities as of the indicated periods (in thousands):

 

 

 

September 30, 2024

 

 

December 31, 2023

 

 

 

Assets

 

 

Liabilities

 

 

Assets

 

 

Liabilities

 

Settlement assets/liabilities

 

$

228,679

 

 

$

226,684

 

 

$

260,712

 

 

$

259,825

 

Merchant reserve assets/liabilities

 

 

12,076

 

 

 

12,099

 

 

 

13,987

 

 

 

13,992

 

Total

 

$

240,755

 

 

$

238,783

 

 

$

274,699

 

 

$

273,817

 

 

10


 

Financial Instruments. Our financial instruments as of September 30, 2024 and December 31, 2023 include cash and cash equivalents, settlement and merchant reserve assets and liabilities, accounts receivable, accounts payable, and debt. Due to their short maturities, the carrying amounts of cash equivalents, settlement and merchant reserve assets and liabilities, accounts receivable, and accounts payable approximate their fair value.

We have chosen not to record our debt at fair value, with changes recognized in earnings each reporting period. The following table indicates the carrying value and estimated fair value of our debt as of the indicated periods (in thousands):

 

 

 

September 30, 2024

 

 

December 31, 2023

 

 

 

Carrying Value

 

 

Fair Value

 

 

Carrying Value

 

 

Fair Value

 

2023 Convertible Notes (par value)

 

$

425,000

 

 

$

425,978

 

 

$

425,000

 

 

$

428,506

 

2021 Credit Agreement (carrying value including
    current maturities)

 

 

127,500

 

 

 

127,500

 

 

 

133,125

 

 

 

133,125

 

The fair value of our convertible notes was estimated based upon quoted market prices or recent sales activity, while the fair value of our credit agreement was estimated using a discounted cash flow methodology, both of which are considered Level 2 inputs. See Note 4 for a discussion regarding our debt.

Pillar Two. Numerous foreign jurisdictions have enacted, or are in the process of enacting, legislation to adopt a minimum effective tax rate. Pillar Two, which was established by the Organization for Economic Co-operation and Development (OECD), generally provides for a 15% minimum effective tax rate for multinational enterprises in every jurisdiction in which they operate. The U.S. has not yet adopted Pillar Two, however, various other governments around the world have. These rules did not have a material impact on our taxes for the quarter and nine months ended September 30, 2024. We continue to monitor evolving tax legislation in the jurisdictions in which we operate.

Accounting Pronouncements Issued but Not Yet Effective. In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280), (“ASU 2023-07”), which enhances reportable segment disclosure requirements in part by requiring entities to disclose significant expenses related to their reportable segments. ASU 2023-07 also requires disclosure of the title and position of the company’s Chief Operating Decision Maker (“CODM”) and how the CODM uses financial reporting to assess segment performance and allocate resources. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The adoption of this standard only impacts disclosures and is not expected to have a material impact on our Financial Statements.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which requires entities to disclose more detailed information about their effective tax rate reconciliation as well as information on income taxes paid. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. The adoption of this standard only impacts disclosures and is not expected to have a material impact on our Financial Statements.

3. GOODWILL AND INTANGIBLE ASSETS

Goodwill. The changes in the carrying amount of goodwill for the nine months ended September 30, 2024 were as follows (in thousands):

 

January 1, 2024, balance

 

$

308,596

 

Effects of changes in foreign currency exchange rates

 

 

4,191

 

Goodwill acquired during the period

 

 

10,662

 

September 30, 2024, balance

 

$

323,449

 

Goodwill acquired during the period relates to the acquisitions discussed in Note 5.

Other Intangible Assets. Our other intangible assets subject to ongoing amortization consist of acquired customer contracts and software. As of September 30, 2024 and December 31, 2023, the carrying values of these assets were as follows (in thousands):

 

 

 

September 30, 2024

 

 

December 31, 2023

 

 

 

Gross Carrying Amount

 

 

Accumulated Amortization

 

 

Net Amount

 

 

Gross Carrying Amount

 

 

Accumulated Amortization

 

 

Net Amount

 

Acquired customer contracts

 

$

177,528

 

 

$

(134,742

)

 

$

42,786

 

 

$

162,348

 

 

$

(126,469

)

 

$

35,879

 

Software

 

 

191,761

 

 

 

(168,808

)

 

 

22,953

 

 

 

171,825

 

 

 

(157,601

)

 

 

14,224

 

Total other intangible assets

 

$

369,289

 

 

$

(303,550

)

 

$

65,739

 

 

$

334,173

 

 

$

(284,070

)

 

$

50,103

 

 

Acquired customer contracts and software as of September 30, 2024 include the assets acquired as part of the acquisitions discussed in Note 5.

11


 

The total amortization expense related to other intangible assets for the third quarters of 2024 and 2023 was $7.1 million and $6.4 million, respectively, and for the nine months ended September 30, 2024 and 2023 was $18.8 million and $19.5 million, respectively. Based on the September 30, 2024 net carrying value of our intangible assets, the estimated total amortization expense for each of the five succeeding fiscal years ending December 31 is: 2024 - $25.7 million; 2025 - $21.9 million; 2026 - $15.1 million; 2027 - $7.0 million; and 2028 - $4.3 million.

Customer Contract Costs. As of September 30, 2024 and December 31, 2023, the carrying values of our customer contract cost assets, related to those contracts with a contractual term greater than one year, were as follows (in thousands):

 

 

 

September 30, 2024

 

 

December 31, 2023

 

 

 

Gross Carrying Amount

 

 

Accumulated Amortization

 

 

Net Amount

 

 

Gross Carrying Amount

 

 

Accumulated Amortization

 

 

Net Amount

 

Customer contract costs

 

$

107,131

 

 

$

(46,641

)

 

$

60,490

 

 

$

96,515

 

 

$

(42,094

)

 

$

54,421

 

The total amortization expense related to customer contract costs for the third quarters of 2024 and 2023 was $5.4 million and $5.0 million, respectively, and for the nine months ended September 30, 2024 and 2023 was $16.1 million and $14.4 million, respectively.

4. DEBT

As of September 30, 2024 and December 31, 2023, our long-term debt was as follows (in thousands):

 

 

 

September 30,
2024

 

 

December 31,
2023

 

2023 Convertible Notes:

 

 

 

 

 

 

2023 Convertible Notes – senior unsecured convertible notes, due
    
September 2028, cash interest at 3.875%

 

$

425,000

 

 

$

425,000

 

Less – deferred financing costs

 

 

(11,279

)

 

 

(13,216

)

 2023 Convertible Notes, net of unamortized discounts

 

 

413,721

 

 

 

411,784

 

2021 Credit Agreement:

 

 

 

 

 

 

2021 Term Loan, due September 2026, interest at adjusted SOFR plus
    applicable margin (combined rate of
6.079% at September 30, 2024)

 

 

127,500

 

 

 

133,125

 

Less – deferred financing costs

 

 

(1,735

)

 

 

(2,412

)

 2021 Term Loan, net of unamortized discounts

 

 

125,765

 

 

 

130,713

 

$450 million revolving loan facility, due September 2026, interest at adjusted
    SOFR plus applicable margin

 

 

-

 

 

 

-

 

Total debt, net of unamortized discounts

 

 

539,486

 

 

 

542,497

 

Current portion of long-term debt

 

 

(7,500

)

 

 

(7,500

)

Long-term debt, net of unamortized discounts

 

$

531,986

 

 

$

534,997

 

2023 Convertible Notes. The 2023 Convertible Notes will be convertible at the option of the noteholders before June 15, 2028, upon the occurrence of certain events. On or after June 15, 2028, and until the close of business on the second scheduled trading day immediately preceding September 15, 2028, the maturity date, noteholders may convert all or any portion of their notes at any time regardless of these conditions.

The 2023 Convertible Notes will be convertible at an initial conversion rate of 14.0753 shares of our common stock per $1,000 principal amount of the 2023 Convertible Notes, which is equivalent to an initial conversion price of $71.05 per share of our common stock, plus carryforward adjustments not yet effected pursuant to the terms of the indenture governing the 2023 Convertible Notes. Under the terms of the 2023 Convertible Notes, we will adjust the conversion rate for any quarterly dividends exceeding $0.28 per share.

We are required to satisfy our conversion obligation as follows: (i) paying cash up to the aggregate principal amount of notes to be converted; and (ii) to the extent the value of our conversion obligation exceeds the par value, we will satisfy the remaining conversion obligation in our common stock, cash, or a combination thereof, at our election. As of September 30, 2024, none of the conditions to early convert have been met.

We may not redeem the 2023 Convertible Notes prior to September 21, 2026. On or after September 21, 2026, we may redeem for cash all or part of the 2023 Convertible Notes, subject to a partial redemption limitation that requires at least $100.0 million of the principal amount of the 2023 Convertible Notes to remain outstanding if the last reported sales price of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption. The redemption price will equal the principal amount of the 2023 Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund has been established for the 2023 Convertible Notes.

12


 

In connection with the pricing of the 2023 Convertible Notes, we entered into privately negotiated capped call transactions (the “Capped Call Transactions”) with certain of the initial purchasers of the 2023 Convertible Notes and other financial institutions (collectively, the “Option Counterparties”). As of September 30, 2024, all the Capped Call Transactions were outstanding and cover, subject to anti-dilution adjustments substantially similar to those applicable to the 2023 Convertible Notes, 5.98 million shares of our common stock, the same number of shares of common stock underlying the 2023 Convertible Notes. The Capped Call Transactions will expire upon the maturity of the 2023 Convertible Notes.

2021 Credit Agreement. During the nine months ended September 30, 2024, we made $5.6 million of principal repayments on our $150.0 million aggregate principal five-year term loan (the “2021 Term Loan”). As of September 30, 2024, we had no borrowings outstanding on our $450.0 million aggregate principal five-year revolving loan facility (the "2021 Revolver"), and had issued standby letters of credit of $1.5 million that count against our available 2021 Revolver balance, leaving $448.5 million available to us.

As of September 30, 2024, our interest rate on the 2021 Term Loan was 6.079% (adjusted Secured Overnight Financing Rate ("SOFR"), credit spread adjustment of 0.10%, plus 1.375% per annum), effective through December 2024, and our commitment fee on the 2021 Revolver was 0.15%.

The interest rates under the 2021 Credit Agreement are based upon our choice of an adjusted SOFR rate plus an applicable margin of 1.375% - 2.125%, or an alternate base rate (“ABR”) plus an applicable margin of 0.375% - 1.125%, with the applicable margin determined in accordance with our then-net secured total leverage ratio. We pay a commitment fee of 0.150% - 0.325% of the average daily unused amount of the 2021 Revolver, with the commitment fee rate also determined in accordance with our then-net secured total leverage ratio.

Other. We finance certain of our internal use software. During the nine months ended September 30, 2024, we entered into two additional financing agreements at a total cost of $10.7 million with payments through 2027. As a result, as of September 30, 2024, we had $9.8 million outstanding under these agreements, of which $4.8 million was included in current liabilities and $5.0 million was included in non-current liabilities in our Balance Sheet. These arrangements are treated as non-cash investing and financing activities for purposes of our Condensed Consolidated Statements of Cash Flows ("Statements of Cash Flows").

5. ACQUISITIONS

Prior Years Acquisition. On October 4, 2021, we acquired DGIT Systems Pty Ltd (“DGIT”), a provider of configure, price and quote (CPQ), and order management solutions for the telecommunications industry. We acquired 100% of the equity of DGIT for a purchase price of approximately $16 million, approximately $14 million paid upon close and the remaining consideration of approximately $2 million to be paid through 2025, subject to certain reductions, as applicable. During the nine months ended September 30, 2024, we made deferred purchase price payments of $0.5 million.

The DGIT acquisition includes provisions for up to approximately $13 million of potential future earn-out payments. The earn-out payments are tied to performance-based goals and a defined service period and are accounted for as post-acquisition compensation, as applicable. The earn-out period was originally through September 30, 2025, but during the third quarter of 2024 was extended through December 31, 2026. As of September 30, 2024, we have accrued $0.1 million related to the potential earn-out payments.

Current Year Acquisitions. On April 1, 2024, we acquired a customer communication services business that operates in multiple industry verticals. The acquisition date fair value of the consideration transferred was $15.0 million, which consisted of $11.5 million in cash paid upfront and a non-cash settlement of working capital items of $3.5 million. The results of this acquisition are included in our results of operations for the period subsequent to the acquisition date.

The preliminary estimated fair values of assets acquired primarily include goodwill of $6.4 million, acquired customer contracts of $4.3 million, trade accounts receivable of $2.1 million, and liabilities assumed of $2.7 million. The estimated fair values are considered provisional and are based on the information that was available as of the acquisition date. The provisional measurements of fair value are subject to change, however, such changes are not expected to be significant. We expect to finalize the valuation and complete the purchase price allocation as soon as practicable but no later than one year from the acquisition date. The amount allocated to goodwill is deductible for income tax purposes.

On June 3, 2024, we acquired 100% of the equity of iCheckGateway.com, LLC (“iCG Pay”), an ACH and credit card payment processing company. We acquired iCG Pay to further expand the industry verticals we serve and to provide opportunities for the continued growth of our business. The acquisition date fair value of the consideration transferred was $17.6 million in cash paid, subject to customary working capital adjustments.

The iCG Pay acquisition includes provisions for up to $15.0 million of potential future earn-out payments. The earn-out payments are tied to performance-based goals and a defined service period and are accounted for as post-acquisition compensation, as applicable. The earn-out period is through June 3, 2027. As of September 30, 2024, we accrued $3.5 million related to the potential earn-out payments. The results of iCG Pay are included in our results of operations for the period subsequent to the acquisition date.

13


 

The preliminary estimated fair values of assets acquired primarily include settlement assets of $45.9 million, acquired customer contracts of $10.7 million, goodwill of $4.2 million, and settlement liabilities assumed of $44.7 million. The estimated fair values are considered provisional and are based on the information that was available as of the acquisition date. The provisional measurements of fair value are subject to change, however, such changes are not expected to be significant. We expect to finalize the valuation and complete the purchase price allocation as soon as practicable but no later than one year from the acquisition date. The amount allocated to goodwill is deductible for income tax purposes.

The cash paid for the acquisitions discussed above, less cash and settlement assets acquired, resulted in net cash provided by business combinations for the nine months ended September 30, 2024 of $17.3 million on our Statement of Cash Flows.

6. RESTRUCTURING AND REORGANIZATION CHARGES

During the third quarters of 2024 and 2023, we recorded restructuring and reorganization charges of $2.9 million and $1.2 million, respectively, and for the nine months ended September 30, 2024 and 2023, we recorded restructuring and reorganization charges of $12.0 million and $8.4 million, respectively.

During the nine months ended September 30, 2024, we reduced our global workforce by approximately 300 employees, as part of initiatives to better align and allocate resources to areas of the business where we have identified growth opportunities. As a result, we incurred restructuring charges related to involuntary terminations of $9.6 million.

 

The activity in the restructuring and reorganization reserves during the nine months ended September 30, 2024 was as follows (in thousands):

 

 

 

Termination Benefits

 

 

Other

 

 

Total

 

January 1, 2024, balance

 

$

1,434

 

 

$

8,100

 

 

$

9,534

 

Charged to expense during period

 

 

9,593

 

 

 

2,447

 

 

 

12,040

 

Cash payments

 

 

(10,311

)

 

 

(7,589

)

 

 

(17,900

)

Adjustment for accelerated depreciation

 

 

-

 

 

 

(438

)

 

 

(438

)

Other

 

 

1,180

 

 

 

-

 

 

 

1,180

 

September 30, 2024, balance

 

$

1,896

 

 

$

2,520

 

 

$

4,416

 

 

During the nine months ended September 30, 2024, we paid $5.6 million related to the exit of two reseller agreements that were acquired with the acquisition of Forte Payment Systems, Inc. in 2018.
 

As of September 30, 2024, $3.2 million of the restructuring and reorganization reserves were included in current liabilities.

7. COMMITMENTS, GUARANTEES AND CONTINGENCIES

Guarantees. In the ordinary course of business, we may provide guarantees in the form of bid bonds or performance bonds. As of September 30, 2024, we had $1.8 million of restricted assets used to collateralize these guarantees, which are included in other non-current assets in our Balance Sheet.

We have performance guarantees in the form of surety bonds and standby letters of credit, along with money transmitter bonds, issued through third-parties that are not required to be reflected on our Balance Sheets. As of September 30, 2024, we had performance guarantees of $7.4 million, which includes $1.5 million in standby letters of credit and $1.0 million in bid bonds. We are ultimately liable for claims that may occur against these guarantees. We have no history of material claims or are aware of circumstances that would require us to pay under any of these arrangements. We also believe that the resolution of any claim that may arise in the future, either individually or in the aggregate, would not be material to our Financial Statements. As of September 30, 2024, we had total aggregate money transmitter bonds of $22.0 million outstanding. These money transmitter bonds are for the benefit of various states to comply with the states’ financial requirements and industry regulations for money transmitter licenses.

Warranties. We generally warrant that our solutions and related offerings will conform to published specifications, or to specifications provided in an individual customer arrangement, as applicable. The typical warranty period is 90 days from the date of acceptance of the solution or offering. For certain service offerings we provide a warranty for the duration of the services provided. We generally warrant that those services will be performed in a professional and skillful manner. The typical remedy for breach of warranty is to correct or replace any defective deliverable, and if not possible or practical, we will accept the return of the defective deliverable and refund the amount paid under the customer arrangement that is allocable to the defective deliverable. Our contracts also generally contain limitation of damages provisions in an effort to reduce our exposure to monetary damages arising from breach of warranty claims. Historically, we have incurred minimal warranty costs, and as a result, do not maintain a warranty reserve.

Solution and Services Indemnifications. Arrangements with our customers generally include an indemnification provision that will indemnify and defend a customer in actions brought against the customer 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.

14


 

Claims for Company Non-performance. Our arrangements with our customers typically limit our liability for breach to a specified amount of the direct damages incurred by the customer 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 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 September 30, 2024, 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 customers.

Indemnifications Related to Officers and the Board of Directors. Other guarantees include promises to indemnify, defend, and hold harmless our directors, and certain officers. Such indemnification covers any expenses and liabilities reasonably incurred by a person, by reason of the fact that such person is, was, or has agreed to be a director or officer, in connection with the investigation, defense, and settlement of any threatened, pending, or contemplated action, suit, proceeding, or claim. 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 of Directors (the "Board"). As a result, we have not recorded any liabilities related to such indemnifications as of September 30, 2024. 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.

8. EARNINGS PER COMMON SHARE

Basic and diluted earnings per common share (“EPS”) amounts are presented on the face of our unaudited Condensed Consolidated Statements of Income (the "Income Statements").

The reconciliation of the basic and diluted EPS denominators related to common shares is included in the following table (in thousands):

 

 

 

Quarter Ended

 

 

Nine Months Ended

 

 

 

 

September 30, 2024

 

 

September 30, 2023

 

 

September 30, 2024

 

 

September 30, 2023

 

 

Basic weighted-average common shares

 

 

28,362

 

 

 

30,097

 

 

 

28,475

 

 

 

30,381

 

 

Dilutive effect of restricted common stock

 

 

106

 

 

 

187

 

 

 

146

 

 

159

 

 

Diluted weighted-average common shares

 

 

28,468

 

 

 

30,284

 

 

 

28,621

 

 

 

30,540

 

 

The dilutive effect of restricted common stock is computed using the treasury stock method. The dilutive effect of the 2023 Convertible Notes is computed using the if-converted method and will only have an effect in those quarterly periods in which our average stock price exceeds the current effective conversion price.

