What changed in CSG SYSTEMS INTERNATIONAL INC's 10-K — 2022 vs 2023
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Paragraph-level year-over-year comparison of CSG SYSTEMS INTERNATIONAL INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.
+440 added−451 removedSource: 10-K (2024-02-16) vs 10-K (2023-02-17)
Top changes in CSG SYSTEMS INTERNATIONAL INC's 2023 10-K
440 paragraphs added · 451 removed · 332 edited across 3 sections
- Item 6. [Reserved]+331 / −316 · 253 edited
- Item 1A. Risk Factors+61 / −84 · 42 edited
- Item 1. Business+48 / −51 · 37 edited
Item 1. Business
Business — how the company describes what it does
37 edited+11 added−14 removed46 unchanged
Item 1. Business
Business — how the company describes what it does
37 edited+11 added−14 removed46 unchanged
2022 filing
2023 filing
Biggest changeAs of December 31, 2022, our workforce was approximately 64% male, 36% female, and less than 1% nonbinary or undeclared. The race/ethnicity of our U.S. workforce was 67% White, 12% Asian, 8% Hispanic or Latino, 7% Black or African American, We believe our employee relations are good and we work hard to constantly improve in this area.
Biggest changeThe race/ethnicity of our U.S. workforce was 67% White, 12% Asian, 7% Hispanic or Latino, 6% Black or African American, We believe our employee relations are good and we work hard to constantly improve in this area. 8 Sustainability and Social Responsibility We aspire to envision, invent, and create a better, more inclusive, and future ready world by channeling the power of all.
The account teams are supported by sales support personnel who are experienced in the various industry-leading solutions that we provide. And because our customers trust and depend on CSG, we have built a self-sustaining customer ecosystem that provides us with the opportunity to gain more share of our customers’ IT spend by cross-selling more solutions to them.
The account teams are supported by sales support personnel who are experienced in the various industry-leading solutions that we provide. And because our customers trust and depend on CSG, we have built a self-sustaining customer ecosystem that provides us with the opportunity to gain a greater share of our customers’ IT spend by cross-selling more solutions to them.
These solutions span the commerce lifecycle, streamlining the entire revenue monetization process from concept to cash, helping companies address digital transformation in the ever-changing and dynamic business world in which they operate. 4 The power and capacity of 5G will fuel the growth of digital services across many industries including healthcare, education, transportation, agriculture, and manufacturing.
These solutions span the commerce lifecycle, streamlining the entire revenue monetization process from concept to cash, helping companies address digital transformation in the ever-changing and dynamic business world in which they operate. The power and capacity of 5G will fuel the growth of digital services across many industries including healthcare, education, transportation, agriculture, and manufacturing.
In marketing, we have taken a digital-first approach aimed at identifying and accelerating opportunities through the pipeline by establishing CSG as an innovative, results-driven thought leader and proven partner in helping our customers solve their toughest business problems. 7 Competition The market for our offerings is competitive and evolving.
In marketing, we have taken a digital-first approach aimed at identifying and accelerating opportunities through the pipeline by establishing CSG as an innovative, results-driven thought leader and proven partner in helping our customers solve their toughest business problems. Competition The market for our offerings is competitive and evolving.
Information on our website is not incorporated by reference into this report and should not be considered part of this document. Additionally, these reports are available on the SEC’s website at www.sec.gov. Code of Conduct and Business Ethics A copy of our Code of Conduct and Business Ethics (the “Code of Conduct”) is maintained on our website.
Information on our website is not incorporated by reference into this report and should not be considered part of this document. Additionally, these reports are available on the SEC’s website at www.sec.gov. 9 Code of Conduct and Business Ethics A copy of our Code of Conduct and Business Ethics (the “Code of Conduct”) is maintained on our website.
We will continually add relevant capabilities to what we do as a company, both in terms of our people and our solutions. 6 Delivering an exceptional customer experience: We believe we deliver more business value by doing what we say and being easy to do business with.
We will continually add relevant capabilities to what we do as a company, both in terms of our people and our solutions. Delivering an exceptional customer experience: We believe we deliver more business value by doing what we say and being easy to do business with.
Taken in whole or in modules, our SaaS payments platform combined with our deep domain expertise, help leading brands across different industries optimize their business processes and integrate critical back- and front-office technology platforms to create a differentiated customer experience, resulting in accelerated growth and profits.
Taken in whole or in modules, our SaaS payments platform combined with our deep domain expertise, helps leading brands across different industries optimize their business processes and integrate critical back- and front-office technology platforms to create a differentiated customer experience, resulting in accelerated growth and profits.
To accomplish that, we are focusing on these key areas: Expanding Our Community Impact: We support Community Based Organizations (“CBOs”) that provide underrepresented communities the opportunity to participate, thrive, and make a lasting impact on the technology industry across the globe. We continue to expand our partnerships with CBOs like WeMakeChange and Earthday.org.
To accomplish that, we are focusing on these key areas: Expanding Our Community Impact: We support Community Based Organizations (“CBOs”) that provide underrepresented communities with the opportunity to participate, thrive, and make a lasting impact across the globe. We continue to expand our partnerships with CBOs like WeMakeChange and Earthday.org.
This means fostering a diverse, industry leading employee experience focused on employee choice and flexibility, providing programs and events focusing on wellbeing and mental health of all team members, and inspiring collaborative and connected teams. • Winning with Talent by attracting and retaining the best, most diverse global talent; accelerating time to productivity, integration, and engagement; embedding diversity, equity, and inclusion considerations into our strategy; and ensuring our global team members thrive in an inclusive environment.
This means fostering a diverse, industry leading employee experience focused on employee choice and flexibility, providing programs and events focusing on wellbeing and mental health of all team members, and inspiring collaborative and connected teams. • Winning with Talent by attracting and retaining the best, most diverse global talent; accelerating time to productivity, integration, and engagement; embedding sustainability and inclusion considerations into our strategy; and ensuring our global team members thrive in an inclusive environment.