Potentially dilutive common shares related to non-participating unvested restricted stock and stock warrants were excluded from the computation of diluted EPS, as the effect was anti-dilutive, and were not material in any period presented.

9. STOCKHOLDERS’ EQUITY AND EQUITY COMPENSATION PLANS

Stock Repurchase Program. We currently have a stock repurchase program, approved by our Board, authorizing us to repurchase shares of our common stock from time-to-time as market and business conditions warrant (the “Stock Repurchase Program”). During the third quarter and nine months ended September 30, 2024, we repurchased approximately 313,000 shares of our common stock for $14.4 million (weighted-average price of $46.11 per share), and approximately 716,000 shares of our common stock for $33.7 million (weighted-average price of $47.07 per share), respectively, under a SEC Rule 10b5-1 Plan. During the third quarter and nine months ended September 30, 2023, we repurchased approximately 1,991,000 shares of our common stock for $107.0 million (weighted-average price of $53.73 per share), which includes approximately 311,000 shares of our common stock that were repurchased for $16.9 million (weighted average price of $54.36 per share) under a SEC Rule 10b5-1 Plan, and approximately 1,680,000 shares of our common stock that were repurchased for $90.1 million (weighted-average price of $53.62 per share) concurrent with the pricing of the offering of the 2023 Convertible Notes.

The excise tax imposed as part of the 2022 Inflation Reduction Act, which is included as a cost of treasury stock, is not reflected in the share repurchase amounts above.

In August 2024, our Board authorized an additional $100.0 million of repurchases under the Stock Repurchase Program. This, combined with the remaining value from the prior Board authorization in August 2023, leaves $162.0 million remaining value of shares available for repurchase at September 30, 2024, with the amount authorized for repurchase through December 31, 2025.

15


 

Stock Repurchases for Tax Withholdings. In addition to the above-mentioned stock repurchases, during the third quarters of 2024 and 2023, we repurchased and then cancelled approximately 3,000 shares of common stock for $0.2 million and approximately 3,000 shares of common stock for $0.1 million, respectively, and during the nine months ended September 30, 2024 and 2023, we repurchased and then cancelled approximately 172,000 shares of common stock for $9.1 million and approximately 171,000 shares of common stock for $9.6 million, respectively, in connection with minimum tax withholding requirements resulting from the vesting of restricted common stock under our stock incentive plan.

Cash Dividends. During the third quarter of 2024, our Board approved a quarterly cash dividend of $0.30 per share of common stock, totaling $8.8 million. During the third quarter of 2023, our Board approved a quarterly cash dividend of $0.28 per share of common stock, totaling $8.7 million. Dividends declared for the nine months ended September 30, 2024 and 2023 totaled $26.4 million for both periods.

Warrants. In July 2014, in conjunction with the execution of an amendment to our agreement with Comcast Corporation (“Comcast”), we issued stock warrants (the “Warrant Agreement”) for the right to purchase up to 2.9 million shares of our common stock (the “Stock Warrants”) with an exercise price of $26.68 per warrant as an additional incentive for Comcast to convert customer accounts onto our solutions based on various milestones. The Stock Warrants had a ten-year term and in July 2024, the remaining 1.0 million issued and unvested Stock Warrants expired.

Stock-Based Awards. During the nine months ended September 30, 2024 we granted restricted stock awards to key members of management in the form of: (i) performance-based awards of approximately 155,000 restricted common stock shares, which vest in the first quarter of 2026 upon meeting certain pre-established financial performance objectives over a two-year performance period; and (ii) market-based awards of approximately 52,000 restricted common stock shares, which vest in the first quarter of 2027 upon meeting a relative total shareholder return performance achievement tier. Certain of these awards may vest (i.e., vesting accelerates) upon the involuntary termination of employment or a change in control (as defined) and the subsequent involuntary termination of employment.

During the nine months ended September 30, 2024, we also granted restricted stock awards to key members of management in the form of time-based awards of approximately 496,000 restricted common stock shares, which vest annually over three years with no restrictions other than the passage of time. Certain of these awards may vest (i.e., vesting accelerates) upon the involuntary termination of employment, a change in control (as defined) and the subsequent involuntary termination of employment, or death.

We recorded stock-based compensation expense for the third quarters of 2024 and 2023 of $8.7 million and $7.2 million, respectively, and for the nine months ended September 30, 2024 and 2023 of $25.0 million and $21.3 million, respectively.

16


 

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 2023 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 I, Item 1A. Risk Factors of our 2023 10-K. Readers are strongly encouraged to review that section closely in conjunction with MD&A.

Company Overview

 

We are a purpose-driven SaaS platform company that enables global companies in a wide variety of industry verticals to tackle the ever-growing complexity of business in the digital age. Our industry leading revenue management and digital monetization, customer experience, and payments solutions make ordinary customer experiences extraordinary. Our cloud-first architecture and customer-centric approach help companies around the world acquire, monetize, engage, and retain the B2B (business-to-business), B2C (business-to-consumer), and B2B2X (business-to-business-to-consumer) customers. As brands reimagine their engagement strategies in an increasingly connected world, we sit at the center of a complex, multi-sided business model ensuring monetization and customer engagement is handled at all levels of the ecosystem.

 

We leverage 40 years of experience to deliver innovative customer engagement solutions for every stage of the customer lifecycle so our customers can deliver an outstanding customer experience that adapts to their customers’ rapidly changing demands. Our diverse, worldwide workforce draws from real-world knowledge and extensive expertise to design and implement business solutions that make our customers’ hardest decisions simpler so that they can focus on delivering differentiated and real-time experiences to their customers. As a global technology leader, we aspire to envision, invent, and shape a better, more future-ready world.

 

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 our customers. Our scalable, modular, and flexible solutions combined with our domain expertise and our ability to effectively migrate customers to our solutions, provide the industry with proven solutions to improve their profitability and consumers’ experiences. We have specifically architected our solutions to offer a phased, incremental approach to transforming our customers' businesses, thereby reducing the business interruption risk associated with this evolution.

 

As discussed in Note 2 to our Financial Statements, we generate a majority of our revenue from the global communications markets; however, we serve an expanding group of customers in other markets including retail, financial services, healthcare, insurance, and government entities.

 

We are a member of the S&P Small Cap 600 and Russell 2000 indices.

 

17


 

Management Overview of Quarterly Results

 

Third Quarter Highlights. A summary of our results of operations for the third quarter of 2024, when compared to the third quarter of 2023, is as follows (in thousands, except per share amounts and percentages):

 

 

 

Quarter Ended

 

 

 

 

September 30, 2024

 

 

September 30, 2023

 

 

Revenue

 

$

295,143

 

 

$

286,868

 

 

Transaction fees (1)

 

 

22,524

 

 

 

20,314

 

 

Operating Results:

 

 

 

 

 

 

 

Operating income

 

$

31,822

 

 

$

32,731

 

 

Operating margin percentage

 

 

10.8

%

 

 

11.4

%

 

Diluted EPS

 

$

0.67

 

 

$

0.62

 

 

Supplemental Data:

 

 

 

 

 

 

 

Restructuring and reorganization charges (2)

 

$

2,943

 

 

$

1,152

 

 

Executive transition costs

 

 

-

 

 

 

1,148

 

 

Acquisition-related costs:

 

 

 

 

 

 

 

Amortization of acquired intangible assets

 

 

3,929

 

 

 

2,996

 

 

Earn-out compensation

 

 

2,591

 

 

 

-

 

 

Transaction-related costs

 

 

32

 

 

 

(40

)

 

Stock-based compensation (2)

 

 

8,759

 

 

 

7,216

 

 

(1)
Transaction fees are primarily comprised of fees paid to third-party payment processors and financial institutions and interchange fees under our payment services contracts. Transaction fees are included in revenue in our Income Statement (and not netted against revenue) because we maintain control and act as the principal over the integrated service provided under our payment services customer contracts.
(2)
Restructuring and reorganization charges include stock-based compensation, which is not included in the stock-based compensation line in the table above, and depreciation, which has not been recorded to the depreciation line on our Income Statement.

Revenue. Revenue for the third quarter of 2024 was $295.1 million, a 2.9% increase when compared to revenue of $286.9 million for the third quarter of 2023. The increase in revenue is primarily attributed to continued growth of our SaaS and related solutions revenue to include the revenue generated from the businesses acquired in the second quarter of 2024, which more than offset lower software and services revenue for the quarter.

Operating Results. Operating income for the third quarter of 2024 was $31.8 million, or a 10.8% operating margin percentage, compared to $32.7 million, or an 11.4% operating margin percentage for the third quarter of 2023. The decrease in operating income is mainly attributed to the increase in acquisition-related expenses in the third quarter of 2024, to include earn-out compensation and amortization of acquired intangible assets.

Diluted EPS. Diluted EPS for the third quarter of 2024 was $0.67 compared to $0.62 for the third quarter of 2023, with the third quarter of 2024 benefiting from a lower effective income tax rate and a lower share count, partially offset by foreign currency movements.

Cash and Cash Flows. As of September 30, 2024, we had cash and cash equivalents of $118.4 million, as compared to $110.4 million as of June 30, 2024 and $186.3 million as of December 31, 2023. Our cash flows provided by operating activities for the third quarter of 2024 were $39.5 million. See the Liquidity section below for further discussion of our cash flows.

Significant Customer Relationships

A large percentage of our revenue is generated from a limited number of customers in the global communications industry, with our three largest customers being Charter Communications Inc. (“Charter”), Comcast, and DISH Network L.L.C.

Customer Concentration. We have significant customer concentration, with the following two customers exceeding 10% of our revenue (in thousands, except percentages):

 

 

 

Quarter Ended

 

 

 

September 30, 2024

 

 

June 30, 2024

 

 

September 30, 2023

 

 

 

Amount

 

 

% of Revenue

 

 

Amount

 

 

% of Revenue

 

 

Amount

 

 

% of Revenue

 

Charter

 

$

59,070

 

 

 

20

%

 

$

60,629

 

 

 

21

%

 

$

59,432

 

 

 

21

%

Comcast

 

 

58,688

 

 

 

20

%

 

 

54,576

 

 

 

19

%

 

 

53,653

 

 

 

19

%

 

18


 

The percentages of net billed accounts receivable balances attributable to these customers as of the dates indicated were as follows:

 

 

As of

 

 

 

September 30, 2024

 

 

June 30, 2024

 

 

December 31, 2023

 

Charter

 

 

20

%

 

 

22

%

 

 

23

%

Comcast

 

 

16

%

 

 

18

%

 

 

17

%

See our 2023 10-K for additional discussion of our business relationships and contractual terms with Charter and Comcast.

Comcast. On October 30, 2024, we entered into an amendment to our current agreement with Comcast (the “Amended Agreement”). The key terms of the Amended Agreement are as follows:

The Amended Agreement extends our contractual relationship with Comcast through December 31, 2030.
The fees to be generated under the Amended Agreement will be based primarily on monthly charges for SaaS and related solutions per Comcast residential customer account, and various other ancillary services based on actual usage. The Amended Agreement includes annual price escalators beginning in 2026 and certain of the per-unit fees include volume-based pricing tiers. We did not provide a renewal discount to Comcast in the Amended Agreement.
The Amended Agreement contains certain financial commitments associated with the number of Comcast residential customer accounts that are to be processed on our solutions.
We maintain the exclusive right to provide print and mail services to all Comcast residential customer accounts through the term of the Amended Agreement.
The Amended Agreement contains certain rights and obligations of both parties, including the following key items: (i) the termination of the agreement under certain conditions; (ii) various service level commitments; and (iii) remedies and limitations on liabilities associated with specified breaches of contractual obligations.

A copy of the Amended Agreement, with confidential information redacted, will be filed as an exhibit to our Form 10-K for the year ended December 31, 2024.

Risk of Customer Concentration. We expect to continue to generate a large percentage of our future revenue from a limited number of customers. There are inherent risks whenever a large percentage of total revenue is concentrated with a limited number of customers. Should a significant customer: (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 financial or operating difficulties, it could have a material adverse effect on our financial position 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 2023 10-K.

Results of Operations

Revenue. Total revenue for the: (i) third quarter of 2024 was $295.1 million, a 2.9% increase when compared to $286.9 million for the third quarter of 2023; and (ii) nine months ended September 30, 2024 was $880.6 million, a 1.0% increase when compared to $871.9 million for the nine months ended September 30, 2023.

19


 

Revenue by type for the third quarters and nine months ended September 30, 2024 and 2023 was as follows (in thousands):

 

 

 

Quarter Ended

 

 

Nine Months Ended

 

 

 

September 30, 2024

 

 

September 30, 2023

 

 

September 30, 2024

 

 

September 30, 2023

 

SaaS and related solutions

 

$

263,701

 

 

$

250,777

 

 

$

788,054

 

 

$

764,253

 

Software and services

 

 

19,705

 

 

 

23,578

 

 

 

56,780

 

 

 

73,235

 

Maintenance

 

 

11,737

 

 

 

12,513

 

 

 

35,762

 

 

 

34,446

 

Total revenue

 

$

295,143

 

 

$

286,868

 

 

$

880,596

 

 

$

871,934

 

The increases in revenue are primarily attributed to continued growth of our SaaS and related solutions revenue, to include the revenue generated from the businesses acquired during the second quarter of 2024 (see Note 5 to our Financial Statements). These acquired businesses contributed approximately $6 million and $9 million, respectively, of revenue during the third quarter and nine months ended September 30, 2024. These increases were offset to a certain degree by lower software and services revenue, to include the software license revenue resulting from the closure of approximately $10 million of license upgrades in the first quarter of 2023.

We use the location of the customer as the basis of attributing revenue to individual countries. Revenue by geographic regions for the third quarters and nine months ended September 30, 2024 and 2023 was as follows (in thousands):

 

 

 

Quarter Ended

 

 

Nine Months Ended

 

 

 

September 30, 2024

 

 

September 30, 2023

 

 

September 30, 2024

 

 

September 30, 2023

 

Americas (principally the U.S.)

 

$

258,620

 

 

$

246,880

 

 

$

771,193

 

 

$

746,299

 

Europe, Middle East, and Africa

 

 

26,381

 

 

 

25,502

 

 

 

72,199

 

 

 

88,795

 

Asia Pacific

 

 

10,142

 

 

 

14,486

 

 

 

37,204

 

 

 

36,840

 

Total revenue

 

$

295,143

 

 

$

286,868

 

 

$

880,596

 

 

$

871,934

 

Total Operating Expenses. Total operating expenses for the: (i) third quarter of 2024 were $263.3 million, a 3.6% increase when compared to $254.1 million for the third quarter of 2023; and (ii) nine months ended September 30, 2024 were $791.6 million, a 2.4% increase when compared to $772.8 million for the nine months ended September 30, 2023. The increases in total operating expenses are a result of the higher SaaS and related solutions revenue between periods and the additional costs from the acquired businesses, to include acquired intangible asset amortization and earn-out compensation, in addition to the increases in restructuring and reorganization charges, discussed below.

The components of total operating expenses are discussed in more detail below.

Cost of Revenue (Exclusive of Depreciation). The cost of revenue for the: (i) third quarter of 2024 was $149.5 million, a 2.1% decrease when compared to $152.7 million for the third quarter of 2023; and (ii) nine months ended September 30, 2024 was $460.3 million, a 0.3% increase when compared to $458.9 million for the nine months ended September 30, 2023.

The decrease in cost of revenue during the third quarter of 2024 is mainly attributed to lower employee-related costs, due to the reallocation of resources to development projects and an increase in deferred costs related to SaaS implementation projects. This decrease is partially offset by the increased costs reflective of the increase in SaaS and related solutions revenue between periods, to include the acquired businesses.
The increase in cost of revenue during the nine months ended September 30, 2024 is reflective of the increase in SaaS and related solutions revenue year-over-year, to include the acquired businesses, offset by a decrease in employee-related costs, due to the reallocation of resources to development projects, and an increase in deferred costs related to SaaS implementation projects.

Total cost of revenue as a percentage of revenue for the: (i) third quarters of 2024 and 2023 was 50.6% and 53.2%, respectively; and (ii) nine months ended September 30, 2024 and 2023 was 52.3% and 52.6%, respectively.

20


 

R&D Expense (Exclusive of Depreciation). R&D expense for the: (i) third quarter of 2024 was $41.7 million, an 18.1% increase when compared to $35.3 million for the third quarter of 2023; and (ii) nine months ended September 30, 2024 was $116.2 million, an 8.2% increase when compared to $107.4 million for the nine months ended September 30, 2023. The increases in R&D expense between periods are mainly attributed to increased employee-related costs. During 2024 our R&D investment increased from prior periods as a result of the continued development of our SaaS platforms as we gain further traction in new industry verticals along with the integration of the recently acquired businesses into our solutions. These investments are focused on the continued evolution of our solutions that enable us to launch, monetize, and scale new digital services quickly and across any channel, while delivering an exceptional customer experience.

As a percentage of total revenue, R&D expense for the: (i) third quarters of 2024 and 2023 was 14.1% and 12.3%, respectively; and (ii) nine months ended September 30, 2024 and 2023 was 13.2% and 12.3%, respectively.

Selling, General, and Administrative ("SG&A") Expense (Exclusive of Depreciation). SG&A expense for the: (i) third quarter of 2024 was $63.9 million, an 8.1% increase when compared to $59.1 million for the third quarter of 2023; and (ii) nine months ended September 30, 2024 was $186.8 million, a 3.2% increase when compared to $180.9 million for the nine months ended September 30, 2023. The increases in SG&A expense are mainly attributed to increased employee-related costs, to include stock-based compensation and acquisition-related earn-out compensation.

As a percentage of total revenue, SG&A expense for the: (i) third quarters of 2024 and 2023 was 21.7% and 20.6%, respectively; and (ii) nine months ended September 30, 2024 and 2023 was 21.2% and 20.8%, respectively.

Restructuring and Reorganization Charges. Restructuring and reorganization charges for the: (i) third quarter of 2024 was $2.9 million, a $1.7 million increase when compared to $1.2 million for the third quarter of 2023; and (ii) nine months ended September 30, 2024 was $12.0 million, a $3.6 million increase when compared to $8.4 million for the nine months ended September 30, 2023. The restructuring and reorganization charges for the nine months ended September 30, 2024 relate mainly to initiatives to better align and allocate resources to areas of the business where we have identified growth opportunities, which have resulted in restructuring charges related to involuntary terminations of $9.6 million.

 

See Note 6 to our Financial Statements for additional discussion.

Operating Income. Operating income for the: (i) third quarter of 2024 was $31.8 million, or 10.8% of total revenue, compared to $32.7 million, or 11.4% of total revenue for the third quarter of 2023; and (ii) nine months ended September 30, 2024 was $89.0 million, or 10.1% of total revenue, compared to $99.1 million, or 11.4% of total revenue, for the nine months ended September 30, 2023.

The decrease in operating income for the third quarter of 2024 is mainly attributed to the increase in acquisition-related expenses in the third quarter of 2024, to include earn-out compensation and amortization of acquired intangible assets.
The decrease in operating income for the nine months ended September 30, 2024 is mainly attributed to: (i) the higher software license revenue recognized during the first quarter of 2023, as the cost associated with this revenue is not generally dependent upon the timing of deal closures; (ii) the increase in acquisition-related expenses to include earn-out compensation and amortization of acquired intangible assets; and (iii) higher restructuring and reorganization charges.

Interest Income. Interest income for the: (i) third quarter of 2024 was $1.9 million, a $0.7 million increase when compared to $1.2 million for the third quarter of 2023; and (ii) nine months ended September 30, 2024 was $6.6 million, a $4.1 million increase when compared to $2.5 million for the nine months ended September 30, 2023, with the increase primarily attributed to certain settlement assets being swept into overnight money market accounts on a daily basis.

Other, net. Other, net for the: (i) third quarter of 2024 was $2.2 million of other expense, a $3.0 million change when compared to $0.8 million of other income for the third quarter of 2023; and (ii) nine months ended September 30, 2024 was $1.5 million of other expense, a $1.5 million change when compared to $3.0 million of other expense for the nine months ended September 30, 2023, with the changes primarily attributed to foreign currency movements.

Income Tax Provision. The effective income tax rates for the: (i) third quarters of 2024 and 2023 were 20% and 30%, respectively; and (ii) nine months ended September 30, 2024 and 2023 were 26% and 29%, respectively. The third quarter of 2024 effective income tax rate benefited from the revaluation of certain deferred income taxes. Our estimated full year 2024 effective income tax rate is approximately 28%, consistent with our 2023 full year effective income tax rate.

21


 

Liquidity

Cash and Liquidity. As of September 30, 2024, our principal sources of liquidity included cash and cash equivalents of $118.4 million, compared to $110.4 million as of June 30, 2024, and $186.3 million as of December 31, 2023.

As part of our 2021 Credit Agreement, we have a $450.0 million senior secured revolving loan facility with a syndicate of financial institutions that expires in September 2026, the 2021 Revolver. As of September 30, 2024, we had no borrowings outstanding on the 2021 Revolver balance, and have issued standby letters of credit for $1.5 million that count against the available 2021 Revolver balance, leaving $448.5 million available to us. The 2021 Credit Agreement contains customary affirmative, negative, and financial covenants. As of September 30, 2024, and the date of this filing, we believe we are in compliance with the provisions of the 2021 Credit Agreement.

Our cash and cash equivalents balances as of the end of the indicated periods were located in the following geographical regions (in thousands):

 

 

September 30, 2024

 

 

December 31, 2023

 

Americas (principally the U.S.)

 

$

82,183

 

 

$

142,515

 

Europe, Middle East, and Africa

 

 

24,113

 

 

 

32,974

 

Asia Pacific

 

 

12,148

 

 

 

10,775

 

Total cash and cash equivalents

 

$

118,444

 

 

$

186,264

 

We generally have ready access to substantially all of our cash and cash equivalents, but may face limitations on moving cash out of certain foreign jurisdictions due to currency controls and potential negative economic consequences.

As of September 30, 2024 and December 31, 2023, we had $1.8 million and $2.9 million, respectively, of cash restricted as to use primarily to collateralize guarantees included in our other current and non-current asset balances. In addition, as of September 30, 2024 and December 31, 2023, we had $240.8 million and $274.7 million, respectively, of settlement and merchant reserve assets which are deemed restricted due to contractual restrictions with the merchants and restrictions arising from our policy and intention. It has historically been our policy to segregate settlement and merchant reserve assets from our operating cash balances and we intend to continue to do so.

Cash Flows from Operating Activities. We calculate our cash flows from operating activities beginning with net income, adding back the impact of non-cash items or non-operating activity (e.g., depreciation, amortization, impairments, gain/loss on items such as investments, lease modifications, and debt extinguishments/conversions, unrealized foreign currency transactions gain/loss, deferred income taxes, stock-based compensation, etc.), and then factoring in the impact of changes in operating assets and liabilities. See our 2023 10-K for a description of the primary uses and sources of our cash flows from operating activities.

Our 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):

 

 

 

Operations

 

 

Changes in Operating Asset and Liabilities

 

 

Net Cash Provided by (Used In) Operating Activities – Totals

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

 

 

2024:

 

 

 

 

 

 

 

 

 

March 31 (1)

 

$

51,655

 

 

$

(81,006

)

 

$

(29,351

)

June 30

 

 

35,625

 

 

 

7,480

 

 

 

43,105

 

September 30

 

 

44,354

 

 

 

(4,895

)

 

 

39,459

 

Total

 

$

131,634

 

 

$

(78,421

)

 

$

53,213

 

 

 

 

 

 

 

 

 

 

 

2023:

 

 

 

 

 

 

 

 

 

March 31 (2)

 

$

50,158

 

 

$

(34,761

)

 

$

15,397

 

June 30

 

 

26,539

 

 

 

(14,153

)

 

 

12,386

 

September 30

 

 

34,618

 

 

 

(10,036

)

 

 

24,582

 

Total

 

$

111,315

 

 

$

(58,950

)

 

$

52,365

 

(1)
Cash flows from operating activities for the first quarter of 2024 were negatively impacted by unfavorable working capital changes, to include the impact of the payment of the 2023 year-end accrued employee incentive compensation and timing of trade accounts receivable.
(2)
Cash flows from operating activities for the first quarter 2023 reflect the impact of the payment of the 2022 year-end accrued employee incentive compensation.

22


 

Variations in our net cash provided by/(used in) operating activities are generally related to the changes in our operating assets and liabilities (related mostly to fluctuations in timing at quarter-end of customer payments, billing milestones, 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 2024 and 2023 that impacted our cash flows from operating activities are as follows:

Billed Trade Accounts Receivable

Management of our billed trade accounts receivable is one of the primary factors in maintaining strong cash flows from operating activities. These balances include 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 billed trade 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 expected losses (“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

 

2024:

 

 

 

 

 

 

 

 

 

 

 

 

March 31

 

$

281,051

 

 

$

(5,692

)

 

$

275,359

 

 

 

67

 

June 30

 

 

270,934

 

 

 

(4,720

)

 

 

266,214

 

 

 

66

 

September 30

 

 

284,740

 

 

 

(4,810

)

 

 

279,930

 

 

 

64

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2023:

 

 

 

 

 

 

 

 

 

 

 

 

March 31

 

$

261,028

 

 

$

(5,254

)

 

$

255,774

 

 

 

68

 

June 30

 

 

260,928

 

 

 

(4,618

)

 

 

256,310

 

 

 

65

 

September 30

 

 

279,892

 

 

 

(4,731

)

 

 

275,161

 

 

 

66

 

As of September 30, 2024 and 2023, approximately 95% and 93%, respectively, of our net billed trade accounts receivable balances were less than 60 days past due.

We may experience adverse impacts to our DBOs if and when customer payment delays occur. However, the recurring monthly payments that cross a reporting period-end do not raise collectability concerns, as payment is generally received subsequent to quarter-end. All other changes in our gross and net billed accounts receivable reflect the normal fluctuations in the timing of customer payments at quarter-end, as evidenced by our relatively consistent DBO metric.

As a global provider of solutions and services, a portion of our trade accounts receivable balance relates to international customers. This diversity in the geographic composition of our customer base may adversely impact our DBOs as longer billing cycles (i.e., billing terms and cash collection cycles) are an inherent characteristic of international software and professional services transactions. As a result, we may experience fluctuations in our trade accounts receivable balance as our ability to invoice and collect arrangement fees is dependent upon, among other things: (i) the completion of various customer administrative matters, local country billing protocols and processes (including local cultural differences), and non-customer administrative matters; (ii) meeting certain contractual invoicing milestones and dates; (iii) the overall project status in certain situations in which we act as a subcontractor to another vendor on a project; or (iv) currency controls in certain foreign jurisdictions.

Unbilled Trade Accounts Receivable

Unbilled trade accounts receivable increased $0.4 million to $82.6 million as of September 30, 2024, from $82.2 million as of December 31, 2023. These unbilled trade accounts receivable balances relate primarily to large implementation projects where various milestone and contractual billing dates have not yet been reached or are delayed. Unbilled trade accounts receivable are an inherent characteristic of certain software and services transactions and may fluctuate between quarters, as these types of transactions typically have scheduled invoicing terms over several quarters, as well as certain milestone billing events.

Income Taxes Payable/Receivable

Net income taxes payable/receivable (current and non-current) as of September 30, 2024 was a net income taxes receivable balance of $10.4 million, compared to a net income taxes payable balance of $5.8 million as of December 31, 2023. This net $16.2 million change is primarily due to the timing of our estimated federal and state income tax payments.

23


 

Accrued Employee Compensation

Accrued employee compensation decreased $26.7 million to $57.7 million as of September 30, 2024, from $84.4 million as of December 31, 2023, due primarily to the payment of the 2023 employee incentive compensation during the first quarter of 2024 that was fully accrued at December 31, 2023 and the timing of accrued wages, partially offset by the accruals for the 2024 employee incentive compensation.

Cash Flows From Investing Activities. Our typical investing activities consist of purchases of software, property, and equipment, and in 2024, our business combination activities, which are discussed below.

Purchases of Software, Property, and Equipment

Our capital expenditures for the nine months ended September 30, 2024 and 2023 for software, property, and equipment were $16.5 million and $22.9 million, respectively, and consisted principally of investments in: (i) communication design and delivery center equipment and infrastructure; (ii) software and related equipment; (iii) computer hardware; and (iv) lease improvements.

Business Combinations, net of Cash and Settlement Assets Acquired

The cash paid for the acquisitions discussed in Note 5 to our Financial Statements, less cash and settlement assets acquired, resulted in net cash provided by business combinations for the nine months ended September 30, 2024 of $17.3 million.

Cash Flows From Financing Activities. Our financing activities typically consist of activities with our common stock, various debt-related transactions, and settlement and merchant reserve activity.

Cash Dividends Paid on Common Stock

During the nine months ended September 30, 2024 and 2023, our Board approved dividends totaling $26.4 million for both periods, and we made dividend payments of $26.6 million and $26.2 million, respectively, with the differences between the amount approved and paid attributed to dividends accrued on unvested incentive shares that are paid upon vesting.

Repurchase of Common Stock

During the nine months ended September 30, 2024 and 2023, we repurchased approximately 716,000 and 1,991,000 shares of our common stock, respectively, under our Stock Repurchase Program for $33.7 million and $107.0 million, respectively.

Additionally, outside of our Stock Repurchase Program, during the nine months ended September 30, 2024 and 2023, we repurchased from our employees and then canceled approximately 172,000 and 171,000 shares of our common stock, respectively, for $9.1 million and $9.6 million, respectively, in connection with minimum tax withholding requirements resulting from the vesting of restricted stock under our stock incentive plans.

Through the nine months ended September 30, 2024 and 2023, we have paid $42.4 million and $116.4 million, respectively, for our total repurchases of common stock, with any differences when compared to the amounts purchased attributed to the timing of the settlement and the accrued excise tax imposed as part of the 2022 Inflation Reduction Act.

See Note 9 to our Financial Statements for additional discussion of our repurchases of common stock.

Long-Term Debt

During the nine months ended September 30, 2024 and 2023, we made principal repayments on our 2021 Term Loan of $5.6 million during each period. Additionally, during the nine months ended September 30, 2024, we borrowed and subsequently repaid $15.0 million from our 2021 Revolver for general corporate purposes.

During the nine months ended September 30, 2023, we borrowed $45.0 million under our 2021 Revolver for general corporate purposes and subsequently repaid $30.0 million. In September 2023, we issued the 2023 Convertible Notes offering and received proceeds of $425.0 million. We used a portion of these proceeds to repay $275.0 million of our 2021 Revolver balance and pay the $34.3 million premiums for the Capped Call Transactions. Additionally, during the nine months ended September 30, 2023, we paid deferred financing costs of $13.5 million.

See Note 4 to our Financial Statements for additional discussion of our long-term debt.

24


 

Settlement and Merchant Reserve Activity

During the nine months ended September 30, 2024 and 2023, we had net settlement and merchant reserve activity of $(79.6) million and ($46.2) million, respectively, related to the cash collected, held on behalf, and paid to our merchants related to our payments services and the net change in deposits held on behalf of our merchants. These balances can significantly fluctuate between periods due to activity at the end of the period and the day in which the period ends.

See Note 2 to our Financial Statements for additional discussion of our settlement and merchant reserves.

Off-Balance Sheet Arrangements

Our off-balance sheet arrangements are mainly limited to money transmitter bonds, bid bonds, performance bonds, and standby letters of credit. These arrangements do not have a material impact and are not reasonably likely to have a material future impact to our financial condition, results of operations, liquidity, capital expenditures, or capital resources. See Note 7 to our Financial Statements for additional information on these guarantees.

Capital Resources

The following are the key items to consider in assessing our sources and uses of capital resources:

Current Sources of Capital Resources. Below are the key items to consider in assessing our current sources of capital resources:

Cash and Cash Equivalents. As of September 30, 2024, we had cash and cash equivalents of $118.4 million, of which approximately 62% was in U.S. dollars and held in the U.S. 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, but may face limitations on moving cash out of certain foreign jurisdictions due to currency controls and potential negative economic consequences.
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, although we may experience quarterly variations in our cash flows from operations related to the changes in our operating assets and liabilities.
Revolving Loan Facility. As part of our 2021 Credit Agreement, we have a $450.0 million revolving loan facility, the 2021 Revolver. As of September 30, 2024, we had no borrowings outstanding on the 2021 Revolver and issued standby letters of credit for $1.5 million that count against the available 2021 Revolver balance, currently leaving $448.5 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 and Cash Dividends. We have made repurchases of our common stock in the past under our Stock Repurchase Program. In August of 2024, our Board authorized an additional $100.0 million of repurchases under our Stock Repurchase Program, with all outstanding authorized repurchases to be completed by December 31, 2025. As of September 30, 2024, we had $162.0 million authorized for repurchase remaining under our Stock Repurchase Program. Our 2021 Credit Agreement places 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 share repurchases are dependent on the current market conditions and other business-related factors. Our common stock repurchases are discussed in more detail in Note 9 to our Financial Statements.

During the nine months ended September 30, 2024, we repurchased approximately 716,000 shares of our common stock for $33.7 million (weighted-average price of $47.07 per share).

Outside of our Stock Repurchase Program, during the nine months ended September 30, 2024, we repurchased from our employees and then cancelled approximately 172,000 shares of our common stock for $9.1 million in connection with minimum tax withholding requirements resulting from the vesting of restricted common stock under our stock incentive plans.

25


 

During the nine months ended September 30, 2024, the Board declared dividends totaling $26.4 million. Going forward, we expect to pay cash dividends each year in March, June, September, and December, with the amount and timing subject to our Board’s approval.

We expect to return a total of $100.0 million to our shareholders through combined common stock repurchases and cash dividends in each of 2024 and 2025.

Acquisitions. As a result of our previous acquisition activity, during the nine months ended September 30, 2024 we made $2.5 million of deferred acquisition payments. We expect to pay $0.3 million in 2025 related to these past acquisitions. Additionally, there are provisions for up to approximately $13 million of potential future earn-out payments. The earn-out period was originally through September 30, 2025, but during the third quarter of 2024 was extended through December 31, 2026. As of September 30, 2024, we have accrued $0.1 million related to potential earn-out payments.

During the second quarter of 2024, we acquired two businesses, discussed in further detail in Note 5 to our Financial Statements. The acquisition date fair value of the consideration transferred totaled $32.6 million, subject to customary working capital adjustments. The iCG Pay purchase agreement includes provisions for up to $15.0 million of potential future earn-out payments tied to performance-based goals and a defined service period. The earn-out period is through June 3, 2027. As of September 30, 2024, we have accrued $3.5 million related to potential earn-out payments. These acquisitions were funded with available cash.

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 customers and expansion into verticals outside the global communications market.

Exit of Reseller Agreements. During 2023, we exited out of two reseller agreements that were acquired with the 2018 acquisition of Forte Payment Systems, Inc., at a total cost of $9.9 million, of which $1.8 million was paid in 2023. We paid an additional $5.6 million during the nine months ended September 30, 2024. Of the remaining $2.5 million, $1.3 million will be paid in 2025 and $1.2 million will be paid in 2026.
Capital Expenditures. During the nine months ended September 30, 2024, we spent $16.5 million on capital expenditures.
Financing Agreements. We have financing agreements for certain of our internal use software. During the nine months ended September 30, 2024, we paid $2.2 million related to these financing agreements, with an additional $1.4 million to be paid in 2024, $4.6 million to be paid in 2025, $3.6 million to be paid in 2026, and $0.9 million to be paid in 2027.
Long-Term Debt. As of September 30, 2024, our long-term debt consisted of the following: (i) 2023 Convertible Notes in the principal aggregate amount of $425.0 million; and (ii) 2021 Credit Agreement term loan borrowings of $127.5 million.

2023 Convertible Notes. The 2023 Convertible Notes are convertible at the option of the note holders before June 15, 2028 upon the occurrence of certain events, however, there are no scheduled conversion triggers over the next twelve months. As a result, we expect our required debt service cash outlay during the next twelve months for the 2023 Convertible Notes to be limited to interest payments of $16.5 million.

2021 Credit Agreement. The mandatory repayments under our 2021 Credit Agreement for the next twelve months are $7.5 million and the cash interest expense (based upon then-current interest rates) for the 2021 Term Loan is $7.7 million. We have the ability to make prepayments without penalties on our 2021 Credit Agreement.

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 and cash equivalents balances and our 2021 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 believe we could obtain additional capital through other debt sources which may be available to us if deemed appropriate.

26


 

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 September 30, 2024, we are exposed to various market risks, including changes in interest rates, fluctuations and changes in the market value of our cash equivalents and settlement and merchant reserve assets, 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 2023 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 2021 Credit Agreement are based upon an adjusted SOFR rate (including a 0.10% credit spread adjustment) plus an applicable margin, or an ABR plus an applicable margin. See Note 4 to our Financial Statements for further details related to our long-term debt.

A hypothetical adverse change of 10% in the September 30, 2024 adjusted SOFR rate would not have a material impact upon our results of operations.

Market Risk

Cash and Cash Equivalents. Our cash and cash equivalents as of September 30, 2024 and December 31, 2023 were $118.4 million and $186.3 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. Our cash equivalents are invested primarily in institutional money market funds held at major banks. We have minimal market risk for our cash and cash equivalents due to the relatively short maturities of the instruments.

Settlement and Merchant Reserve Assets. We are exposed to market risk associated with cash held on behalf of our merchants related to our payment processing services. As of September 30, 2024 and December 31, 2023, we had $240.8 million and $274.7 million, respectively, of cash collected on behalf of our merchants. The cash is held in accounts with various major financial institutions in the U.S. and Canada in an amount equal to at least 100% of the aggregate amount owed to our merchants. These balances can significantly fluctuate between periods due to activity at the end of the period and the day in which the period ends. Certain settlement assets are swept into overnight money market accounts on a daily basis.

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 September 30, 2024, the fair value of the 2023 Convertible Notes was estimated at $426.0 million, using quoted market prices.

Foreign Currency Exchange Rate Risk

Due to foreign operations around the world, our financial statements are exposed to foreign currency exchange risk due to the fluctuations in the value of currencies in which we conduct business. Our principal currency exposures include the British Pound, Euro, Australian Dollar, Saudi Riyal, and South African Rand. 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. In particular, if the U.S. Dollar were to strengthen it would reduce the reported amount of our foreign-denominated cash, cash equivalents, trade receivables, revenue, and expenses that we translate into U.S. Dollars and report in our consolidated financial statements for, and as of the end of, each reporting period.

During the nine months ended September 30, 2024, we generated approximately 90% 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.

We have analyzed our foreign currency exposure as of September 30, 2024. A hypothetical adverse change of 10% in the September 30, 2024 exchange rates would not have had a material impact upon our results of operations.

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.

27


 

(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.

 

28


 

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. In the opinion of our management, 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 2023 10-K. There were no material changes to the risk factors disclosed in our 2023 10-K during the third quarter of 2024.