At CSG, we have been recognized as a leader in payments, providing a full end-to-end SaaS payments platform, allowing organizations to accept electronic check/ACH, debit and credit card payments, and offer the ability to receive funds quicker via same-day ACH.
We have been recognized as a leader in payments, providing a full end-to-end SaaS payments platform, allowing organizations to accept electronic check/ACH, debit and credit card payments, and offer the ability to receive funds quicker via same-day ACH.
Accelerating our revenue growth: We continue to target accelerated long-term organic revenue growth and unlock significant value with disciplined strategic, financially-attractive acquisitions. Accelerating our growth will enable CSG to add scale and operating leverage in order to create greater customer and shareholder value.
Accelerating our revenue growth: We continue to target accelerated long-term organic revenue growth and unlock significant value with disciplined strategic, financially-attractive acquisitions. Accelerating our growth will enable CSG to add scale and operating leverage in order to create greater customer and stockholder value.
We look to acquire capabilities, proven product platforms, market share in high-growth industry verticals, and human capital talent. In today’s challenging macro-economic environment, we will remain highly disciplined and strive to ensure that every acquisition meets our four criteria: strategic fit, culture/integration fit, financial fit, and risk/return profile.
We look to acquire capabilities, proven product platforms, market share in high-growth industry verticals, and human capital talent. In today’s challenging macroeconomic environment, we will remain highly disciplined and strive to ensure that every acquisition meets our four criteria: strategic fit, culture/integration fit, financial fit, and risk/return profile.
Creating and leading with category-defining technology: Our broad portfolio of industry-leading solutions provide our customers with a competitive advantage. These solutions enable customers to efficiently manage their traditional businesses while being able to quickly deliver new digital services and a more personalized and relevant experience to their consumers.
Creating and leading with category-defining technology: Our broad portfolio of industry-leading solutions provide our customers with a competitive advantage. These solutions enable customers to efficiently manage their traditional businesses while being able to quickly deliver new digital services and incorporating AI to create a more personalized and relevant experience to their consumers.
Historically, we have had no waivers of a provision of our Code of Conduct. 10
Historically, we have had no waivers of a provision of our Code of Conduct.
In addition, we've continued our commitment to CSG's Global Days of Action, where we give every team member an opportunity (two free days) to volunteer their time in the community impact area of their choosing. Enhancing Our Environmental Stewardship: With employees in over 20 countries and serving customers globally, this is a vital and important focus area.
In addition, we've continued our commitment to CSG's Global Days of Action, where we give every team member an opportunity (two free days) to volunteer their time giving back to the community. Enhancing Our Environmental Stewardship: With employees in over 20 countries and serving customers globally, this is a vital and important focus area.
Our all-in-one payments platform simplifies and enables businesses and governments to onboard merchants quickly, deliver ongoing innovation, and address the changing market demands in digital payments. Our platform handles tens of billions of dollars in payment volumes annually for more than 98,000 active merchants. And we do this all in a secure, PCI-compliant environment.
Our all-in-one payments platform simplifies and enables businesses and governments to onboard merchants quickly, deliver ongoing innovation, and address the changing market demands in digital payments. Our platform handles tens of billions of dollars in payment volumes annually for approximately 114,000 active merchants and we do this all in a secure, PCI-compliant environment.
Outside of the CSP space, we work with hundreds of other customers and over 98,000 active merchants including some of the largest financial services companies, three of the largest pharmacy retailers in the U.S., property management companies, and state and local governments.
Outside of the CSP space, we work with hundreds of other customers and approximately 114,000 active merchants including some of the largest financial services companies, three of the largest pharmacy retailers in the U.S., property management companies, and state and local governments.
Customers that represented 10% or more of our revenue for 2022 and 2021 were as follows (in millions, except percentages): 2022 2021 Amount % of Revenue Amount % of Revenue Charter $ 221 20 % $ 221 21 % Comcast 214 20 % 216 21 % See the Significant Customer Relationships section of our Management’s Discussion and Analysis (“MD&A”) for additional information regarding our business relationships with these key customers.
Customers that represented 10% or more of our revenue for 2023 and 2022 were as follows (in millions, except percentages): 2023 2022 Amount % of Revenue Amount % of Revenue Charter $ 241 21 % $ 221 20 % Comcast 215 18 % 214 20 % See the Significant Customer Relationships section of our Management’s Discussion and Analysis (“MD&A”) for additional information regarding our business relationships with these key customers.
For a description of the risks associated with our intellectual property rights, see “Item 1A - Risk Factors – Failure to Protect Our Intellectual Property Rights or Claims by Others That We Infringe Their Intellectual Property Rights Could Substantially Harm Our Business, Financial Position and Results of Operations,” and “Item 1A – Risk Factors – We Rely on A Limited Number of Third-Party Vendor Relationships to Execute Our Business Which Exposes Us to Supply Chain Disruptions, Costs Increases, and Cyberattacks”.
Our failure to adequately establish, maintain, and protect our intellectual property rights could have a material adverse impact on our business, financial position, and results of operations. 7 For a description of the risks associated with our intellectual property rights, see “Item 1A - Risk Factors – Failure to Protect Our Intellectual Property Rights or Claims by Others That We Infringe Their Intellectual Property Rights Could Substantially Harm Our Business, Financial Position and Results of Operations,” and “Item 1A - Risk Factors – We Rely on A Limited Number of Third-Party Vendor Relationships to Execute Our Business Which Exposes Us to Supply Chain Disruptions, Costs Increases, and Cyberattacks”.
They need to make it easier for customers to identify which product or service is right for them; easier to buy, procure, and provision their goods and services; easier to communicate with or get updates from them; easier to modify the goods/services they buy; and easier to pay for the products and services they purchase.