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 third quarter of 2024 by CSG Systems International, Inc. or any “affiliated purchaser” of CSG Systems International, Inc., as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 Dollar Value of
Shares that May
Yet Be Purchased
Under the
Program (2) (3)

 

July 1 - July 31

 

 

77,932

 

 

$

43.21

 

 

 

77,000

 

 

$

73,135,900

 

August 1 - August 31 (3)

 

 

78,726

 

 

 

46.50

 

 

 

77,000

 

 

 

169,553,935

 

September 1 - September 30

 

 

159,695

 

 

 

47.31

 

 

 

158,947

 

 

 

162,034,521

 

Total

 

 

316,353

 

 

$

46.10

 

 

 

312,947

 

 

 

 

(1)
The total number of shares repurchased that are not part of the Stock Repurchase Program represents shares purchased and cancelled in connection with stock incentive plans.
(2)
See Note 9 to our Financial Statements for additional information regarding our share repurchases under our Stock Repurchase Program.
(3)
In August 2024, we announced that our Board had authorized the repurchase of an additional $100.0 million of common stock under our Stock Repurchase Program, with all outstanding authorized repurchases to be completed by December 31, 2025.

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

None

Item 5. Other Information

(c) Rule 10b5-1 Trading Plans

During the third quarter of 2024, none of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted, modified, or terminated any contract, instruction, or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act or any “non-Rule 10b5-1 trading arrangement” as defined in Item 408(c) of Regulation S-K.

Item 6. Exhibits

The Exhibits filed or incorporated by reference herewith are as specified in the Exhibit Index.

29


 

CSG SYSTEMS INTERNATIONAL, INC.

EXHIBIT INDEX

Exhibit
Number

 

Description

10.27Z*

First Amendment to Encompass Addendum to the CSG Master Subscriber Management System Agreement between CSG Systems, Inc. and Comcast Cable Communications Management, LLC

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

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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 With Embedded Linkbase Documents

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.

30


 

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: November 7, 2024

 

CSG SYSTEMS INTERNATIONAL, INC.

 

/s/ Brian A. Shepherd

Brian A. Shepherd

President and Chief Executive Officer

(Principal Executive Officer)

 

/s/ Hai Tran

Hai Tran

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

 

/s/ Lori J. Szwanek

Lori J. Szwanek

Chief Accounting Officer

(Principal Accounting Officer)

 

31


Exhibit 10.27Z

 

THIS DOCUMENT CONTAINS INFORMATION WHICH HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED INFORMATION IS IDENTIFIED BY BRACKETS AND MARKED WITH (***).

 

First Amendment to Encompass Addendum

to the

CSG Master Subscriber Management System Agreement

between

CSG Systems, Inc.

and

Comcast Cable Communications Management, LLC

 

This First Amendment to Encompass Addendum (“Amendment”) is effective as of the date of the last Party’s signature below (the “Amendment Effective Date”) and is by and between CSG Systems, Inc. (“CSG”) and Comcast Cable Communications Management, LLC (“Customer”). CSG and Customer may sometimes be hereinafter referred to individually as a “Party” and/or collectively as the “Parties”.

 

RECITALS

 

WHEREAS, CSG and Customer are parties to that certain Encompass Addendum (CSG Doc. #50011.0) effective as of June 17, 2024 (the “Encompass Addendum”) and that certain Encompass Order Document (CSG Doc. #50034.0) effective as of June 20, 2024 (the “Encompass Order Document”) that prescribes the fees, terms and conditions by which CSG agreed to provide Customer a specialized licensed software offering known as CSG Encompass and related Services as prescribed by such Encompass Addendum and Encompass Order Document.

 

WHEREAS, the Encompass Addendum and the Encompass Order Document were entered into pursuant to the terms of that certain CSG Master Subscriber Management System Agreement (CSG Doc. #4131273) entered into between the Parties with an effective date of January 1, 2020, as amended to date (the “Agreement”).

 

WHEREAS, CSG and Customer desire to amend the Encompass Addendum to clarify the terms and conditions upon which certain [******] software components will be procured by Customer through CSG and be [******* ** ******** ***** ***** ********] as such term is defined in the Agreement.

 

NOW THEREFORE, in consideration of the mutual covenants and agreements herein contained, CSG and Customer agree to the following as of the Amendment Effective Date:

 

1.
Definitions. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Encompass Addendum, Encompass Order Document and the Agreement.

 

2.
Amendments to Encompass Addendum. As of the Amendment Effective Date, the Encompass Addendum is amended as follows:

 

2.1
Section 3.6 (entitled “Embedded Third Party Software”) of Attachment 3 to Encompass Addendum (General Terms and Conditions) shall be deleted in its entirety and replaced with the following:

 

3.6 Embedded Third Party Software. The [******] software components described in Attachment 1 – Description, which is distributed by CSG to Customer together with the CSG Licensed Offering under this Encompass Addendum, is sublicensed to Customer on a non-exclusive and non-transferable basis, to use in object code form only at the Site. In its use of such [******] software, Customer agrees to be bound by the terms of the [******] EULA identified in Exhibit A of Attachment 1 and further agrees to execute any additional documents that the licensor may reasonably require enabling CSG to deliver and Customer to use the [******] software. Such [******] software shall be [******* ** ******** ***** ***** ********] as such term in defined in the Agreement.

 

 


 

2.2
Subsection 1.7 of Section 2 (CSG Encompass – Support Services) of Attachment 4 to Encompass Addendum (Support Services Terms and Conditions) shall be deleted in its entirety and replaced with the following:

 

1.7  Customer acknowledges that the [********** **** *** ***** ** ******* * ** ********** *] may be impacted in certain limited scenarios where CSG cannot feasibly or commercially reasonably create a [********** ****** ****** *** *** ********] and is therefore [******* ** * ****** **** *** *****/******** ** *** ******] software that is being distributed by CSG to Customer together with the CSG Licensed Offering under this Encompass Addendum.

 

2.3
Attachment 1 to Encompass Addendum (Description) shall be deleted in its entirety and replaced with Attachment 1 to Encompass Addendum (Description) which is attached hereto as Amendment Exhibit A.

 

2.4
Appendix A of Exhibit A ([******] EULA) of Attachment 1 to Encompass Addendum (Description) shall be deleted in its entirety and replaced with Appendix A to Exhibit A ([******] EULA) of Attachment 1 to Encompass Addendum (Description) which is attached hereto as Amendment Exhibit B.

 

3.
Encompass Addendum Remains in Effect. Except as amended and modified in this Amendment, the terms and conditions of the Encompass Addendum remain in full force and effect.

 

4.
Counterparts and Facsimile. This Amendment may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same agreement. A document signed, scanned and transmitted electronically and verifiably is to be treated as an original and shall have the same binding effect as an original signature on an original document.

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their duly authorized representatives.

 

COMCAST CABLE COMMUNICATIONS MANAGEMENT, LLC (“CUSTOMER”)

 

CSG SYSTEMS, INC. (“CSG”)

 

By: /s/ Deepak Bharathan

 

By: /s/ Michael J Woods

 

Name: Deepak Bharathan

 

Name: Michael J. Woods

 

Title: Vice President, Procurement

 

Title: President, CMT

 

Date: 12-Sep-24

 

Date: 12-Sep-24

 

 

 


 

Amendment Exhibit A

 

Attachment 1

to

Encompass Addendum

 

DESCRIPTION

 

Terms capitalized in this Attachment 1 have the meaning given to them in this Encompass Addendum or the Agreement.

 

CSG Licensed Offering and Embedded Third Party Software

CSG Licensed Offering and Version

The CSG Licensed Offering is CSG Encompass, version [**], and only the modules identified below, which is being bundled with the [****** ********] identified in this Attachment 1 (together, the CSG Licensed Offering and such [****** ********] are collectively referred to as “Singleview Plus”):

[********** ******* ******]
[******** ******* (******* ****) ******]

Embedded Third Party Software

[****** *********** ****]

[****** ******** ********* ********** ****]

[****** **** *********** ********]

[****** ************]

[****** ***** ********]

[****** ****** ]

[****** ****** ******** *********** ****]

[****** ****** ****]

[****** ******** ********** *******]

[****** ****** **** *****]

[****** ******** ********]

[****** ******** *****]

Customer agrees to be bound by the terms of the [******] EULA identified in Exhibit A of Attachment 1 to this Encompass Addendum.

Territory

Customer shall be entitled to use the standard CSG Licensed Offering identified above solely for Customer’s business in the following Territory: [****** ******]

License Term

Upon the mutual execution of the Encompass Order Document, Customer shall be entitled to use the CSG Licensed Offering for the License Term. The License Term commences upon the [********* ***** ********* ****] (as defined in the Encompass Order Document) and remains in effect through [******** **, ****].

Site

The Site of the CSG Licensed Offering shall be at the following physical location: Hosted in cgs-comcast.com and [******-*********** ***** *** *****] environments hosted in [*** **].

License Unit Volumes

The Software License under this Encompass Addendum is limited to allow the processing of the following maximum number of Service Units: [***,***] Service Units.

 

 


 

Amendment Exhibit B

 

Appendix A

to

Exhibit A of Attachment 1

 

[****** ********]:

[****** *********** ****]

[****** ******** ********* ********** ****]

[****** **** *********** ********]

[****** ************]

[****** ***** ********]

[****** ******]

[****** ****** ******** *********** ****]

[****** ****** ****]

[****** ******** ********** *******]

[****** ****** **** *****]

[****** ******** ********]

[****** ******** *****]

 

CSG Licensed Offering: Encompass Version [**]

 


 

EXHIBIT 31.01

CERTIFICATION PURSUANT TO

SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Brian A. Shepherd, certify that:

1.
I have reviewed this report on Form 10-Q of CSG Systems International, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 7, 2024

/s/ Brian A. Shepherd

Brian A. Shepherd

President and Chief Executive Officer

 

 


 

EXHIBIT 31.02

CERTIFICATION PURSUANT TO

SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Hai Tran, certify that:

1.
I have reviewed this report on Form 10-Q of CSG Systems International, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 7, 2024

 

/s/ Hai Tran

 

Hai Tran

Executive Vice President and Chief Financial Officer

 

 


 

EXHIBIT 32.01

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The certification set forth below is being submitted in connection with the Quarterly Report on Form 10-Q (the “Report”) for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code.

Brian A. Shepherd, the Chief Executive Officer and Hai Tran, the Chief Financial Officer of CSG Systems International Inc., each certifies that, to the best of his knowledge:

(1)
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and
(2)
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of CSG Systems International, Inc.

November 7, 2024

/s/ Brian A. Shepherd

Brian A. Shepherd

President and Chief Executive Officer

November 7, 2024

/s/ Hai Tran

Hai Tran

Executive Vice President and Chief Financial Officer

 


v3.24.3
Document and Entity Information - shares
9 Months Ended
Sep. 30, 2024
Nov. 05, 2024
Cover [Abstract]    
Entity Registrant Name CSG SYSTEMS INTERNATIONAL, INC.  
Entity Central Index Key 0001005757  
Document Type 10-Q  
Document Period End Date Sep. 30, 2024  
Amendment Flag false  
Entity Small Business false  
Entity Emerging Growth Company false  
Document Fiscal Year Focus 2024  
Document Fiscal Period Focus Q3  
Trading Symbol CSGS  
Current Fiscal Year End Date --12-31  
Entity Filer Category Large Accelerated Filer  
Entity Common Stock, Shares Outstanding   29,092,661
Entity Current Reporting Status Yes  
Entity Shell Company false  
Entity File Number 0-27512  
Entity Tax Identification Number 47-0783182  
Entity Address, Address Line One 169 Inverness Dr W  
Entity Address, Address Line Two Suite 300  
Entity Address, City or Town Englewood  
Entity Address, State or Province CO  
Entity Address, Postal Zip Code 80112  
City Area Code (303)  
Local Phone Number 200-2000  
Entity Incorporation, State or Country Code DE  
Document Quarterly Report true  
Document Transition Report false  
Title of 12(b) Security Common Stock, Par Value $0.01 Per Share  
Security Exchange Name NASDAQ  
Entity Interactive Data Current Yes  
v3.24.3
CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED - USD ($)
$ in Thousands
Sep. 30, 2024
Dec. 31, 2023
Current assets:    
Cash and cash equivalents $ 118,444 $ 186,264
Settlement and merchant reserve assets 240,755 274,699
Trade accounts receivable:    
Billed, net of allowance of $4,810 and $5,432 279,930 267,680
Unbilled 82,585 82,163
Income taxes receivable 13,992 1,345
Other current assets 51,534 50,075
Total current assets 787,240 862,226
Non-current assets:    
Property and equipment, net of depreciation of $136,641 and $121,816 58,353 65,545
Operating lease right-of-use assets 25,842 34,283
Intangible Assets 65,739 50,103
Goodwill 323,449 308,596
Customer contract costs, net of amortization of $46,641 and $42,094 60,490 54,421
Deferred income taxes 57,831 57,855
Other assets 8,502 10,017
Total non-current assets 600,206 580,820
Total assets 1,387,446 1,443,046
Current liabilities:    
Current portion of long-term debt 7,500 7,500
Operating lease liabilities 14,002 15,946
Customer deposits 37,716 41,035
Trade accounts payable 51,907 46,406
Accrued employee compensation 57,704 84,380
Settlement and merchant reserve liabilities 238,783 273,817
Deferred revenue 62,797 54,199
Income taxes payable 937 4,104
Other current liabilities 28,163 33,449
Total current liabilities 499,509 560,836
Non-current liabilities:    
Long-term debt, net of unamortized discounts of $13,014 and $15,628 531,986 534,997
Operating lease liabilities 24,427 34,360
Deferred revenue 22,968 23,447
Income taxes payable 2,684 3,041
Deferred income taxes 120 123
Other non-current liabilities 17,341 12,916
Total non-current liabilities 599,526 608,884
Total liabilities 1,099,035 1,169,720
Stockholders' equity:    
Preferred stock, par value $.01 per share; 10,000 shares authorized; zero shares issued and outstanding 0 0
Common stock, par value $.01 per share; 100,000 shares authorized; 29,292 and 29,541 shares outstanding 717 713
Additional paid-in capital 509,294 490,947
Treasury stock, at cost; 41,115 and 40,398 shares (1,170,118) (1,136,055)
Accumulated other comprehensive income (loss):    
Unrealized gain on short-term investments, net of tax 0 1
Cumulative foreign currency translation adjustments (45,562) (50,414)
Accumulated earnings 994,080 968,134
Total stockholders' equity 288,411 273,326
Total liabilities and stockholders' equity 1,387,446 1,443,046
Software    
Non-current assets:    
Intangible Assets 22,953 14,224
Acquired customer contracts    
Non-current assets:    
Intangible Assets $ 42,786 $ 35,879
v3.24.3
CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED (Parenthetical) - USD ($)
$ in Thousands
Sep. 30, 2024
Dec. 31, 2023
Trade accounts receivable-billed, allowance $ 4,810 $ 5,432
Property and equipment, accumulated depreciation 136,641 121,816
Intangibles, accumulated amortization 303,550 284,070
Customer contract costs, accumulated amortization 46,641 42,094
Long-term debt, unamortized discounts $ 13,014 $ 15,628
Preferred stock, par value $ 0.01 $ 0.01
Preferred stock, shares authorized 10,000,000 10,000,000
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
Common stock, par value $ 0.01 $ 0.01
Common stock, shares authorized 100,000,000 100,000,000
Common stock, shares outstanding 29,292,000 29,541,000
Treasury stock, shares 41,115,000 40,398,000
Software    
Intangibles, accumulated amortization $ 168,808 $ 157,601
Acquired customer contracts    
Intangibles, accumulated amortization $ 134,742 $ 126,469
v3.24.3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Income Statement [Abstract]        
Revenue $ 295,143 $ 286,868 $ 880,596 $ 871,934
Cost of revenue (exclusive of depreciation, shown separately below) 149,487 152,734 460,266 458,897
Other operating expenses:        
Research and development 41,665 35,292 116,171 107,401
Selling, general and administrative 63,913 59,097 186,794 180,930
Depreciation 5,313 5,862 16,286 17,155
Restructuring and reorganization charges 2,943 1,152 12,040 8,421
Total operating expenses 263,321 254,137 791,557 772,804
Operating income 31,822 32,731 89,039 99,130
Other income (expense):        
Interest expense (7,778) (8,036) (22,982) (23,092)
Interest income 1,922 1,175 6,641 2,516
Other, net (2,187) 813 (1,455) (3,047)
Total other (8,043) (6,048) (17,796) (23,623)
Income before income taxes 23,779 26,683 71,243 75,507
Income tax provision (4,691) (7,989) (18,859) (21,931)
Net income $ 19,088 $ 18,694 $ 52,384 $ 53,576
Weighted-average shares outstanding:        
Basic 28,362 30,097 28,475 30,381
Diluted 28,468 30,284 28,621 30,540
Earnings per common share:        
Basic $ 0.67 $ 0.62 $ 1.84 $ 1.76
Diluted $ 0.67 $ 0.62 $ 1.83 $ 1.75
v3.24.3
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - UNAUDITED - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Statement of Comprehensive Income [Abstract]        
Net income $ 19,088 $ 18,694 $ 52,384 $ 53,576
Other comprehensive income (loss), net of tax:        
Foreign currency translation adjustments 10,067 (6,495) 4,851 (1,943)
Other comprehensive income (loss), net of tax 10,067 (6,495) 4,851 (1,943)
Total comprehensive income, net of tax $ 29,155 $ 12,199 $ 57,235 $ 51,633
v3.24.3
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - UNAUDITED - USD ($)
$ in Thousands
Total
Common Stock
Additional Paid-in Capital
Treasury Stock
Accumulated Other Comprehensive Income (Loss)
Accumulated Earnings
Balance, beginning of period, shares at Dec. 31, 2022   31,269,000        
Balance, beginning of period at Dec. 31, 2022 $ 355,249 $ 708 $ 495,189 $ (1,018,034) $ (58,829) $ 936,215
Net Income (Loss)           20,928
Foreign currency translation adjustments         2,843  
Total comprehensive income 23,771          
Repurchase of common stock, shares   (166,000)        
Repurchase of common stock (9,306) $ (2) (9,304) 0    
Issuance of common stock pursuant to employee stock purchase plan 893   893      
Issuance of common stock pursuant to employee stock purchase plan, shares   19,000        
Issuance of restricted common stock pursuant to stock-based compensation plans, shares   574,000        
Issuance of restricted common stock pursuant to stock-based compensation plans   $ 6 (6)      
Cancellation of restricted common stock issued pursuant to stock-based compensation plans, shares   (18,000)        
Stock-based compensation expense 6,412   6,412      
Dividends (8,796)         (8,796)
Balance, ending of period, shares at Mar. 31, 2023   31,678,000        
Balance, ending of period at Mar. 31, 2023 368,223 $ 712 493,184 (1,018,034) (55,986) 948,347
Balance, beginning of period, shares at Dec. 31, 2022   31,269,000        
Balance, beginning of period at Dec. 31, 2022 355,249 $ 708 495,189 (1,018,034) (58,829) 936,215
Net Income (Loss) 53,576          
Foreign currency translation adjustments (1,943)          
Total comprehensive income 51,633          
Balance, ending of period, shares at Sep. 30, 2023   29,726,000        
Balance, ending of period at Sep. 30, 2023 260,491 $ 713 483,063 (1,125,897) (60,772) 963,384
Balance, beginning of period, shares at Mar. 31, 2023   31,678,000        
Balance, beginning of period at Mar. 31, 2023 368,223 $ 712 493,184 (1,018,034) (55,986) 948,347
Net Income (Loss)           13,954
Foreign currency translation adjustments         1,709  
Total comprehensive income 15,663          
Repurchase of common stock, shares   (2,000)        
Repurchase of common stock (112)   (112)      
Issuance of common stock pursuant to employee stock purchase plan 771   771      
Issuance of common stock pursuant to employee stock purchase plan, shares   18,000        
Issuance of restricted common stock pursuant to stock-based compensation plans, shares   64,000        
Issuance of restricted common stock pursuant to stock-based compensation plans   $ 1 (1)      
Cancellation of restricted common stock issued pursuant to stock-based compensation plans, shares   (7,000)        
Stock-based compensation expense 7,644   7,644      
Dividends (8,878)         (8,878)
Balance, ending of period, shares at Jun. 30, 2023   31,751,000        
Balance, ending of period at Jun. 30, 2023 383,311 $ 713 501,486 (1,018,034) (54,277) 953,423
Net Income (Loss) 18,694         18,694
Foreign currency translation adjustments (6,495)       (6,495)  
Total comprehensive income 12,199          
Repurchase of common stock, shares   (1,994,000)        
Repurchase of common stock (108,007)   (144) (107,863)    
Issuance of common stock pursuant to employee stock purchase plan 877   877      
Issuance of common stock pursuant to employee stock purchase plan, shares   20,000        
Issuance of restricted common stock pursuant to stock-based compensation plans, shares   12,000        
Cancellation of restricted common stock issued pursuant to stock-based compensation plans, shares   (63,000)        
Stock-based compensation expense 7,197   7,197      
Purchase of capped call transactions (net of tax) (26,353)   (26,353)      
Dividends (8,733)         (8,733)
Balance, ending of period, shares at Sep. 30, 2023   29,726,000        
Balance, ending of period at Sep. 30, 2023 $ 260,491 $ 713 483,063 (1,125,897) (60,772) 963,384
Balance, beginning of period, shares at Dec. 31, 2023 29,541,000 29,541,000        
Balance, beginning of period at Dec. 31, 2023 $ 273,326 $ 713 490,947 (1,136,055) (50,413) 968,134
Net Income (Loss)           19,467
Foreign currency translation adjustments         (4,975)  
Total comprehensive income 14,492          
Repurchase of common stock, shares   (344,000)        
Repurchase of common stock (18,223) $ (2) (8,538) (9,683)    
Issuance of common stock pursuant to employee stock purchase plan 866   866      
Issuance of common stock pursuant to employee stock purchase plan, shares   20,000        
Issuance of restricted common stock pursuant to stock-based compensation plans, shares   573,000        
Issuance of restricted common stock pursuant to stock-based compensation plans   $ 6 (6)      
Cancellation of restricted common stock issued pursuant to stock-based compensation plans, shares   (11,000)        
Stock-based compensation expense 7,736   7,736      
Dividends (8,857)         (8,857)
Balance, ending of period, shares at Mar. 31, 2024   29,779,000        
Balance, ending of period at Mar. 31, 2024 $ 269,340 $ 717 491,005 (1,145,738) (55,388) 978,744
Balance, beginning of period, shares at Dec. 31, 2023 29,541,000 29,541,000        
Balance, beginning of period at Dec. 31, 2023 $ 273,326 $ 713 490,947 (1,136,055) (50,413) 968,134
Net Income (Loss) 52,384          
Foreign currency translation adjustments 4,851          
Total comprehensive income $ 57,235          
Balance, ending of period, shares at Sep. 30, 2024 29,292,000 29,292,000        
Balance, ending of period at Sep. 30, 2024 $ 288,411 $ 717 509,294 (1,170,118) (45,562) 994,080
Balance, beginning of period, shares at Mar. 31, 2024   29,779,000        
Balance, beginning of period at Mar. 31, 2024 269,340 $ 717 491,005 (1,145,738) (55,388) 978,744
Net Income (Loss)           13,829
Foreign currency translation adjustments         (241)  
Total comprehensive income 13,588          
Repurchase of common stock, shares   (228,000)        
Repurchase of common stock (10,201)   (397) (9,804)    
Issuance of common stock pursuant to employee stock purchase plan 752   752      
Issuance of common stock pursuant to employee stock purchase plan, shares   20,000        
Issuance of restricted common stock pursuant to stock-based compensation plans, shares   90,000        
Issuance of restricted common stock pursuant to stock-based compensation plans   $ 1 (1)      
Cancellation of restricted common stock issued pursuant to stock-based compensation plans   $ (1) 1      
Cancellation of restricted common stock issued pursuant to stock-based compensation plans, shares   (70,000)        
Stock-based compensation expense 8,635   8,635      
Dividends (8,785)         (8,785)
Balance, ending of period, shares at Jun. 30, 2024   29,591,000        
Balance, ending of period at Jun. 30, 2024 273,329 $ 717 499,995 (1,155,542) (55,629) 983,788
Net Income (Loss) 19,088         19,088
Foreign currency translation adjustments 10,067       10,067  
Total comprehensive income 29,155          
Repurchase of common stock, shares   (317,000)        
Repurchase of common stock (14,727)   (151) (14,576)    
Issuance of common stock pursuant to employee stock purchase plan 798   798      
Issuance of common stock pursuant to employee stock purchase plan, shares   19,000        
Issuance of restricted common stock pursuant to stock-based compensation plans, shares   22,000        
Cancellation of restricted common stock issued pursuant to stock-based compensation plans, shares   (23,000)        
Stock-based compensation expense 8,652   8,652      
Dividends $ (8,796)         (8,796)
Balance, ending of period, shares at Sep. 30, 2024 29,292,000 29,292,000        
Balance, ending of period at Sep. 30, 2024 $ 288,411 $ 717 $ 509,294 $ (1,170,118) $ (45,562) $ 994,080
v3.24.3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED - USD ($)
$ in Thousands
9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Cash flows from operating activities:    
Net income $ 52,384 $ 53,576
Adjustments to reconcile net income to net cash provided by operating activities-    
Depreciation 16,724 17,549
Amortization 37,467 34,543
Asset impairment 0 1,689
Gain on lease modifications 0 (4,349)
Unrealized foreign currency transaction (gain) loss, net 225 (442)
Deferred income taxes (189) (12,504)
Stock-based compensation 25,023 21,253
Changes in operating assets and liabilities, net of acquired amounts:    
Trade accounts receivable, net (7,873) (33,351)
Other current and non-current assets and liabilities (12,771) (11,449)
Income taxes payable/receivable (16,194) (4,650)
Trade accounts payable and accrued liabilities (48,658) (24,158)
Deferred revenue 7,075 14,658
Net cash provided by operating activities 53,213 52,365
Cash flows from investing activities:    
Purchases of software, property and equipment (16,528) (22,940)
Proceeds from sale/maturity of short-term investments 0 71
Business combinations, net of cash and settlement assets acquired of $46,432 and zero 17,293 0
Net cash provided by (used in) investing activities 765 (22,869)
Cash flows from financing activities:    
Proceeds from issuance of common stock 2,416 2,541
Payment of cash dividends (26,598) (26,231)
Repurchase of common stock (42,439) (116,418)
Deferred acquisition payments (2,488) (3,220)
Proceeds from long-term debt 15,000 470,000
Payments on long-term debt (20,625) (310,625)
Purchase of capped call transactions related to convertible notes 0 (34,298)
Payments of deferred financing costs 0 (13,518)
Payments on financing obligations (2,191) 0
Settlement and merchant reserve activity (79,606) (46,196)
Net cash used in financing activities (156,531) (77,965)
Effect of exchange rate fluctuations on cash, cash equivalents and restricted cash (337) (448)
Net decrease in cash, cash equivalents, and restricted cash (102,890) (48,917)
Cash, cash equivalents and restricted cash, beginning of period 463,876 389,018
Cash, cash equivalents and restricted cash, end of period 360,986 340,101
Cash paid during the period for-    
Interest 24,592 21,772
Income taxes 35,292 39,136
Non-cash investing and financing activities:    
Software, property and equipment included in current and noncurrent liabilities 9,830 0
Reconciliation of cash, cash equivalents and restricted cash:    
Cash and cash equivalents 118,444 146,730
Settlement and merchant reserve assets 240,755 193,371
Restricted cash included in current and non-current assets 1,787 0
Total cash, cash equivalents and restricted cash $ 360,986 $ 340,101
v3.24.3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED (Parenthetical) - USD ($)
$ in Thousands
9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Statement of Cash Flows [Abstract]    
Cash and settlement assets acquired $ 46,432 $ 0
v3.24.3
Pay vs Performance Disclosure - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Pay vs Performance Disclosure        
Net Income (Loss) $ 19,088 $ 18,694 $ 52,384 $ 53,576
v3.24.3
Insider Trading Arrangements
3 Months Ended
Sep. 30, 2024
Trading Arrangements, by Individual  
Rule 10b5-1 Arrangement Adopted false
Non-Rule 10b5-1 Arrangement Adopted false
Rule 10b5-1 Arrangement Terminated false
Non-Rule 10b5-1 Arrangement Terminated false
Rule 10b5-1 Arrangement Modified false
Non-Rule 10b5-1 Arrangement Modified false
v3.24.3
General
9 Months Ended
Sep. 30, 2024
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
General

1. GENERAL

We have prepared the accompanying unaudited condensed consolidated financial statements as of September 30, 2024 and December 31, 2023, and for the quarters and nine months ended September 30, 2024 and 2023, 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, 2023 (our “2023 10-K”), filed with the SEC. The results of operations for the quarter and nine months ended September 30, 2024 are not necessarily indicative of the expected results for the entire year ending December 31, 2024.

v3.24.3
Summary of Significant Accounting Policies
9 Months Ended
Sep. 30, 2024
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates in Preparation of Financial Statements. The preparation of our Financial Statements requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of 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 customer contracts for our SaaS and related solutions that include variable consideration dependent upon a series of monthly volumes and/or daily usage of services and have contractual terms ending from 2024 through 2036. Our customer contracts may include guaranteed minimums and fixed monthly or annual fees. As of September 30, 2024, our aggregate amount of the transaction price allocated to the remaining performance obligations was approximately $1.3 billion, which is made up of fixed fee consideration and guaranteed minimums expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied). We expect to recognize over 70% of this amount by the end of 2026, with the remaining amount recognized by the end of 2036. We have excluded from this amount variable consideration expected to be recognized in the future related to performance obligations that are unsatisfied.

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 revenue type, geographic region, and customer vertical.

Revenue by type for the quarters and nine months ended September 30, 2024 and 2023 was as follows (in thousands):

 

 

 

Quarter Ended

 

 

Nine Months Ended

 

 

 

September 30, 2024

 

 

September 30, 2023

 

 

September 30, 2024

 

 

September 30, 2023

 

SaaS and related solutions

 

$

263,701

 

 

$

250,777

 

 

$

788,054

 

 

$

764,253

 

Software and services

 

 

19,705

 

 

 

23,578

 

 

 

56,780

 

 

 

73,235

 

Maintenance

 

 

11,737

 

 

 

12,513

 

 

 

35,762

 

 

 

34,446

 

Total revenue

 

$

295,143

 

 

$

286,868

 

 

$

880,596

 

 

$

871,934

 

 

We use the location of the customer as the basis of attributing revenue to geographic regions. Revenue by geographic region for the quarters and nine months ended September 30, 2024 and 2023, as a percentage of our total revenue, was as follows:

 

 

 

Quarter Ended

 

 

Nine Months Ended

 

 

 

September 30, 2024

 

 

September 30, 2023

 

 

September 30, 2024

 

 

September 30, 2023

 

Americas (principally the U.S.)

 

 

88

%

 

 

86

%

 

 

88

%

 

 

86

%

Europe, Middle East, and Africa

 

 

9

%

 

 

9

%

 

 

8

%

 

 

10

%

Asia Pacific

 

 

3

%

 

 

5

%

 

 

4

%

 

 

4

%

Total revenue

 

 

100

%

 

 

100

%

 

 

100

%

 

 

100

%

 

We generate our revenue primarily from the global communications markets; however, we serve an expanding group of customers in other markets including retail, financial services, healthcare, insurance, and government entities. Revenue by customer vertical for the quarters and nine months ended September 30, 2024 and 2023, as a percentage of our total revenue, was as follows:

 

 

 

Quarter Ended

 

 

Nine Months Ended

 

 

 

September 30, 2024

 

 

September 30, 2023

 

 

September 30, 2024

 

 

September 30, 2023

 

Broadband/Cable/Satellite

 

 

53

%

 

 

53

%

 

 

52

%

 

 

53

%

Telecommunications

 

 

18

%

 

 

20

%

 

 

18

%

 

 

20

%

Other

 

 

29

%

 

 

27

%

 

 

30

%

 

 

27

%

Total revenue

 

 

100

%

 

 

100

%

 

 

100

%

 

 

100

%

Deferred revenue recognized during the quarters ended September 30, 2024 and 2023 was $8.6 million and $7.8 million, respectively. Deferred revenue recognized during the nine months ended September 30, 2024 and 2023 was $38.4 million and $39.3 million, respectively.

Cash and Cash Equivalents. We consider all highly liquid investments with original maturities of three months or less as of the date of purchase to be cash equivalents. As of September 30, 2024 and December 31, 2023, our cash equivalents consist primarily of institutional money market funds and time deposits held at major banks. For the cash and cash equivalents denominated in foreign currencies and/or located outside the U.S., we do not anticipate any material amounts being unavailable for use in running our business, but may face limitations on moving cash out of certain foreign jurisdictions due to currency controls and potential negative economic consequences.

Restricted Cash. Restricted cash includes cash that is legally or contractually restricted, as well as our settlement and merchant reserve assets (discussed below). The nature of the restrictions on our settlement and merchant reserve assets consists of contractual restrictions with the merchants and restrictions arising from our policy and intention. It has historically been our policy to segregate settlement and merchant reserve assets from our operating cash balances and our intention is to continue to do so. As of September 30, 2024 and December 31, 2023, we had $1.8 million and $2.9 million, respectively, of restricted cash that mainly serves to collateralize bank and performance guarantees included in other current and non-current assets in our unaudited Condensed Consolidated Balance Sheets (“Balance Sheets” or “Balance Sheet”).

Settlement and Merchant Reserve Assets and Liabilities. Settlement assets and settlement liabilities represent cash collected on behalf of merchants via payments processing services which is held for an established holding period until settlement with the customer. The holding period is generally one to four business days depending on the payment model and contractual terms with the customer. During the holding period, cash is subject to restriction and segregation based on the nature of our custodial relationship with the merchants. Should we fail to remit these funds to our merchants, the merchant's sole recourse for payment would be against us. These rights and obligations are set forth in the contracts between us and the merchants. Settlement assets are held with various major financial institutions and a corresponding liability is recorded for the amounts owed to the customer. At any given time, there may be differences between the cash held and the corresponding liability due to the timing of operating-related cash transfers.

Merchant reserve assets/liabilities represent deposits collected from merchants to mitigate our risk of loss due to nonperformance of settlement obligations initiated by those merchants using our payments processing services, or non-payment by customers for services rendered by us. We perform a credit risk evaluation on each customer based on multiple criteria, which provides the basis for the deposit amount required for each merchant. For the duration of our relationship with each merchant, we hold their reserve deposits with major financial institutions. We hold these funds in separate accounts, which are offset by corresponding liabilities.

The following table summarizes our settlement and merchant reserve assets and liabilities as of the indicated periods (in thousands):

 

 

 

September 30, 2024

 

 

December 31, 2023

 

 

 

Assets

 

 

Liabilities

 

 

Assets

 

 

Liabilities

 

Settlement assets/liabilities

 

$

228,679

 

 

$

226,684

 

 

$

260,712

 

 

$

259,825

 

Merchant reserve assets/liabilities

 

 

12,076

 

 

 

12,099

 

 

 

13,987

 

 

 

13,992

 

Total

 

$

240,755

 

 

$

238,783

 

 

$

274,699

 

 

$

273,817

 

 

Financial Instruments. Our financial instruments as of September 30, 2024 and December 31, 2023 include cash and cash equivalents, settlement and merchant reserve assets and liabilities, accounts receivable, accounts payable, and debt. Due to their short maturities, the carrying amounts of cash equivalents, settlement and merchant reserve assets and liabilities, accounts receivable, and accounts payable approximate their fair value.

We have chosen not to record our debt at fair value, with changes recognized in earnings each reporting period. The following table indicates the carrying value and estimated fair value of our debt as of the indicated periods (in thousands):

 

 

 

September 30, 2024

 

 

December 31, 2023

 

 

 

Carrying Value

 

 

Fair Value

 

 

Carrying Value

 

 

Fair Value

 

2023 Convertible Notes (par value)

 

$

425,000

 

 

$

425,978

 

 

$

425,000

 

 

$

428,506

 

2021 Credit Agreement (carrying value including
    current maturities)

 

 

127,500

 

 

 

127,500

 

 

 

133,125

 

 

 

133,125

 

The fair value of our convertible notes was estimated based upon quoted market prices or recent sales activity, while the fair value of our credit agreement was estimated using a discounted cash flow methodology, both of which are considered Level 2 inputs. See Note 4 for a discussion regarding our debt.

Pillar Two. Numerous foreign jurisdictions have enacted, or are in the process of enacting, legislation to adopt a minimum effective tax rate. Pillar Two, which was established by the Organization for Economic Co-operation and Development (OECD), generally provides for a 15% minimum effective tax rate for multinational enterprises in every jurisdiction in which they operate. The U.S. has not yet adopted Pillar Two, however, various other governments around the world have. These rules did not have a material impact on our taxes for the quarter and nine months ended September 30, 2024. We continue to monitor evolving tax legislation in the jurisdictions in which we operate.

Accounting Pronouncements Issued but Not Yet Effective. In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280), (“ASU 2023-07”), which enhances reportable segment disclosure requirements in part by requiring entities to disclose significant expenses related to their reportable segments. ASU 2023-07 also requires disclosure of the title and position of the company’s Chief Operating Decision Maker (“CODM”) and how the CODM uses financial reporting to assess segment performance and allocate resources. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The adoption of this standard only impacts disclosures and is not expected to have a material impact on our Financial Statements.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which requires entities to disclose more detailed information about their effective tax rate reconciliation as well as information on income taxes paid. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. The adoption of this standard only impacts disclosures and is not expected to have a material impact on our Financial Statements.

v3.24.3
Goodwill and Intangible Assets
9 Months Ended
Sep. 30, 2024
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Intangible Assets

3. GOODWILL AND INTANGIBLE ASSETS

Goodwill. The changes in the carrying amount of goodwill for the nine months ended September 30, 2024 were as follows (in thousands):

 

January 1, 2024, balance

 

$

308,596

 

Effects of changes in foreign currency exchange rates

 

 

4,191

 

Goodwill acquired during the period

 

 

10,662

 

September 30, 2024, balance

 

$

323,449

 

Goodwill acquired during the period relates to the acquisitions discussed in Note 5.