They need to make it easier for customers to identify which product or service is right for them; easier to buy, procure, provision, and pay for their goods and services; easier to communicate with or get updates from them; and easier to modify the goods/services they buy. This is exactly where CSG’s SaaS platforms come in.
As of December 31, 2022, we employed over 5,700 people, of which approximately 41% were in North America, 42% were in our locations in Asia-Pacific and Australia, 10% were in our locations in Europe, the Middle East, and Africa, and 7% in our locations in South and Central America.
As of December 31, 2023, we employed over 6,000 people, of which approximately 45% were in our locations in Asia-Pacific and Australia, 38% were in our locations in North America, 10% were in our locations in Europe, the Middle East, and Africa, and 7% were in our locations in South and Central America.
Our products are recognized by industry analysts as best-in-class in the areas of 5G/IOT monetization, financial services, technology, telecom, field service management, OSS/BSS, journey orchestration, journey analytics, customer experience, and integrated payments.
Our products are recognized by industry analysts as best-in-class in the areas of 5G/IOT monetization, financial services, technology, telecom, field service management, OSS/BSS, journey orchestration, journey analytics, customer experience, and integrated payments. In 2023 we made our debut in the Gartner Magic Quadrant for Configure, Price and Quote (“CPQ”).
We help our customers deliver personalized, secure, and integrated customer experience solutions in order to grow their revenues and wow their customers with future-ready solutions that drive exceptional customer experiences.
What We Do Simply put, CSG helps companies solve their toughest business challenges. We help our customers deliver personalized, secure, and integrated customer experience solutions in order to grow their revenues and wow their customers with future-ready solutions that drive exceptional customer experiences.
Our pre-integrated approach, combined with our deep domain experts managing the applications, allow our customers to scale their operations and do what matters most – focus on satisfying their end customers and growing their businesses.
Our pre-integrated approach, combined with our deep domain experts managing the applications, allow our customers to scale their operations and do what matters most – focus on satisfying their end customers and growing their businesses. 5 Why We Win At CSG, many of our significant customer relationships span decades.
We expect to incur ongoing costs to comply with existing and future requirements. We are also subject to regulation by various U.S. federal regulatory agencies and by the applicable regulatory authorities in countries in which we operate.
These authorities can modify or revoke our permits, registrations, or other authorizations and can enforce compliance through fines and injunctions. We expect to incur ongoing costs to comply with existing and future requirements. We are also subject to regulation by various U.S. federal regulatory agencies and by the applicable regulatory authorities in countries in which we operate.
We seek to work with partners that are committed to reducing and recycling waste, investing in green energy, and responsible sourcing to create a more sustainable future. Reducing global emissions is critical, and we are working towards disclosing our carbon footprint.
We seek to work with partners that are committed to reducing and recycling waste, investing in green energy, and responsible sourcing to create a more sustainable future. Reducing global emissions is critical, and we recently announced our goal to become carbon neutral for Scope 1 and 2 greenhouse emissions by 2035.
And the power of all means that together, we strive to make a bigger difference in the communities in which we operate by envisioning, inventing, and shaping a better, more future-ready world. 8 Delivering on our greater purpose and mission at speed and scale while delighting our customers and being mindful of our team members’ growth, wellbeing, and happiness requires a people and culture philosophy that accelerates sustainable growth and innovation through three pillars: • Leading the Future of Work through our flexible work approach.
Delivering on our greater purpose and mission at speed and scale while delighting our customers and being mindful of our team members’ growth, wellbeing, and happiness requires a people and culture philosophy that accelerates sustainable growth and innovation through three pillars: • Leading the Future of Work through our flexible work approach.
Customers We work with some of the world’s leading brands in a wide variety of industry verticals. These range from working with leading CSPs like Charter, Comcast, MTN, Airtel Africa, DISH, Mobily, Verizon, AT&T, American Movil, and Telstra.
These range from working with leading CSPs like Charter, Comcast, MTN, Airtel Africa, DISH, Mobily, Verizon, AT&T, American Movil, and Telstra.
These laws and regulations govern matters that include environmental, employment, and occupational health and safety matters. Additionally, these laws and regulations also require us to obtain and comply with permits, registrations, and other authorizations issued by governmental authorities. These authorities can modify or revoke our permits, registrations, or other authorizations and can enforce compliance through fines and injunctions.
Regulatory Matters We are subject to numerous international, federal, state, and local laws and regulations. These laws and regulations govern matters that include environmental, employment, and occupational health and safety matters. Additionally, these laws and regulations also require us to obtain and comply with permits, registrations, and other authorizations issued by governmental authorities.
We also believe that diverse experiences and perspectives help bring out the best ideas, drive innovation, and achieve transformative results to benefit the clients we serve.
We also believe that diverse experiences and perspectives help bring out the best ideas, drive innovation, and achieve transformative results to benefit the clients we serve. We are committed to digital inclusivity, doing the right thing for the users of our products, and taking action to improve the accessibility of our digital products and services.
Our solutions are architected to bring speed, agility, and interoperability while maintaining the operational stability, security, reliability, and scalability needed to power these complex ecosystems. We enable companies to bring new services to market with hyper speed and scale with our revenue management platforms which are key to growing revenue and profits in a digital world.
Our solutions are architected to bring speed, agility, and interoperability while maintaining the operational stability, security, reliability, and scalability needed to power these complex ecosystems.
Technology Innovation & Operations Our customers are looking for the best, most modern, and cost-efficient technologies to solve their toughest business challenges. We continue to make meaningful investments in research and development (“R&D”) to ensure that we stay ahead of our customers’ needs, advancing our customers’ businesses as well as our own.
We continue to make meaningful investments in research and development (“R&D”), incorporating AI and other emerging technologies into our solutions, to ensure that we stay ahead of our customers’ needs, advancing our customers’ businesses as well as our own.
While we’ve made significant progress over the years, we have significant opportunities to expand our footprint in these verticals. CSG is helping some of the biggest brands in retail, healthcare, financial services, and government digitize and modernize their revenue management, customer experience and payments capabilities.
CSG is helping some of the biggest brands in retail, healthcare, financial services, and government digitize and modernize their revenue management, customer experience and payments capabilities. 6 Customers We work with some of the world’s leading brands in a wide variety of industry verticals.
This is exactly where CSG’s SaaS platforms come in. Industry leaders in telecom, broadband cable, media, retail, healthcare, financial services, insurance, government, and other industries leverage the power of our technology to compete and win in the digital age.
Industry leaders in telecom, broadband cable, media, retail, healthcare, financial services, insurance, government, and other industries leverage the power of our technology to compete and win in the digital age. Our 6,000-plus employees around the globe have made CSG a trusted technology leader and SaaS platform company to some of the biggest and most innovative brands around the world.
Additionally, during 2022 analysts ranked CSG as a Leader in the Forrester Wave: Customer Journey Orchestration, SPARK Matrix: Customer Communication Management, SPARK Matrix: Customer Data Platform, SPARK Matrix: Journey Analytics, and SPARK Matrix: Real Time Interaction Management. 5 In addition, we provide operational services encompassing infrastructure management (including hardware, application, and environmental management), application configuration management (including configuration development, release, and deployment) and business operations management (including event processing, revenue management, and settlement).
In addition, we provide operational services encompassing infrastructure management (including hardware, application, and environmental management), application configuration management (including configuration development, release, and deployment) and business operations management (including event processing, revenue management, and settlement).
Our common stock is listed on the NASDAQ Stock Market LLC (“NASDAQ”) under the symbol “CSGS”. We are a member of the S&P Small Cap 600 and Russell 2000 indices. What We Do Simply put, CSG helps companies solve their toughest business challenges.
Our corporate headquarters is located at 169 Inverness Dr W, Suite 300, Englewood, Colorado 80112, and the telephone number at that address is (303) 200-2000. Our common stock is listed on the NASDAQ Stock Market LLC (“NASDAQ”) under the symbol “CSGS”. We are a member of the S&P Small Cap 600 and Russell 2000 indices.
Social Impact & Responsibility We aspire to envision, invent, and create a better, more inclusive and future ready world by channeling the power of all.
And the power of all means that together, we strive to make a bigger difference in the communities in which we operate by envisioning, inventing, and shaping a better, more future-ready world.
Removed
Our 5,700-plus employees around the globe have made CSG a trusted technology leader and SaaS platform company to some of the biggest and most innovative brands around the world. Our corporate headquarters is located at 169 Inverness Dr W, Suite 300, Englewood, Colorado 80112, and the telephone number at that address is (303) 200-2000.
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We enable companies to bring new services to market with hyper speed and scale with our revenue management platforms which are key to growing revenue and profits in a digital world. 4 Transformational Customer Experiences: We believe customer experience is the number one differentiator for businesses today.
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Transformational Customer Experiences: Delivering exceptional customer experience is a critical strategic lever that companies need to excel at in order to grow faster, improve retention, and strengthen customer loyalty. We believe customer experience is the number one differentiator for businesses today.
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We help businesses "win" on this front by helping them be easier to do business with digitally in the moments that matter. We do this with our SaaS platforms that leverage AI technology and drives loyalty, growth, and cost efficiency across the customer lifecycle.
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We provide some of the biggest brands in the world with strategic insights, experience design, customer journey management, business intelligence analytics, and customer communication solutions aimed at driving extraordinary customer experiences and better business outcomes. We help companies deliver unique customer experiences across both traditional and digital channels creating moments that are personalized, predictive, and proactive.
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Some of the biggest communications, financial services, healthcare, and retail brands in the world rely on our solutions, expertise, and insights to enable better experiences and drive customer engagement and retention. Retaining and growing these consumer relationships is critical for industry leaders to continue to thrive and grow.
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Today, companies use many different communication channels to interact with customers including website, call center, physical location, SMS text, print, and more. Each of these channels generates a massive amount of information that can be harnessed by these companies to craft extraordinary customer journeys.
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Post-acquisition, we help these companies deliver differentiated experiences across digital channels creating engagements that are personalized, predictive, and proactive. Our extensive customer analytics unlock critical insights from the trail of data footprints across websites, stores, emails, texts, and other channels throughout consumer journeys, enabling real-time decisions and personalized digital communication.
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Each customer touchpoint illuminates key moments of truth that are pivotal in growing customer acquisition and retention. Continuous active customer profiling and decisioning for care and commerce – based on real-time and stored data from a variety of sources – provides value to our customers by powering them with insights needed to optimize every interaction with their customers.
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Our data and orchestration approach utilizes AI to ignite exceptional experiences that fuel loyalty and growth by creating detailed profiles and propelling customized acquisition, engagement, and retention strategies. This translates into faster results, lower risk, and ultimately, better business outcomes for our customers.
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These solutions are designed to help the end consumers easily interact with our customers’ brands through their preferred channel of choice. We take a holistic approach to orchestrating end-to-end customer experiences that helps brands see, think, act and react in real-time to drive conversion, retention, and loyalty.
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With our advanced fraud identification and prevention, utilizing AI-driven behavioral analysis and detection, we are able to help entities optimize their revenue, minimize their losses, and most importantly, protect their reputation.
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Our approach yields better business results with quicker time to value and lower risk.
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Technology Innovation & Operations Our customers are looking for the best, most modern, and cost-efficient technologies to solve their toughest business challenges.
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Product award wins include the Big Innovation Awards for CSG Xponent (2022) and CSG Encompass (2023) and the Card Not Present Best E-Commerce Platform and Best Processor awards for CSG Forte (2022).
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New Analyst leadership recognition for 2023 includes MGI Research for Agile Billing, Kaleido Intelligence for Data and Financial Clearing, and Frost and Sullivan for 5G Revenue Management and Monetization. We were also recipients of the TSG Best of Breed API Award for Payments in 2023.