Other Intangible Assets. Our other intangible assets subject to ongoing amortization consist of acquired customer contracts and software. As of September 30, 2024 and December 31, 2023, the carrying values of these assets were as follows (in thousands):

 

 

 

September 30, 2024

 

 

December 31, 2023

 

 

 

Gross Carrying Amount

 

 

Accumulated Amortization

 

 

Net Amount

 

 

Gross Carrying Amount

 

 

Accumulated Amortization

 

 

Net Amount

 

Acquired customer contracts

 

$

177,528

 

 

$

(134,742

)

 

$

42,786

 

 

$

162,348

 

 

$

(126,469

)

 

$

35,879

 

Software

 

 

191,761

 

 

 

(168,808

)

 

 

22,953

 

 

 

171,825

 

 

 

(157,601

)

 

 

14,224

 

Total other intangible assets

 

$

369,289

 

 

$

(303,550

)

 

$

65,739

 

 

$

334,173

 

 

$

(284,070

)

 

$

50,103

 

 

Acquired customer contracts and software as of September 30, 2024 include the assets acquired as part of the acquisitions discussed in Note 5.

The total amortization expense related to other intangible assets for the third quarters of 2024 and 2023 was $7.1 million and $6.4 million, respectively, and for the nine months ended September 30, 2024 and 2023 was $18.8 million and $19.5 million, respectively. Based on the September 30, 2024 net carrying value of our intangible assets, the estimated total amortization expense for each of the five succeeding fiscal years ending December 31 is: 2024 - $25.7 million; 2025 - $21.9 million; 2026 - $15.1 million; 2027 - $7.0 million; and 2028 - $4.3 million.

Customer Contract Costs. As of September 30, 2024 and December 31, 2023, the carrying values of our customer contract cost assets, related to those contracts with a contractual term greater than one year, were as follows (in thousands):

 

 

 

September 30, 2024

 

 

December 31, 2023

 

 

 

Gross Carrying Amount

 

 

Accumulated Amortization

 

 

Net Amount

 

 

Gross Carrying Amount

 

 

Accumulated Amortization

 

 

Net Amount

 

Customer contract costs

 

$

107,131

 

 

$

(46,641

)

 

$

60,490

 

 

$

96,515

 

 

$

(42,094

)

 

$

54,421

 

The total amortization expense related to customer contract costs for the third quarters of 2024 and 2023 was $5.4 million and $5.0 million, respectively, and for the nine months ended September 30, 2024 and 2023 was $16.1 million and $14.4 million, respectively.

v3.24.3
Debt
9 Months Ended
Sep. 30, 2024
Debt Disclosure [Abstract]  
Debt

4. DEBT

As of September 30, 2024 and December 31, 2023, our long-term debt was as follows (in thousands):

 

 

 

September 30,
2024

 

 

December 31,
2023

 

2023 Convertible Notes:

 

 

 

 

 

 

2023 Convertible Notes – senior unsecured convertible notes, due
    
September 2028, cash interest at 3.875%

 

$

425,000

 

 

$

425,000

 

Less – deferred financing costs

 

 

(11,279

)

 

 

(13,216

)

 2023 Convertible Notes, net of unamortized discounts

 

 

413,721

 

 

 

411,784

 

2021 Credit Agreement:

 

 

 

 

 

 

2021 Term Loan, due September 2026, interest at adjusted SOFR plus
    applicable margin (combined rate of
6.079% at September 30, 2024)

 

 

127,500

 

 

 

133,125

 

Less – deferred financing costs

 

 

(1,735

)

 

 

(2,412

)

 2021 Term Loan, net of unamortized discounts

 

 

125,765

 

 

 

130,713

 

$450 million revolving loan facility, due September 2026, interest at adjusted
    SOFR plus applicable margin

 

 

-

 

 

 

-

 

Total debt, net of unamortized discounts

 

 

539,486

 

 

 

542,497

 

Current portion of long-term debt

 

 

(7,500

)

 

 

(7,500

)

Long-term debt, net of unamortized discounts

 

$

531,986

 

 

$

534,997

 

2023 Convertible Notes. The 2023 Convertible Notes will be convertible at the option of the noteholders before June 15, 2028, upon the occurrence of certain events. On or after June 15, 2028, and until the close of business on the second scheduled trading day immediately preceding September 15, 2028, the maturity date, noteholders may convert all or any portion of their notes at any time regardless of these conditions.

The 2023 Convertible Notes will be convertible at an initial conversion rate of 14.0753 shares of our common stock per $1,000 principal amount of the 2023 Convertible Notes, which is equivalent to an initial conversion price of $71.05 per share of our common stock, plus carryforward adjustments not yet effected pursuant to the terms of the indenture governing the 2023 Convertible Notes. Under the terms of the 2023 Convertible Notes, we will adjust the conversion rate for any quarterly dividends exceeding $0.28 per share.

We are required to satisfy our conversion obligation as follows: (i) paying cash up to the aggregate principal amount of notes to be converted; and (ii) to the extent the value of our conversion obligation exceeds the par value, we will satisfy the remaining conversion obligation in our common stock, cash, or a combination thereof, at our election. As of September 30, 2024, none of the conditions to early convert have been met.

We may not redeem the 2023 Convertible Notes prior to September 21, 2026. On or after September 21, 2026, we may redeem for cash all or part of the 2023 Convertible Notes, subject to a partial redemption limitation that requires at least $100.0 million of the principal amount of the 2023 Convertible Notes to remain outstanding if the last reported sales price of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption. The redemption price will equal the principal amount of the 2023 Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund has been established for the 2023 Convertible Notes.

In connection with the pricing of the 2023 Convertible Notes, we entered into privately negotiated capped call transactions (the “Capped Call Transactions”) with certain of the initial purchasers of the 2023 Convertible Notes and other financial institutions (collectively, the “Option Counterparties”). As of September 30, 2024, all the Capped Call Transactions were outstanding and cover, subject to anti-dilution adjustments substantially similar to those applicable to the 2023 Convertible Notes, 5.98 million shares of our common stock, the same number of shares of common stock underlying the 2023 Convertible Notes. The Capped Call Transactions will expire upon the maturity of the 2023 Convertible Notes.

2021 Credit Agreement. During the nine months ended September 30, 2024, we made $5.6 million of principal repayments on our $150.0 million aggregate principal five-year term loan (the “2021 Term Loan”). As of September 30, 2024, we had no borrowings outstanding on our $450.0 million aggregate principal five-year revolving loan facility (the "2021 Revolver"), and had issued standby letters of credit of $1.5 million that count against our available 2021 Revolver balance, leaving $448.5 million available to us.

As of September 30, 2024, our interest rate on the 2021 Term Loan was 6.079% (adjusted Secured Overnight Financing Rate ("SOFR"), credit spread adjustment of 0.10%, plus 1.375% per annum), effective through December 2024, and our commitment fee on the 2021 Revolver was 0.15%.

The interest rates under the 2021 Credit Agreement are based upon our choice of an adjusted SOFR rate plus an applicable margin of 1.375% - 2.125%, or an alternate base rate (“ABR”) plus an applicable margin of 0.375% - 1.125%, with the applicable margin determined in accordance with our then-net secured total leverage ratio. We pay a commitment fee of 0.150% - 0.325% of the average daily unused amount of the 2021 Revolver, with the commitment fee rate also determined in accordance with our then-net secured total leverage ratio.

Other. We finance certain of our internal use software. During the nine months ended September 30, 2024, we entered into two additional financing agreements at a total cost of $10.7 million with payments through 2027. As a result, as of September 30, 2024, we had $9.8 million outstanding under these agreements, of which $4.8 million was included in current liabilities and $5.0 million was included in non-current liabilities in our Balance Sheet. These arrangements are treated as non-cash investing and financing activities for purposes of our Condensed Consolidated Statements of Cash Flows ("Statements of Cash Flows").

v3.24.3
Acquisitions
9 Months Ended
Sep. 30, 2024
Business Combinations [Abstract]  
Acquisitions

5. ACQUISITIONS

Prior Years Acquisition. On October 4, 2021, we acquired DGIT Systems Pty Ltd (“DGIT”), a provider of configure, price and quote (CPQ), and order management solutions for the telecommunications industry. We acquired 100% of the equity of DGIT for a purchase price of approximately $16 million, approximately $14 million paid upon close and the remaining consideration of approximately $2 million to be paid through 2025, subject to certain reductions, as applicable. During the nine months ended September 30, 2024, we made deferred purchase price payments of $0.5 million.

The DGIT acquisition includes provisions for up to approximately $13 million of potential future earn-out payments. The earn-out payments are tied to performance-based goals and a defined service period and are accounted for as post-acquisition compensation, as applicable. The earn-out period was originally through September 30, 2025, but during the third quarter of 2024 was extended through December 31, 2026. As of September 30, 2024, we have accrued $0.1 million related to the potential earn-out payments.

Current Year Acquisitions. On April 1, 2024, we acquired a customer communication services business that operates in multiple industry verticals. The acquisition date fair value of the consideration transferred was $15.0 million, which consisted of $11.5 million in cash paid upfront and a non-cash settlement of working capital items of $3.5 million. The results of this acquisition are included in our results of operations for the period subsequent to the acquisition date.

The preliminary estimated fair values of assets acquired primarily include goodwill of $6.4 million, acquired customer contracts of $4.3 million, trade accounts receivable of $2.1 million, and liabilities assumed of $2.7 million. The estimated fair values are considered provisional and are based on the information that was available as of the acquisition date. The provisional measurements of fair value are subject to change, however, such changes are not expected to be significant. We expect to finalize the valuation and complete the purchase price allocation as soon as practicable but no later than one year from the acquisition date. The amount allocated to goodwill is deductible for income tax purposes.

On June 3, 2024, we acquired 100% of the equity of iCheckGateway.com, LLC (“iCG Pay”), an ACH and credit card payment processing company. We acquired iCG Pay to further expand the industry verticals we serve and to provide opportunities for the continued growth of our business. The acquisition date fair value of the consideration transferred was $17.6 million in cash paid, subject to customary working capital adjustments.

The iCG Pay acquisition includes provisions for up to $15.0 million of potential future earn-out payments. The earn-out payments are tied to performance-based goals and a defined service period and are accounted for as post-acquisition compensation, as applicable. The earn-out period is through June 3, 2027. As of September 30, 2024, we accrued $3.5 million related to the potential earn-out payments. The results of iCG Pay are included in our results of operations for the period subsequent to the acquisition date.

The preliminary estimated fair values of assets acquired primarily include settlement assets of $45.9 million, acquired customer contracts of $10.7 million, goodwill of $4.2 million, and settlement liabilities assumed of $44.7 million. The estimated fair values are considered provisional and are based on the information that was available as of the acquisition date. The provisional measurements of fair value are subject to change, however, such changes are not expected to be significant. We expect to finalize the valuation and complete the purchase price allocation as soon as practicable but no later than one year from the acquisition date. The amount allocated to goodwill is deductible for income tax purposes.

The cash paid for the acquisitions discussed above, less cash and settlement assets acquired, resulted in net cash provided by business combinations for the nine months ended September 30, 2024 of $17.3 million on our Statement of Cash Flows.

v3.24.3
Restructuring and Reorganization Charges
9 Months Ended
Sep. 30, 2024
Restructuring and Related Activities [Abstract]  
Restructuring and Reorganization Charges

6. RESTRUCTURING AND REORGANIZATION CHARGES

During the third quarters of 2024 and 2023, we recorded restructuring and reorganization charges of $2.9 million and $1.2 million, respectively, and for the nine months ended September 30, 2024 and 2023, we recorded restructuring and reorganization charges of $12.0 million and $8.4 million, respectively.

During the nine months ended September 30, 2024, we reduced our global workforce by approximately 300 employees, as part of initiatives to better align and allocate resources to areas of the business where we have identified growth opportunities. As a result, we incurred restructuring charges related to involuntary terminations of $9.6 million.

 

The activity in the restructuring and reorganization reserves during the nine months ended September 30, 2024 was as follows (in thousands):

 

 

 

Termination Benefits

 

 

Other

 

 

Total

 

January 1, 2024, balance

 

$

1,434

 

 

$

8,100

 

 

$

9,534

 

Charged to expense during period

 

 

9,593

 

 

 

2,447

 

 

 

12,040

 

Cash payments

 

 

(10,311

)

 

 

(7,589

)

 

 

(17,900

)

Adjustment for accelerated depreciation

 

 

-

 

 

 

(438

)

 

 

(438

)

Other

 

 

1,180

 

 

 

-

 

 

 

1,180

 

September 30, 2024, balance

 

$

1,896

 

 

$

2,520

 

 

$

4,416

 

 

During the nine months ended September 30, 2024, we paid $5.6 million related to the exit of two reseller agreements that were acquired with the acquisition of Forte Payment Systems, Inc. in 2018.
 

As of September 30, 2024, $3.2 million of the restructuring and reorganization reserves were included in current liabilities.

v3.24.3
Commitments, Guarantees and Contingencies
9 Months Ended
Sep. 30, 2024
Commitments and Contingencies Disclosure [Abstract]  
Commitments, Guarantees and Contingencies

7. COMMITMENTS, GUARANTEES AND CONTINGENCIES

Guarantees. In the ordinary course of business, we may provide guarantees in the form of bid bonds or performance bonds. As of September 30, 2024, we had $1.8 million of restricted assets used to collateralize these guarantees, which are included in other non-current assets in our Balance Sheet.

We have performance guarantees in the form of surety bonds and standby letters of credit, along with money transmitter bonds, issued through third-parties that are not required to be reflected on our Balance Sheets. As of September 30, 2024, we had performance guarantees of $7.4 million, which includes $1.5 million in standby letters of credit and $1.0 million in bid bonds. We are ultimately liable for claims that may occur against these guarantees. We have no history of material claims or are aware of circumstances that would require us to pay under any of these arrangements. We also believe that the resolution of any claim that may arise in the future, either individually or in the aggregate, would not be material to our Financial Statements. As of September 30, 2024, we had total aggregate money transmitter bonds of $22.0 million outstanding. These money transmitter bonds are for the benefit of various states to comply with the states’ financial requirements and industry regulations for money transmitter licenses.

Warranties. We generally warrant that our solutions and related offerings will conform to published specifications, or to specifications provided in an individual customer arrangement, as applicable. The typical warranty period is 90 days from the date of acceptance of the solution or offering. For certain service offerings we provide a warranty for the duration of the services provided. We generally warrant that those services will be performed in a professional and skillful manner. The typical remedy for breach of warranty is to correct or replace any defective deliverable, and if not possible or practical, we will accept the return of the defective deliverable and refund the amount paid under the customer arrangement that is allocable to the defective deliverable. Our contracts also generally contain limitation of damages provisions in an effort to reduce our exposure to monetary damages arising from breach of warranty claims. Historically, we have incurred minimal warranty costs, and as a result, do not maintain a warranty reserve.

Solution and Services Indemnifications. Arrangements with our customers generally include an indemnification provision that will indemnify and defend a customer in actions brought against the customer 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 customers typically limit our liability for breach to a specified amount of the direct damages incurred by the customer 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 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 September 30, 2024, 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 customers.

Indemnifications Related to Officers and the Board of Directors. Other guarantees include promises to indemnify, defend, and hold harmless our directors, and certain officers. Such indemnification covers any expenses and liabilities reasonably incurred by a person, by reason of the fact that such person is, was, or has agreed to be a director or officer, in connection with the investigation, defense, and settlement of any threatened, pending, or contemplated action, suit, proceeding, or claim. 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 of Directors (the "Board"). As a result, we have not recorded any liabilities related to such indemnifications as of September 30, 2024. 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.

v3.24.3
Earnings Per Common Share
9 Months Ended
Sep. 30, 2024
Earnings Per Share [Abstract]  
Earnings Per Common Share

8. EARNINGS PER COMMON SHARE

Basic and diluted earnings per common share (“EPS”) amounts are presented on the face of our unaudited Condensed Consolidated Statements of Income (the "Income Statements").

The reconciliation of the basic and diluted EPS denominators related to common shares is included in the following table (in thousands):

 

 

 

Quarter Ended

 

 

Nine Months Ended

 

 

 

 

September 30, 2024

 

 

September 30, 2023

 

 

September 30, 2024

 

 

September 30, 2023

 

 

Basic weighted-average common shares

 

 

28,362

 

 

 

30,097

 

 

 

28,475

 

 

 

30,381

 

 

Dilutive effect of restricted common stock

 

 

106

 

 

 

187

 

 

 

146

 

 

159

 

 

Diluted weighted-average common shares

 

 

28,468

 

 

 

30,284

 

 

 

28,621

 

 

 

30,540

 

 

The dilutive effect of restricted common stock is computed using the treasury stock method. The dilutive effect of the 2023 Convertible Notes is computed using the if-converted method and will only have an effect in those quarterly periods in which our average stock price exceeds the current effective conversion price.

Potentially dilutive common shares related to non-participating unvested restricted stock and stock warrants were excluded from the computation of diluted EPS, as the effect was anti-dilutive, and were not material in any period presented.

v3.24.3
Stockholders' Equity and Equity Compensation Plans
9 Months Ended
Sep. 30, 2024
Stockholders' Equity Note [Abstract]  
Stockholders' Equity and Equity Compensation Plans

9. STOCKHOLDERS’ EQUITY AND EQUITY COMPENSATION PLANS

Stock Repurchase Program. We currently have a stock repurchase program, approved by our Board, authorizing us to repurchase shares of our common stock from time-to-time as market and business conditions warrant (the “Stock Repurchase Program”). During the third quarter and nine months ended September 30, 2024, we repurchased approximately 313,000 shares of our common stock for $14.4 million (weighted-average price of $46.11 per share), and approximately 716,000 shares of our common stock for $33.7 million (weighted-average price of $47.07 per share), respectively, under a SEC Rule 10b5-1 Plan. During the third quarter and nine months ended September 30, 2023, we repurchased approximately 1,991,000 shares of our common stock for $107.0 million (weighted-average price of $53.73 per share), which includes approximately 311,000 shares of our common stock that were repurchased for $16.9 million (weighted average price of $54.36 per share) under a SEC Rule 10b5-1 Plan, and approximately 1,680,000 shares of our common stock that were repurchased for $90.1 million (weighted-average price of $53.62 per share) concurrent with the pricing of the offering of the 2023 Convertible Notes.

The excise tax imposed as part of the 2022 Inflation Reduction Act, which is included as a cost of treasury stock, is not reflected in the share repurchase amounts above.

In August 2024, our Board authorized an additional $100.0 million of repurchases under the Stock Repurchase Program. This, combined with the remaining value from the prior Board authorization in August 2023, leaves $162.0 million remaining value of shares available for repurchase at September 30, 2024, with the amount authorized for repurchase through December 31, 2025.

Stock Repurchases for Tax Withholdings. In addition to the above-mentioned stock repurchases, during the third quarters of 2024 and 2023, we repurchased and then cancelled approximately 3,000 shares of common stock for $0.2 million and approximately 3,000 shares of common stock for $0.1 million, respectively, and during the nine months ended September 30, 2024 and 2023, we repurchased and then cancelled approximately 172,000 shares of common stock for $9.1 million and approximately 171,000 shares of common stock for $9.6 million, respectively, in connection with minimum tax withholding requirements resulting from the vesting of restricted common stock under our stock incentive plan.

Cash Dividends. During the third quarter of 2024, our Board approved a quarterly cash dividend of $0.30 per share of common stock, totaling $8.8 million. During the third quarter of 2023, our Board approved a quarterly cash dividend of $0.28 per share of common stock, totaling $8.7 million. Dividends declared for the nine months ended September 30, 2024 and 2023 totaled $26.4 million for both periods.

Warrants. In July 2014, in conjunction with the execution of an amendment to our agreement with Comcast Corporation (“Comcast”), we issued stock warrants (the “Warrant Agreement”) for the right to purchase up to 2.9 million shares of our common stock (the “Stock Warrants”) with an exercise price of $26.68 per warrant as an additional incentive for Comcast to convert customer accounts onto our solutions based on various milestones. The Stock Warrants had a ten-year term and in July 2024, the remaining 1.0 million issued and unvested Stock Warrants expired.