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Over the past several years, two of the largest drugstore chains in the United States (“U.S.”) and one of the largest retailers used our technology to help improve their digital customer experience related to COVID-19 vaccinations, appointment scheduling, prescription refill notifications, and other transactional engagements.
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Additionally, analysts ranked CSG as a Leader in the Forrester Wave: Customer Journey Orchestration, SPARK Matrix: Customer Communication Management, SPARK Matrix: Customer Data Platform, SPARK Matrix: Journey Analytics, and SPARK Matrix: CPQ.
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During 2022, we won and signed a large new contract expansion with one of these leading drugstore chains. Over the past couple of years, we also helped one of the largest financial services providers in the U.S. streamline and personalize their mortgage and auto lending processes in a digital world with our journey orchestration and analytics offerings.
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While we’ve made significant progress over the years, we have significant opportunities to expand our footprint in these verticals.
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And, we helped some of the largest CSPs in the world scale and grow their enterprise and consumer businesses by consolidating, standardizing, and automating their disparate systems to a modern platform that can manage complex ecosystems, new digital B2B marketplaces, 5G deployments, and multi-sided business models.
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As of December 31, 2023, our workforce was approximately 64% male, 36% female, and less than 1% nonbinary or undeclared.
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On this front, during 2022, we largely completed the migration of approximately 14 million Charter Communications customer accounts from a competitor’s platform. This six-year contract with Charter was the largest contract in our history. Why We Win At CSG, many of our significant customer relationships span decades.
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Our failure to adequately establish, maintain, and protect our intellectual property rights could have a material adverse impact on our business, financial position, and results of operations.
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We are committed to digital inclusivity, doing the right thing for the users of our products, and taking action to improve the accessibility of our digital products and services. 9 Regulatory Matters We are subject to numerous international, federal, state, and local laws and regulations.
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
42 edited+19 added−42 removed97 unchanged
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
42 edited+19 added−42 removed97 unchanged
2022 filing
2023 filing
Biggest changeA Reduction in Demand for Our Revenue Management Platforms Could Have a Material Adverse Effect on Our Financial Position and Results of Operations. Historically, a substantial percentage of our total revenue has been generated from our SaaS platforms and related solutions.
Biggest changeHistorically, a substantial percentage of our total revenue has been generated from our SaaS platforms and related solutions. Our platforms and solutions are expected to continue to provide a large percentage of our total revenue in the foreseeable future. Any significant reduction in demand for these products could have a material adverse effect on our business.
Such risks include, but are not limited to, a significant customer: (i) undergoing a formalized process to evaluate alternative providers for solutions and services we provide; (ii) terminating or failing to renew their contracts with us, in whole or in part, for any reason; (iii) significantly reducing the number of customer accounts processed on our solutions, the price paid for our solutions and services, or the scope of solutions and services that we provide; or (iv) experiencing significant financial or operating difficulties.
Such risks include, but are not limited to, a significant customer: (i) undergoing a formalized process to evaluate alternative providers for solutions and services we provide; (ii) terminating or failing to renew their contracts with us, in whole or in part, for any reason; (iii) significantly reducing the number of customer accounts processed on our solutions, the price paid for our solutions and services, or the scope of solutions and services that we provide; or (iv) experiencing financial or operating difficulties.
We have implemented heightened monitoring of our Networks and Systems, but cannot guarantee that our efforts, or those of third parties on whom we rely or with whom we partner, will be successful in preventing any such information security incidents or attacks. We May Be Subject to Enforcement Actions or Financial Penalties with Payments Regulation in the U.S.
We have implemented heightened monitoring of our Networks and Systems, but cannot guarantee that our efforts, or those of third parties on whom we rely on or with whom we partner, will be successful in preventing any such information security incidents or attacks. We May Be Subject to Enforcement Actions or Financial Penalties with Payments Regulation in the U.S.
As a result, there is a risk, which is increased during economic downturns and with expanded global operations, that we may incur material restructuring or reorganization charges in the future. 13 We Rely on A Limited Number of Third-Party Vendor Relationships to Execute Our Business Which Exposes Us to Supply Chain Disruptions, Cost Increases, and Cyberattacks.
As a result, there is a risk, which is increased during economic downturns and with expanded global operations, that we may incur material restructuring or reorganization charges in the future. We Rely on A Limited Number of Third-Party Vendor Relationships to Execute Our Business Which Exposes Us to Supply Chain Disruptions, Cost Increases, and Cyberattacks.
We rely on a combination of trade secret, copyright, trademark, and patent laws in the U.S. and similar laws in other countries, and non-disclosure, confidentiality, and other types of contractual arrangements to establish, maintain, and enforce our intellectual property rights in our solutions. Despite these measures, any of our intellectual property rights could be challenged, invalidated, circumvented, or misappropriated.
We rely on a combination of trade secret, copyright, trademark, and patent laws in the U.S. and similar laws in other countries, and non-disclosure, confidentiality, and other types of contractual arrangements to establish, maintain, and enforce our intellectual property rights in our solutions. Despite these protective measures, any of our intellectual property rights could be challenged, invalidated, circumvented, or misappropriated.
The above industry factors are impacting our customers’ businesses, and thus could cause delays, cancellations/loss of business, and/or downward pricing pressure on our sales and services. This could cause us to either fall short of revenue expectations or have a cost model that is misaligned with revenue. 16 We Face Significant Competition in Our Industry.
The above industry factors are impacting our customers’ businesses, and thus could cause delays, cancellations/loss of business, and/or downward pricing pressure on our sales and services. This could cause us to either fall short of revenue expectations or have a cost model that is misaligned with revenue. We Face Significant Competition in Our Industry.
These measures need to be continually updated to address emerging means of perpetrating fraud or to accommodate new solution offerings, but the increase in costs could adversely impact our business. Our Use of Open Source Software May Subject Us to Certain Intellectual Property-Related Claims or Require Us to Re-Engineer Our Software, Which Could Harm Our Business.
These measures need to be continually updated to address emerging means of perpetrating fraud or to accommodate new solution offerings, but the increase in costs could adversely impact our business. 14 Our Use of Open Source Software May Subject Us to Certain Intellectual Property-Related Claims or Require Us to Re-Engineer Our Software, Which Could Harm Our Business.
In addition, our inability to complete implementations in an efficient and effective manner could damage our reputation in the global marketplace, adversely impacting our financial results and/or reducing our opportunity to grow our organic business with both new and existing customers and merchants. 12 We May Not Be Successful in the Integration or Achievement of Financial Targets of Our Acquisitions.
In addition, our inability to complete implementations in an efficient and effective manner could damage our reputation in the global marketplace, adversely impacting our financial results and/or reducing our opportunity to grow our organic business with both new and existing customers and merchants. We May Not Be Successful in the Integration or Achievement of Financial Targets of Our Acquisitions.
If an impairment was to be recorded in the future, it could materially impact our results of operations in the period such impairment is recognized, but such an impairment charge would be a non-cash expense, and therefore would have no impact on our current or future cash flows. I tem 1B. Unresolved Staff Comments None. I tem 2.
If an impairment was to be recorded in the future, it could materially impact our results of operations in the period such impairment is recognized, but such an impairment charge would be a non-cash expense, and therefore would have no impact on our current or future cash flows. I tem 1B. Unresolved Staff Comments None.
We are subject to certain risks associated with operating globally including the following items: • Our solutions may not meet local or legal requirements; • Fluctuations and unexpected changes in foreign currency exchange rates that may be due to inflation and interest rate spreads; • Staffing and managing of our global operations at a reasonable cost; • Longer sales cycles for new contracts; • Longer collection cycles for customer billings or accounts receivable, as well as heightened customer collection risks, especially in countries with high inflation rates and/or restrictions on the movement of cash out of the country; • Trade barriers; • Governmental and economic sanctions; • Complying with varied legal and regulatory requirements across jurisdictions; • Growing requirements related to human rights and occupational safety and health; • Reduced protection for intellectual property rights in some countries; • Inability to recover value added taxes and/or goods and services taxes in foreign jurisdictions; • Political and financial instability and threats of terrorism and/or war; • A potential adverse impact to our overall effective income tax rate resulting from, among other things: o Operations in foreign countries with higher tax rates than the U.S.; o The inability to utilize certain foreign tax credits; and o The inability to utilize some or all of losses generated in one or more foreign countries.
We are subject to certain risks associated with operating globally including the following items: • Our solutions may not meet local or legal requirements; • Fluctuations and unexpected changes in foreign currency exchange rates that may be due to inflation, interest rate spreads, and geopolitical events; • Staffing and managing of our global operations at a reasonable cost; • Longer sales cycles for new contracts; • Longer collection cycles for customer billings or accounts receivable, as well as heightened customer collection risks, especially in countries with high inflation rates and/or restrictions on the movement of cash or certain currencies out of the country; • Trade barriers; • Governmental and economic sanctions; • Complying with varied legal and regulatory requirements across jurisdictions; • Growing requirements related to human rights and occupational safety and health; • Reduced protection for intellectual property rights in some countries; • Inability to recover value added taxes and/or goods and services taxes in foreign jurisdictions; • Political and financial instability and threats of terrorism and/or war; • A potential adverse impact to our overall effective income tax rate resulting from, among other things: o Operations in foreign countries with higher tax rates than the U.S.; o The inability to utilize certain foreign tax credits; and o The inability to utilize some or all of losses generated in one or more foreign countries.
One or any combination of these or other risks could have an adverse impact on our operations and business. 14 Failure to Deal Effectively with Fraud, Fictitious Transactions, Bad Transactions, and Negative Experiences Could Increase Our Loss Rate and Harm Our Payments Business, and Could Severely Diminish Merchant and Consumer Confidence in and Use of Our Services.
One or any combination of these or other risks could have an adverse impact on our operations and business. Failure to Deal Effectively with Fraud, Fictitious Transactions, Bad Transactions, and Negative Experiences Could Increase Our Loss Rate and Harm Our Payments Business, and Could Severely Diminish Merchant and Consumer Confidence in and Use of Our Services.
Accordingly, the risk factors and any forward-looking statements are qualified in their entirety by reference to and are accompanied by the following meaningful cautionary statements: • If any of the following risk factors would occur, it could have a material adverse effect on our business, financial position, results of operations, and/or trading price of our common stock. • This list of risk factors is not exhaustive, and management cannot predict all of the relevant risk factors, nor can it assess the potential impact, if any, of such risk factors on our business or the extent to which any risk factor, or combination of risk factors, may create. • There can be no assurances that forward-looking statements will be accurate indicators of future actual results, and it is likely that actual results will differ from results projected in the forward-looking statements, and that such differences may be material.
Accordingly, the risk factors and any forward-looking statements are qualified in their entirety by reference to, and are accompanied by, the following meaningful cautionary statements: • If any of the following risk factors should occur, it could have a material adverse effect on our business, financial position, results of operations, and/or trading price of our common stock. • This list of risk factors is not exhaustive, and management cannot predict all of the relevant risk factors, nor can it assess the potential impact, if any, of such risk factors on our business or the extent to which any risk factor, or combination of risk factors, may create. • There can be no assurances that forward-looking statements will be accurate indicators of future actual results, and it is likely that actual results will differ from results projected in the forward-looking statements, and that such differences may be material.
We may also be subject to card association and network rules and requirements, and violations of such rules and requirements could result in fines or the inability to use third-party networks to conduct our business. We Are Subject to Various Anti-Money Laundering and Counter-Terrorist Financing Laws and Regulations.