Stock-Based Awards. During the nine months ended September 30, 2024 we granted restricted stock awards to key members of management in the form of: (i) performance-based awards of approximately 155,000 restricted common stock shares, which vest in the first quarter of 2026 upon meeting certain pre-established financial performance objectives over a two-year performance period; and (ii) market-based awards of approximately 52,000 restricted common stock shares, which vest in the first quarter of 2027 upon meeting a relative total shareholder return performance achievement tier. Certain of these awards may vest (i.e., vesting accelerates) upon the involuntary termination of employment or a change in control (as defined) and the subsequent involuntary termination of employment.

During the nine months ended September 30, 2024, we also granted restricted stock awards to key members of management in the form of time-based awards of approximately 496,000 restricted common stock shares, which vest annually over three years with no restrictions other than the passage of time. Certain of these awards may vest (i.e., vesting accelerates) upon the involuntary termination of employment, a change in control (as defined) and the subsequent involuntary termination of employment, or death.

We recorded stock-based compensation expense for the third quarters of 2024 and 2023 of $8.7 million and $7.2 million, respectively, and for the nine months ended September 30, 2024 and 2023 of $25.0 million and $21.3 million, respectively.

v3.24.3
Summary of Significant Accounting Policies (Policies)
9 Months Ended
Sep. 30, 2024
Accounting Policies [Abstract]  
Use of Estimates in Preparation of Financial Statements Use of Estimates in Preparation of Financial Statements. The preparation of our Financial Statements requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of 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

Revenue. The majority of our future revenue is related to our customer contracts for our SaaS and related solutions that include variable consideration dependent upon a series of monthly volumes and/or daily usage of services and have contractual terms ending from 2024 through 2036. Our customer contracts may include guaranteed minimums and fixed monthly or annual fees. As of September 30, 2024, our aggregate amount of the transaction price allocated to the remaining performance obligations was approximately $1.3 billion, which is made up of fixed fee consideration and guaranteed minimums expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied). We expect to recognize over 70% of this amount by the end of 2026, with the remaining amount recognized by the end of 2036. We have excluded from this amount variable consideration expected to be recognized in the future related to performance obligations that are unsatisfied.

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 revenue type, geographic region, and customer vertical.

Revenue by type for the quarters and nine months ended September 30, 2024 and 2023 was as follows (in thousands):

 

 

 

Quarter Ended

 

 

Nine Months Ended

 

 

 

September 30, 2024

 

 

September 30, 2023

 

 

September 30, 2024

 

 

September 30, 2023

 

SaaS and related solutions

 

$

263,701

 

 

$

250,777

 

 

$

788,054

 

 

$

764,253

 

Software and services

 

 

19,705

 

 

 

23,578

 

 

 

56,780

 

 

 

73,235

 

Maintenance

 

 

11,737

 

 

 

12,513

 

 

 

35,762

 

 

 

34,446

 

Total revenue

 

$

295,143

 

 

$

286,868

 

 

$

880,596

 

 

$

871,934

 

 

We use the location of the customer as the basis of attributing revenue to geographic regions. Revenue by geographic region for the quarters and nine months ended September 30, 2024 and 2023, as a percentage of our total revenue, was as follows:

 

 

 

Quarter Ended

 

 

Nine Months Ended

 

 

 

September 30, 2024

 

 

September 30, 2023

 

 

September 30, 2024

 

 

September 30, 2023

 

Americas (principally the U.S.)

 

 

88

%

 

 

86

%

 

 

88

%

 

 

86

%

Europe, Middle East, and Africa

 

 

9

%

 

 

9

%

 

 

8

%

 

 

10

%

Asia Pacific

 

 

3

%

 

 

5

%

 

 

4

%

 

 

4

%

Total revenue

 

 

100

%

 

 

100

%

 

 

100

%

 

 

100

%

 

We generate our revenue primarily from the global communications markets; however, we serve an expanding group of customers in other markets including retail, financial services, healthcare, insurance, and government entities. Revenue by customer vertical for the quarters and nine months ended September 30, 2024 and 2023, as a percentage of our total revenue, was as follows:

 

 

 

Quarter Ended

 

 

Nine Months Ended

 

 

 

September 30, 2024

 

 

September 30, 2023

 

 

September 30, 2024

 

 

September 30, 2023

 

Broadband/Cable/Satellite

 

 

53

%

 

 

53

%

 

 

52

%

 

 

53

%

Telecommunications

 

 

18

%

 

 

20

%

 

 

18

%

 

 

20

%

Other

 

 

29

%

 

 

27

%

 

 

30

%

 

 

27

%

Total revenue

 

 

100

%

 

 

100

%

 

 

100

%

 

 

100

%

Deferred revenue recognized during the quarters ended September 30, 2024 and 2023 was $8.6 million and $7.8 million, respectively. Deferred revenue recognized during the nine months ended September 30, 2024 and 2023 was $38.4 million and $39.3 million, respectively.

Cash and Cash Equivalents

Cash and Cash Equivalents. We consider all highly liquid investments with original maturities of three months or less as of the date of purchase to be cash equivalents. As of September 30, 2024 and December 31, 2023, our cash equivalents consist primarily of institutional money market funds and time deposits held at major banks. For the cash and cash equivalents denominated in foreign currencies and/or located outside the U.S., we do not anticipate any material amounts being unavailable for use in running our business, but may face limitations on moving cash out of certain foreign jurisdictions due to currency controls and potential negative economic consequences.

Restricted Cash. Restricted cash includes cash that is legally or contractually restricted, as well as our settlement and merchant reserve assets (discussed below). The nature of the restrictions on our settlement and merchant reserve assets consists of contractual restrictions with the merchants and restrictions arising from our policy and intention. It has historically been our policy to segregate settlement and merchant reserve assets from our operating cash balances and our intention is to continue to do so. As of September 30, 2024 and December 31, 2023, we had $1.8 million and $2.9 million, respectively, of restricted cash that mainly serves to collateralize bank and performance guarantees included in other current and non-current assets in our unaudited Condensed Consolidated Balance Sheets (“Balance Sheets” or “Balance Sheet”).
Settlement and Merchant Reserve Assets and Liabilities

Settlement and Merchant Reserve Assets and Liabilities. Settlement assets and settlement liabilities represent cash collected on behalf of merchants via payments processing services which is held for an established holding period until settlement with the customer. The holding period is generally one to four business days depending on the payment model and contractual terms with the customer. During the holding period, cash is subject to restriction and segregation based on the nature of our custodial relationship with the merchants. Should we fail to remit these funds to our merchants, the merchant's sole recourse for payment would be against us. These rights and obligations are set forth in the contracts between us and the merchants. Settlement assets are held with various major financial institutions and a corresponding liability is recorded for the amounts owed to the customer. At any given time, there may be differences between the cash held and the corresponding liability due to the timing of operating-related cash transfers.

Merchant reserve assets/liabilities represent deposits collected from merchants to mitigate our risk of loss due to nonperformance of settlement obligations initiated by those merchants using our payments processing services, or non-payment by customers for services rendered by us. We perform a credit risk evaluation on each customer based on multiple criteria, which provides the basis for the deposit amount required for each merchant. For the duration of our relationship with each merchant, we hold their reserve deposits with major financial institutions. We hold these funds in separate accounts, which are offset by corresponding liabilities.

The following table summarizes our settlement and merchant reserve assets and liabilities as of the indicated periods (in thousands):

 

 

 

September 30, 2024

 

 

December 31, 2023

 

 

 

Assets

 

 

Liabilities

 

 

Assets

 

 

Liabilities

 

Settlement assets/liabilities

 

$

228,679

 

 

$

226,684

 

 

$

260,712

 

 

$

259,825

 

Merchant reserve assets/liabilities

 

 

12,076

 

 

 

12,099

 

 

 

13,987

 

 

 

13,992

 

Total

 

$

240,755

 

 

$

238,783

 

 

$

274,699

 

 

$

273,817

 

 

Financial Instruments

Financial Instruments. Our financial instruments as of September 30, 2024 and December 31, 2023 include cash and cash equivalents, settlement and merchant reserve assets and liabilities, accounts receivable, accounts payable, and debt. Due to their short maturities, the carrying amounts of cash equivalents, settlement and merchant reserve assets and liabilities, accounts receivable, and accounts payable approximate their fair value.

We have chosen not to record our debt at fair value, with changes recognized in earnings each reporting period. The following table indicates the carrying value and estimated fair value of our debt as of the indicated periods (in thousands):

 

 

 

September 30, 2024

 

 

December 31, 2023

 

 

 

Carrying Value

 

 

Fair Value

 

 

Carrying Value

 

 

Fair Value

 

2023 Convertible Notes (par value)

 

$

425,000

 

 

$

425,978

 

 

$

425,000

 

 

$

428,506

 

2021 Credit Agreement (carrying value including
    current maturities)

 

 

127,500

 

 

 

127,500

 

 

 

133,125

 

 

 

133,125

 

The fair value of our convertible notes was estimated based upon quoted market prices or recent sales activity, while the fair value of our credit agreement was estimated using a discounted cash flow methodology, both of which are considered Level 2 inputs. See Note 4 for a discussion regarding our debt.

Pillar Two

Pillar Two. Numerous foreign jurisdictions have enacted, or are in the process of enacting, legislation to adopt a minimum effective tax rate. Pillar Two, which was established by the Organization for Economic Co-operation and Development (OECD), generally provides for a 15% minimum effective tax rate for multinational enterprises in every jurisdiction in which they operate. The U.S. has not yet adopted Pillar Two, however, various other governments around the world have. These rules did not have a material impact on our taxes for the quarter and nine months ended September 30, 2024. We continue to monitor evolving tax legislation in the jurisdictions in which we operate.

Accounting Pronouncements Issued but Not Yet Effective

Accounting Pronouncements Issued but Not Yet Effective. In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280), (“ASU 2023-07”), which enhances reportable segment disclosure requirements in part by requiring entities to disclose significant expenses related to their reportable segments. ASU 2023-07 also requires disclosure of the title and position of the company’s Chief Operating Decision Maker (“CODM”) and how the CODM uses financial reporting to assess segment performance and allocate resources. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The adoption of this standard only impacts disclosures and is not expected to have a material impact on our Financial Statements.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which requires entities to disclose more detailed information about their effective tax rate reconciliation as well as information on income taxes paid. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. The adoption of this standard only impacts disclosures and is not expected to have a material impact on our Financial Statements.

v3.24.3
Summary of Significant Accounting Policies (Tables)
9 Months Ended
Sep. 30, 2024
Accounting Policies [Abstract]  
Schedule of Revenue Disaggregated by Revenue Type, Geographic Region and Customer

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 revenue type, geographic region, and customer vertical.

Revenue by type for the quarters and nine months ended September 30, 2024 and 2023 was as follows (in thousands):

 

 

 

Quarter Ended

 

 

Nine Months Ended

 

 

 

September 30, 2024

 

 

September 30, 2023

 

 

September 30, 2024

 

 

September 30, 2023

 

SaaS and related solutions

 

$

263,701

 

 

$

250,777

 

 

$

788,054

 

 

$

764,253

 

Software and services

 

 

19,705

 

 

 

23,578

 

 

 

56,780

 

 

 

73,235

 

Maintenance

 

 

11,737

 

 

 

12,513

 

 

 

35,762

 

 

 

34,446

 

Total revenue

 

$

295,143

 

 

$

286,868

 

 

$

880,596

 

 

$

871,934

 

 

We use the location of the customer as the basis of attributing revenue to geographic regions. Revenue by geographic region for the quarters and nine months ended September 30, 2024 and 2023, as a percentage of our total revenue, was as follows:

 

 

 

Quarter Ended

 

 

Nine Months Ended

 

 

 

September 30, 2024

 

 

September 30, 2023

 

 

September 30, 2024

 

 

September 30, 2023

 

Americas (principally the U.S.)

 

 

88

%

 

 

86

%

 

 

88

%

 

 

86

%

Europe, Middle East, and Africa

 

 

9

%

 

 

9

%

 

 

8

%

 

 

10

%

Asia Pacific

 

 

3

%

 

 

5

%

 

 

4

%

 

 

4

%

Total revenue

 

 

100

%

 

 

100

%

 

 

100

%

 

 

100

%

 

We generate our revenue primarily from the global communications markets; however, we serve an expanding group of customers in other markets including retail, financial services, healthcare, insurance, and government entities. Revenue by customer vertical for the quarters and nine months ended September 30, 2024 and 2023, as a percentage of our total revenue, was as follows:

 

 

 

Quarter Ended

 

 

Nine Months Ended

 

 

 

September 30, 2024

 

 

September 30, 2023

 

 

September 30, 2024

 

 

September 30, 2023

 

Broadband/Cable/Satellite

 

 

53

%

 

 

53

%

 

 

52

%

 

 

53

%

Telecommunications

 

 

18

%

 

 

20

%

 

 

18

%

 

 

20

%

Other

 

 

29

%

 

 

27

%

 

 

30

%

 

 

27

%

Total revenue

 

 

100

%

 

 

100

%

 

 

100

%

 

 

100

%

Schedule of Settlement and Merchant Reserve Assets and Liabilities

The following table summarizes our settlement and merchant reserve assets and liabilities as of the indicated periods (in thousands):

 

 

 

September 30, 2024

 

 

December 31, 2023

 

 

 

Assets

 

 

Liabilities

 

 

Assets

 

 

Liabilities

 

Settlement assets/liabilities

 

$

228,679

 

 

$

226,684

 

 

$

260,712

 

 

$

259,825

 

Merchant reserve assets/liabilities

 

 

12,076

 

 

 

12,099

 

 

 

13,987

 

 

 

13,992

 

Total

 

$

240,755

 

 

$

238,783

 

 

$

274,699

 

 

$

273,817

 

 

Carrying Value and Estimated Fair Value of Debt

We have chosen not to record our debt at fair value, with changes recognized in earnings each reporting period. The following table indicates the carrying value and estimated fair value of our debt as of the indicated periods (in thousands):

 

 

 

September 30, 2024

 

 

December 31, 2023

 

 

 

Carrying Value

 

 

Fair Value

 

 

Carrying Value

 

 

Fair Value

 

2023 Convertible Notes (par value)

 

$

425,000

 

 

$

425,978

 

 

$

425,000

 

 

$

428,506

 

2021 Credit Agreement (carrying value including
    current maturities)

 

 

127,500

 

 

 

127,500

 

 

 

133,125

 

 

 

133,125

 

v3.24.3
Goodwill and Intangible Assets (Tables)
9 Months Ended
Sep. 30, 2024
Goodwill and Intangible Assets Disclosure [Abstract]  
Rollforward of Goodwill The changes in the carrying amount of goodwill for the nine months ended September 30, 2024 were as follows (in thousands):

 

January 1, 2024, balance

 

$

308,596

 

Effects of changes in foreign currency exchange rates

 

 

4,191

 

Goodwill acquired during the period

 

 

10,662

 

September 30, 2024, balance

 

$

323,449

 

Summary of Carrying Value of Other Intangible Assets As of September 30, 2024 and December 31, 2023, the carrying values of these assets were as follows (in thousands):

 

 

 

September 30, 2024

 

 

December 31, 2023

 

 

 

Gross Carrying Amount

 

 

Accumulated Amortization

 

 

Net Amount

 

 

Gross Carrying Amount

 

 

Accumulated Amortization

 

 

Net Amount

 

Acquired customer contracts

 

$

177,528

 

 

$

(134,742

)

 

$

42,786

 

 

$

162,348

 

 

$

(126,469

)

 

$

35,879

 

Software

 

 

191,761

 

 

 

(168,808

)

 

 

22,953

 

 

 

171,825

 

 

 

(157,601

)

 

 

14,224

 

Total other intangible assets

 

$

369,289

 

 

$

(303,550

)

 

$

65,739

 

 

$

334,173

 

 

$

(284,070

)

 

$

50,103

 

Summary of Carrying Values of Customer Contract Cost Assets

Customer Contract Costs. As of September 30, 2024 and December 31, 2023, the carrying values of our customer contract cost assets, related to those contracts with a contractual term greater than one year, were as follows (in thousands):

 

 

 

September 30, 2024

 

 

December 31, 2023

 

 

 

Gross Carrying Amount

 

 

Accumulated Amortization

 

 

Net Amount

 

 

Gross Carrying Amount

 

 

Accumulated Amortization

 

 

Net Amount

 

Customer contract costs

 

$

107,131

 

 

$

(46,641

)

 

$

60,490

 

 

$

96,515

 

 

$

(42,094

)

 

$

54,421

 

v3.24.3
Debt (Tables)
9 Months Ended
Sep. 30, 2024
Debt Disclosure [Abstract]  
Long-Term Debt

As of September 30, 2024 and December 31, 2023, our long-term debt was as follows (in thousands):

 

 

 

September 30,
2024

 

 

December 31,
2023

 

2023 Convertible Notes:

 

 

 

 

 

 

2023 Convertible Notes – senior unsecured convertible notes, due
    
September 2028, cash interest at 3.875%

 

$

425,000

 

 

$

425,000

 

Less – deferred financing costs

 

 

(11,279

)

 

 

(13,216

)

 2023 Convertible Notes, net of unamortized discounts

 

 

413,721

 

 

 

411,784

 

2021 Credit Agreement:

 

 

 

 

 

 

2021 Term Loan, due September 2026, interest at adjusted SOFR plus
    applicable margin (combined rate of
6.079% at September 30, 2024)

 

 

127,500

 

 

 

133,125

 

Less – deferred financing costs

 

 

(1,735

)

 

 

(2,412

)

 2021 Term Loan, net of unamortized discounts

 

 

125,765

 

 

 

130,713

 

$450 million revolving loan facility, due September 2026, interest at adjusted
    SOFR plus applicable margin

 

 

-

 

 

 

-

 

Total debt, net of unamortized discounts

 

 

539,486

 

 

 

542,497

 

Current portion of long-term debt

 

 

(7,500

)

 

 

(7,500

)

Long-term debt, net of unamortized discounts

 

$

531,986

 

 

$

534,997

 

v3.24.3
Restructuring and Reorganization Charges (Tables)
9 Months Ended
Sep. 30, 2024
Restructuring and Related Activities [Abstract]  
Schedule of Activity in Business Restructuring and Reorganization Reserves

The activity in the restructuring and reorganization reserves during the nine months ended September 30, 2024 was as follows (in thousands):

 

 

 

Termination Benefits

 

 

Other

 

 

Total

 

January 1, 2024, balance

 

$

1,434

 

 

$

8,100

 

 

$

9,534

 

Charged to expense during period

 

 

9,593

 

 

 

2,447

 

 

 

12,040

 

Cash payments

 

 

(10,311

)

 

 

(7,589

)

 

 

(17,900

)

Adjustment for accelerated depreciation

 

 

-

 

 

 

(438

)

 

 

(438

)

Other

 

 

1,180

 

 

 

-

 

 

 

1,180

 

September 30, 2024, balance

 

$

1,896

 

 

$

2,520

 

 

$

4,416

 

v3.24.3
Earnings Per Common Share (Tables)
9 Months Ended
Sep. 30, 2024
Earnings Per Share [Abstract]  
Reconciliation of the Basic and Diluted EPS Denominators

The reconciliation of the basic and diluted EPS denominators related to common shares is included in the following table (in thousands):

 

 

 

Quarter Ended

 

 

Nine Months Ended

 

 

 

 

September 30, 2024

 

 

September 30, 2023

 

 

September 30, 2024

 

 

September 30, 2023

 

 

Basic weighted-average common shares

 

 

28,362

 

 

 

30,097

 

 

 

28,475

 

 

 

30,381

 

 

Dilutive effect of restricted common stock

 

 

106

 

 

 

187

 

 

 

146

 

 

159

 

 

Diluted weighted-average common shares

 

 

28,468

 

 

 

30,284

 

 

 

28,621

 

 

 

30,540

 

 

v3.24.3
Summary of Significant Accounting Policies (Details Textual) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Dec. 31, 2023
Summary Of Significant Accounting Policies [Line Items]          
Aggregate amount of transaction price allocated to remaining performance obligations $ 1,300,000   $ 1,300,000    
Remaining performance obligations expected to be recognized, year 2036   2036    
Deferred revenue recognized $ 8,600 $ 7,800 $ 38,400 $ 39,300  
Restricted cash $ 1,787 $ 0 $ 1,787 $ 0 $ 2,900
Minimum          
Summary Of Significant Accounting Policies [Line Items]          
Holding period of settlement and merchant reserve assets and liabilities     1 day    
Maximum          
Summary Of Significant Accounting Policies [Line Items]          
Holding period of settlement and merchant reserve assets and liabilities     4 days    
Software as a Service and Related Solutions Revenue | Minimum          
Summary Of Significant Accounting Policies [Line Items]          
Future revenue including variable consideration, contractual terms ending, year     2024    
Software as a Service and Related Solutions Revenue | Maximum          
Summary Of Significant Accounting Policies [Line Items]          
Future revenue including variable consideration, contractual terms ending, year     2036    
v3.24.3
Summary of Significant Accounting Policies (Details Textual 1) - Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2024-10-01
Sep. 30, 2024
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]  
Remaining performance obligations expected to be recognized, percentage 70.00%
Remaining performance obligations expected to be recognized, period 2 years 3 months
v3.24.3
Summary of Significant Accounting Policies - Schedule of Revenue Disaggregated by Revenue Type, Geographic Region and Customer (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Disaggregation Of Revenue [Line Items]        
Total revenue $ 295,143 $ 286,868 $ 880,596 $ 871,934
Percentage of total revenue 100.00% 100.00% 100.00% 100.00%
Broadband/Cable/Satellite        
Disaggregation Of Revenue [Line Items]        
Percentage of total revenue 53.00% 53.00% 52.00% 53.00%
Telecommunications        
Disaggregation Of Revenue [Line Items]        
Percentage of total revenue 18.00% 20.00% 18.00% 20.00%
Other        
Disaggregation Of Revenue [Line Items]        
Percentage of total revenue 29.00% 27.00% 30.00% 27.00%
Americas (principally the U.S.)        
Disaggregation Of Revenue [Line Items]        
Percentage of total revenue 88.00% 86.00% 88.00% 86.00%
Europe, Middle East and Africa        
Disaggregation Of Revenue [Line Items]        
Percentage of total revenue 9.00% 9.00% 8.00% 10.00%
Asia Pacific        
Disaggregation Of Revenue [Line Items]        
Percentage of total revenue 3.00% 5.00% 4.00% 4.00%
SaaS and Related Solutions        
Disaggregation Of Revenue [Line Items]        
Total revenue $ 263,701 $ 250,777 $ 788,054 $ 764,253
Software and Services        
Disaggregation Of Revenue [Line Items]        
Total revenue 19,705 23,578 56,780 73,235
Maintenance        
Disaggregation Of Revenue [Line Items]        
Total revenue $ 11,737 $ 12,513 $ 35,762 $ 34,446
v3.24.3
Summary of Significant Accounting Policies - Schedule of Settlement and Merchant Reserve Assets and Liabilities (Details) - USD ($)
$ in Thousands
Sep. 30, 2024
Dec. 31, 2023
Sep. 30, 2023
Settlement And Merchant Reserve Assets And Liabilities [Abstract]      
Settlement assets $ 228,679 $ 260,712  
Merchant reserve assets 12,076 13,987  
Total 240,755 274,699 $ 193,371
Settlement liabilities 226,684 259,825  
Merchant reserve liabilities 12,099 13,992  
Total $ 238,783 $ 273,817  
v3.24.3
Summary of Significant Accounting Policies - Carrying Value and Estimated Fair Value of Debt (Details) - USD ($)
$ in Thousands
Sep. 30, 2024
Dec. 31, 2023
2023 Convertible Notes    
Carrying value and estimated fair value of debt    
Carrying Value $ 425,000 $ 425,000
Fair Value 425,978 428,506
2021 Credit Agreement    
Carrying value and estimated fair value of debt    
Carrying Value 127,500 133,125
Fair Value $ 127,500 $ 133,125
v3.24.3
Goodwill and Intangible Assets - Summary of Changes in Carrying Amount of Goodwill (Details)
$ in Thousands
9 Months Ended
Sep. 30, 2024
USD ($)
Goodwill RollForward  
Beginning balance $ 308,596
Effects of changes in foreign currency exchange rates 4,191
Goodwill acquired during the period 10,662
Ending balance $ 323,449
v3.24.3
Goodwill and Intangible Assets - Summary of Carrying Value of Assets (Details) - USD ($)
$ in Thousands
Sep. 30, 2024
Dec. 31, 2023
Finite Lived Intangible Assets [Line Items]    
Gross Carrying Amount $ 369,289 $ 334,173
Accumulated Amortization (303,550) (284,070)
Net Amount 65,739 50,103
Acquired customer contracts    
Finite Lived Intangible Assets [Line Items]    
Gross Carrying Amount 177,528 162,348
Accumulated Amortization (134,742) (126,469)
Net Amount 42,786 35,879
Software    
Finite Lived Intangible Assets [Line Items]    
Gross Carrying Amount 191,761 171,825
Accumulated Amortization (168,808) (157,601)
Net Amount $ 22,953 $ 14,224
v3.24.3
Goodwill and Intangible Assets (Details Textual) - USD ($)
$ in Millions
3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Finite Lived Intangible Assets [Line Items]        
Total amortization expense $ 7.1 $ 6.4 $ 18.8 $ 19.5
Estimated total amortization expense 2024 25.7   25.7  
Estimated total amortization expense 2025 21.9   21.9  
Estimated total amortization expense 2026 15.1   15.1  
Estimated total amortization expense 2027 7.0   7.0  
Estimated total amortization expense 2028 4.3   4.3  
Customer contract costs        
Finite Lived Intangible Assets [Line Items]        
Total amortization expense $ 5.4 $ 5.0 $ 16.1 $ 14.4
v3.24.3
Goodwill and Intangible Assets - Summary of Carrying Values of Customer Contract Cost Assets (Details) - USD ($)
$ in Thousands
Sep. 30, 2024
Dec. 31, 2023
Capitalized Contract Cost [Abstract]    
Customer contract costs, Gross Carrying Amount $ 107,131 $ 96,515
Customer contract costs, Accumulated Amortization (46,641) (42,094)
Customer contract costs, Net Amount $ 60,490 $ 54,421
v3.24.3
Debt - Long-Term Debt (Details) - USD ($)
$ in Thousands
Sep. 30, 2024
Dec. 31, 2023
Debt Instrument [Line Items]    
Total debt, net of unamortized discounts $ 539,486 $ 542,497
Current portion of long-term debt (7,500) (7,500)
Long-term debt, net of unamortized discounts 531,986 534,997
2021 Credit Agreement    
Debt Instrument [Line Items]    
Total long-term debt, gross 127,500 133,125
2021 Credit Agreement | Revolving Loan    
Debt Instrument [Line Items]    
Revolving loan facility 0 0
2021 Credit Agreement | 2021 Term Loan    
Debt Instrument [Line Items]    
Total long-term debt, gross 127,500 133,125
Less – deferred financing costs (1,735) (2,412)
Total debt, net of unamortized discounts 125,765 130,713
2023 Convertible Notes    
Debt Instrument [Line Items]    
Total long-term debt, gross 425,000 425,000
Less – deferred financing costs (11,279) (13,216)
Total debt, net of unamortized discounts 413,721 411,784
2023 Senior Unsecured Convertible Notes    
Debt Instrument [Line Items]    
Total long-term debt, gross $ 425,000 $ 425,000
v3.24.3
Debt - Long-Term Debt (Parenthetical) (Details)
$ in Millions
9 Months Ended
Sep. 30, 2024
USD ($)
2023 Senior Unsecured Convertible Notes  
Debt Instrument [Line Items]  
Interest rate on 2023 Convertible Notes 3.875%
Maturity period Sep. 30, 2028
2021 Credit Agreement | 2021 Term Loan  
Debt Instrument [Line Items]  
Combined interest rate on 2021 Term Loan 6.079%
Maturity period Sep. 30, 2026
2021 Credit Agreement | Revolving Loan  
Debt Instrument [Line Items]  
Combined interest rate on 2021 Term Loan 6.079%
Amount available under credit facility $ 450
Maturity period Sep. 30, 2026
v3.24.3
Debt - 2023 Convertible Notes (Details Textual) - 2023 Convertible Notes
$ / shares in Units, shares in Thousands, $ in Thousands
9 Months Ended
Sep. 30, 2024
USD ($)
Tradingday
$ / shares
shares
Debt Instrument [Line Items]  
Initial conversion rate of common stock 14.0753
Convertible Notes, initial conversion of Par Value Convertible Notes to common stock | $ $ 1,000
Initial conversion price | $ / shares $ 71.05
Initial conversion rate | $ / shares $ 0.28
Redemption period Sep. 21, 2026
Trading days | Tradingday 20
Consecutive trading days | Tradingday 30
Common Stock  
Debt Instrument [Line Items]  
Number of shares issuable upon conversion | shares 5,980
Minimum  
Debt Instrument [Line Items]  
Carrying value of debt | $ $ 100,000
Conversion price 130.00%
v3.24.3
Debt - Credit Agreement (Details Textual) - USD ($)
$ in Thousands
9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Debt Instrument Line Items    
Principal Repayments $ 20,625 $ 310,625
Letter of credit amount $ 1,500  
2021 Credit Agreement | Minimum    
Debt Instrument Line Items    
Line of credit facility, unused capacity, commitment fee percentage 0.15%  
2021 Credit Agreement | Maximum    
Debt Instrument Line Items    
Line of credit facility, unused capacity, commitment fee percentage 0.325%  
2021 Credit Agreement | SOFR | Minimum    
Debt Instrument Line Items    
Basis spread on term loan 1.375%  
2021 Credit Agreement | SOFR | Maximum    
Debt Instrument Line Items    
Basis spread on term loan 2.125%  
2021 Credit Agreement | Base Rate | Minimum    
Debt Instrument Line Items    
Basis spread on term loan 0.375%  
2021 Credit Agreement | Base Rate | Maximum    
Debt Instrument Line Items    
Basis spread on term loan 1.125%  
2021 Credit Agreement | Revolving Loan    
Debt Instrument Line Items    
Carrying value of debt $ 450,000  
Term loan period 5 years  
Basis spread on term loan 1.375%  
Line of credit facility, unused capacity, commitment fee percentage 0.15%  
Combined interest rate on 2021 Term Loan 6.079%  
Credit facility, current borrowing capacity $ 448,500  
Credit Facility, current borrowing outstanding $ 0  
2021 Credit Agreement | Revolving Loan | SOFR    
Debt Instrument Line Items    
SOFR, spread adjustment 0.10%  
2021 Credit Agreement | 2021 Term Loan    
Debt Instrument Line Items    
Carrying value of debt $ 150,000  
Term loan period 5 years  
Principal Repayments $ 5,600  
Basis spread on term loan 1.375%  
Combined interest rate on 2021 Term Loan 6.079%  
2021 Credit Agreement | 2021 Term Loan | SOFR    
Debt Instrument Line Items    
SOFR, spread adjustment 0.10%  
v3.24.3
Debt - Others (Details Textual) - New Financing Agreement
$ in Millions
Sep. 30, 2024
USD ($)
Debt Instrument [Line Items]  
Financing agreement amount $ 10.7
Amount outstanding 9.8
Current Liabilities  
Debt Instrument [Line Items]  
Amount outstanding 4.8
Noncurrent Liabilities  
Debt Instrument [Line Items]  
Amount outstanding $ 5.0
v3.24.3
Acquisitions (Details Textual) - USD ($)
$ in Thousands
9 Months Ended
Jun. 03, 2024
Sep. 30, 2024
Sep. 30, 2023
Apr. 01, 2024
Dec. 31, 2023
Business Acquisition [Line Items]          
Goodwill   $ 323,449     $ 308,596
Business combinations, net of cash and settlement assets acquired   17,293 $ 0    
DGIT Systems Pty Ltd          
Business Acquisition [Line Items]          
Potential future earn out payments   13,000      
Accrued potential future earn out payments   $ 100      
Business acquisition date   Oct. 04, 2021      
Percentage of acquired of equity   100.00%      
Business acquisition, purchase price   $ 16,000      
Business acquisition, payment   14,000      
Business acquisition, remaining consideration   2,000      
Purchase price payments   $ 500      
Acquisition 1          
Business Acquisition [Line Items]          
Business acquisition date   Apr. 01, 2024      
Business acquisition, purchase price   $ 15,000      
Non-cash settlement of working capital items   3,500      
Business acquisition, payment   11,500      
Goodwill       $ 6,400  
Acquired trade accounts receivable       2,100  
Settlement liabilities assumed       2,700  
Acquisition 1 | Acquired customer contracts          
Business Acquisition [Line Items]          
Estimated fair values of assets acquired       $ 4,300  
iCheckGateway.com, LLC          
Business Acquisition [Line Items]          
Potential future earn out payments $ 15,000        
Accrued potential future earn out payments   $ 3,500      
Business acquisition date   Jun. 03, 2024      
Percentage of acquired of equity 100.00%        
Business acquisition, purchase price $ 17,600        
Goodwill 4,200        
Settlement assets assumed 45,900        
Settlement liabilities assumed 44,700        
iCheckGateway.com, LLC | Acquired customer contracts          
Business Acquisition [Line Items]          
Estimated fair values of assets acquired $ 10,700        
v3.24.3
Restructuring and Reorganization Charges (Details Textual)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2024
USD ($)
Sep. 30, 2023
USD ($)
Sep. 30, 2024
USD ($)
Employees
Sep. 30, 2023
USD ($)
Dec. 31, 2023
USD ($)
Restructuring Cost and Reserve [Line Items]          
Restructuring and reorganization reserves $ 4,416   $ 4,416   $ 9,534
Cash payments     17,900    
Restructuring and reorganization charges 2,943 $ 1,152 12,040 $ 8,421  
Current Liabilities          
Restructuring Cost and Reserve [Line Items]          
Restructuring and reorganization reserves $ 3,200   3,200    
Termination Benefits Related to Organizational Changes          
Restructuring Cost and Reserve [Line Items]          
Restructuring and reorganization charges     $ 9,600    
Reduced workforce | Employees     300    
Contract Termination          
Restructuring Cost and Reserve [Line Items]          
Cash payments     $ 5,600    
v3.24.3
Restructuring and Reorganization Charges - Schedule of Activity in Business Restructuring and Reorganization Reserves (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Restructuring Cost and Reserve [Line Items]        
Beginning Balance     $ 9,534  
Charged to expense during period $ 2,943 $ 1,152 12,040 $ 8,421
Cash payments     (17,900)  
Adjustment for accelerated depreciation     (438)  
Other     1,180  
Ending Balance 4,416   4,416  
Termination Benefits        
Restructuring Cost and Reserve [Line Items]        
Beginning Balance     1,434  
Charged to expense during period     9,593  
Cash payments     (10,311)  
Adjustment for accelerated depreciation     0  
Other     1,180  
Ending Balance 1,896   1,896  
Other        
Restructuring Cost and Reserve [Line Items]        
Beginning Balance     8,100  
Charged to expense during period     2,447  
Cash payments     (7,589)  
Adjustment for accelerated depreciation     (438)  
Other     0  
Ending Balance $ 2,520   $ 2,520  
v3.24.3
Commitments, Guarantees and Contingencies (Details Textual) - USD ($)
$ in Thousands
9 Months Ended
Sep. 30, 2024
Dec. 31, 2023
Sep. 30, 2023
Other Commitments [Line Items]      
Letter of credit amount $ 1,500    
Restricted cash included in current and non-current assets 1,787 $ 2,900 $ 0
Money transmitter bonds outstanding $ 22,000    
Warranty period 90 days    
Surety And Money Transmitter Bonds      
Other Commitments [Line Items]      
Restricted assets used to collateralize guarantees $ 7,400    
Bid Bond      
Other Commitments [Line Items]      
Restricted assets used to collateralize guarantees $ 1,000    
v3.24.3
Earnings Per Common Share - Reconciliation of the Basic and Diluted EPS Denominators (Details) - shares
shares in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Reconciliation of the basic and diluted EPS denominators        
Basic weighted-average common shares 28,362 30,097 28,475 30,381
Dilutive effect of restricted common stock 106 187 146 159
Diluted weighted-average common shares 28,468 30,284 28,621 30,540
v3.24.3
Stockholders' Equity and Equity Compensation Plans (Details Textual) - USD ($)
$ / shares in Units, $ in Thousands
1 Months Ended 3 Months Ended 9 Months Ended
Jul. 31, 2014
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Aug. 01, 2024
Stockholders Equity And Equity Compensation Plans [Line Items]            
Repurchase of common stock, shares     1,991,000   1,991,000  
Total amount paid     $ 107,000   $ 107,000  
Weighted-average price per share     $ 53.73   $ 53.73  
Repurchase of common stock for employee tax withholdings, shares   3,000 3,000 172,000 171,000  
Repurchase of common stock for tax withholdings, value   $ 200 $ 100 $ 9,100 $ 9,600  
Cash dividends declared per common share   $ 0.3 $ 0.28      
Cash dividend   $ 8,800 $ 8,700 $ 26,400 26,400  
Stock warrants term 10 years          
Performance based awards granted to executive management and certain key employees shares       155,000    
Vesting maturity date       first quarter of 2026    
Vesting period       2 years    
Stock-based compensation expense   $ 8,700 $ 7,200 $ 25,023 $ 21,253  
Market-based Awards            
Stockholders Equity And Equity Compensation Plans [Line Items]            
Awards vested       52,000    
Time-based Awards            
Stockholders Equity And Equity Compensation Plans [Line Items]            
Vesting period       3 years    
Awards vested       496,000    
Comcast            
Stockholders Equity And Equity Compensation Plans [Line Items]            
Issuance of stock warrants 2,900,000          
Stock warrants, exercise price $ 26.68          
Stock warrants issued 1,000,000          
SEC Rule 10b5-1 Plan            
Stockholders Equity And Equity Compensation Plans [Line Items]            
Repurchase of common stock, shares   313,000 311,000 716,000 311,000  
Total amount paid   $ 14,400 $ 16,900 $ 33,700 $ 16,900  
Weighted-average price per share   $ 46.11 $ 54.36 $ 47.07 $ 54.36  
Stock Repurchase Program            
Stockholders Equity And Equity Compensation Plans [Line Items]            
Remaining authorized repurchase amount   $ 162,000   $ 162,000   $ 100,000
Share repurchase program, expiration date       Dec. 31, 2025    
2023 Convertible Notes            
Stockholders Equity And Equity Compensation Plans [Line Items]            
Repurchase of common stock, shares     1,680,000   1,680,000  
Total amount paid     $ 90,100   $ 90,100  
Weighted-average price per share     $ 53.62   $ 53.62  

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