We may also be subject to card association and network rules and requirements, and violations of such rules and requirements could result in fines or the inability to use third-party networks to conduct our business. 17 We Are Subject to Various Anti-Money Laundering and Counter-Terrorist Financing Laws and Regulations.
Our failure to adequately establish, maintain, and protect our intellectual property rights could have a material adverse effect on our business. 15 Our Alliances with Strategic Partners Could Put Our Business at Risk if the Partner Does Not Perform as Expected.
Our failure to adequately establish, maintain, and protect our intellectual property rights could have a material adverse effect on our business. Our Alliances with Strategic Partners Could Put Our Business at Risk if the Partner Does Not Perform as Expected.
As new laws and regulations emerge and evolve and as our business continues to expand to include new products and technologies, these risks will likely continue to increase, and our compliance costs are likely to increase substantially as well.
As new laws and regulations emerge and evolve and as our business continues to expand to include new products and technologies, these risks will likely continue to increase, and our compliance costs are likely to increase as well.
Finally, third parties may claim that we, our customers, licensees or other parties indemnified by us are infringing upon their intellectual property rights. Even if we believe that such claims are without merit, they can be time consuming and costly to defend and distract management and technical staff attention and resources.
Finally, third parties may claim that we, our customers, licensees, or other parties indemnified by us, are infringing upon their intellectual property rights. Even if we believe that such claims are without merit, they can be time consuming and costly to defend and can divert management and technical staff attention and resources.
Consistent with this market concentration, we generate over 40% of our revenue from our two largest customers, which are Charter and Comcast, which each individually accounted for over 10% or more of our total revenue. See the Significant Customer Relationships section of MD&A for a brief summary of our business relationship with these customers.
Consistent with this market concentration, we generate approximately 40% of our revenue from our two largest customers, Charter and Comcast, which each accounted for over 10% or more of our total revenue. See the Significant Customer Relationships section of MD&A for a brief summary of our business relationship with these customers.
Risks Related to Our Industry Our Business is Highly Dependent on the Global Communications Industry. Since a large percentage of our revenue is generated from customers that operate within the global communications industry, we are highly dependent on the health and the business trends occurring within this industry (in particular for our North American cable and satellite customers).
Since a large percentage of our revenue is generated from customers that operate within the global communications industry, we are highly dependent on the health and the business trends occurring within this industry (in particular for our North American cable and satellite customers).
These measures include standard industry practices (e.g., payment card industry (“PCI”) requirements), periodic security reviews of our systems by independent parties, secure development practices, network firewalls, policy directives, procedural controls, training of our personnel, intrusion detection systems, and antivirus applications.
These measures include standard industry practices (e.g., payment card industry (“PCI”) requirements, ISO/IEC 27001), periodic security reviews of our systems by independent parties, secure development practices, network firewalls, policy directives, procedural controls, training of our personnel, intrusion detection systems, and antivirus applications.
In response to these evolving restrictions and regulations (which include, without limitation, the Health Insurance Portability and Accountability Act (“HIPAA”), the Health Information Technology for Economic and Clinical Health Act (“HITECH”), the California Consumer Privacy Act (“CCPA”), the Gramm-Leach-Bliley Act (“GLBA”), and other U.S. federal and state financial privacy laws and regulations, the European Union’s General Data Protection Regulation (“GDPR”), the South Africa Protection of Personal Information Act (“POPIA”) and the Brazilian General Data Protection Low (“LGPD”)), we have implemented and maintain administrative, technical, and physical security measures and it is our standard practice to contractually require our service providers to whom we disclose data (including PII) to implement and maintain reasonable privacy, data protection, and information security measures, in each case to protect against loss, theft, misuse, or unauthorized access to or disclosure of such information, and otherwise comply with these laws and regulations.
In response to these evolving restrictions and regulations (which include, without limitation, the Health Insurance Portability and Accountability Act (“HIPAA”), the Health Information Technology for Economic and Clinical Health Act (“HITECH”), the California Consumer Privacy Act (“CCPA”), the Gramm-Leach-Bliley Act (“GLBA”), and other U.S. federal and state privacy laws and regulations, the European Union’s General Data Protection Regulation (“EU GDPR”), the United Kingdom’s GDPR (“UK GDPR”), the South Africa Protection of Personal Information Act (“POPIA”) and the Brazilian General Data Protection Low (“LGPD”)), we have implemented and maintain administrative, technical, and physical security measures and it is our standard practice to contractually require our service providers to whom we disclose data (including PII) to implement and maintain reasonable privacy, data protection, and information security measures, in each case to protect against loss, theft, misuse, or unauthorized access to or disclosure of such information, and otherwise comply with these laws and regulations.
In addition, changes in demand for traditional services for CSPs are causing them to seek new revenue sources, while also managing their cost structure and quality of service delivery during their business transformation.
In addition, changes in demand or customer preferences for traditional services for CSPs are causing them to seek new revenue sources, while also managing their cost structure and quality of service delivery during their business transformation.
We May Incur Material Restructuring or Reorganization Charges in the Future. In the past, we have recorded restructuring and reorganization charges related to involuntary employee terminations, various facility abandonments, and various other restructuring and reorganization activities. We continually evaluate ways to reduce our operating expenses through restructuring plans, including more effective utilization of our assets, workforce, and operating facilities.
In the past, we have recorded restructuring and reorganization charges related to involuntary employee terminations, various facility abandonments, and various other restructuring and reorganization activities. We continually evaluate ways to reduce our operating expenses through restructuring plans, including more effective utilization of our assets, workforce, and operating facilities.
As a result of various acquisitions and the growth of our Company over the last several years, as of December 31, 2022, we have approximately $244 million of long-lived assets other than goodwill (principally, property and equipment, operating lease right-of-use assets, software, acquired customer contracts, and customer contract costs) and approximately $304 million of goodwill.
As a result of various acquisitions and the growth of our Company over the last several years, as of December 31, 2023, we have approximately $204 million of long-lived assets other than goodwill (principally, property and equipment, operating lease right-of-use assets, software, acquired customer contracts, and customer contract costs) and approximately $309 million of goodwill.
Additionally, if these third-party vendors would decide to significantly increase our costs, due to inflationary pressures or otherwise, it could have an adverse financial impact to our business as we may have limited third-party options and the ability to shift to a competing solution, or redesign our solutions would take considerable time, effort, and money.
Additionally, if these third-party vendors would decide to significantly increase our costs, due to inflationary pressures or otherwise, it could have an adverse financial impact to our business as we may have limited third-party options and the ability to shift to a competing solution, or redesign our solutions would take considerable time, effort, and money. 13 Our Global Operations Subject Us to Additional Risks.
These factors could impose substantial additional costs and involve considerable delay to the development or provision of our solutions or services, or could require significant and costly operational changes or prevent us from providing our solutions or services in a given market. These limitations may adversely affect our ability to grow our business.
These factors could impose substantial additional costs and involve considerable delay to the development or provision of our solutions or services, or could require significant and costly operational changes or prevent us from providing our solutions or services in a given market.
Organized criminals, nation state threat actors, and motivated hacktivists have the possibility of impacting our Systems, Networks, data, and business operations. We may not be able or willing to respond to any such attacks due to policy, laws, or other regulations.
Organized criminals, nation state threat actors, and motivated hacktivists have the possibility of impacting our Systems, Networks, data, and business operations, as well as our customers' systems, networks, data, and business operations. Neither we, nor our customers, may be able or willing to respond to any such attacks due to policy, laws, regulations, or other reasons.
While we actively screen and monitor the global companies and individuals that we do business with, utilizing a risk-based approach, there is no guarantee that we have not or will not, through the lack of accurate information, changing customer business structures, process failure, oversight, or error, have violations occur. 18 General Risks Our Business May be Disrupted and Our Results of Operations and Cash Flows May be Adversely Affected by a Global Pandemic.
While we actively screen and monitor the global companies and individuals that we do business with, utilizing a risk-based approach, there is no guarantee that we have not or will not, through the lack of accurate information, changing customer business structures, process failure, oversight, or error, have violations occur.
Many states in which we operate have laws that govern payments activities and have implemented various definitions and licensing requirements for entities deemed to be money transmitters, including licensure.
Many states in which we operate have laws that govern payments activities and have implemented various definitions and licensing requirements for entities deemed to be money transmitters, including licensure. We have applied for money transmitter licenses in all states where the state regulates for money transmission and where we do business.
Further, laws governing payments activities may evolve and changes in such law could affect our ability to provide our solutions or services in the same form and on the same terms as we have historically, or at all. 17 There are substantial costs and potential solution changes involved in maintaining such licenses, and we could be subject to fines or other enforcement action if we are found to have violated applicable federal, state, and local laws and regulations, including those related to licensing and supervision, anti-money laundering, the Bank Secrecy Act, financial privacy, and cybersecurity and data security.
There are substantial costs and potential solution changes involved in maintaining such licenses, and we could be subject to fines or other enforcement action if we are found to have violated applicable federal, state, and local laws and regulations, including those related to licensing and supervision, anti-money laundering, the Bank Secrecy Act, financial privacy, and cybersecurity and data security.
While our customers may incur costs in switching to our competitors or developing their own solutions, they may do so for a variety of reasons, including: (i) price; (ii) dissatisfaction with our solutions or service levels, including our ability to adequately protect their data; or (iii) dissatisfaction with our relationship.
While our customers may incur costs in switching to our competitors or developing their own solutions, they may do so for a variety of reasons, including: (i) price; (ii) dissatisfaction with our solutions or service levels, including our ability to adequately protect their data; or (iii) dissatisfaction with our relationship. 10 A Reduction in Demand for Our Revenue Management Platforms Could Have a Material Adverse Effect on Our Financial Position and Results of Operations.
There can be no assurance: (i) of continued market acceptance of our solutions; (ii) that we will be successful in the development of enhancements or new solutions that respond to technological advances or changing customer needs at the pace the market demands; or (iii) that we will be successful in supporting the implementation, conversion, integration, and/or operations of enhancements or new solutions.
There can be no assurance: (i) of continued market acceptance of our solutions; (ii) that we will be successful in the development of enhancements or new solutions that respond to technological advances or changing customer needs at the pace the market demands; or (iii) that we will be successful in supporting the implementation, conversion, integration, and/or operations of enhancements or new solutions. 12 We Are Incorporating Generative Artificial Intelligence into Certain of Our Solutions, Which is New and Developing, and May Result in Operational, Financial and Other Adverse Consequences to Our Business.
These risks will increase as our business continues to expand to include new solutions, technologies, verticals, and markets. These risks, individually or collectively, could result in an adverse material impact to our business. We May Not Be Able to Efficiently and Effectively Implement New Solutions or Migrate Customers and Merchants onto Our Solutions.
These risks, individually or collectively, could result in an adverse material impact to our business. 11 We May Not Be Able to Efficiently and Effectively Implement New Solutions or Migrate Customers and Merchants onto Our Solutions. Our continued growth plans include the implementation of new solutions, as well as migrating both new and existing customers and merchants to our solutions.
Our Global Operations Subject Us to Additional Risks. We currently conduct a portion of our business outside the U.S.
We currently conduct a portion of our business outside the U.S.
Many of our current and potential competitors have significantly greater financial, marketing, technical, and other competitive resources than our Company, many with significant and well-established domestic and international operations. There can be no assurance that we will be able to compete successfully with our existing competitors or with new competitors.
Many of our current and potential competitors have significantly greater financial, marketing, technical, and other competitive resources than our Company, many with significant and well-established domestic and international operations.
While we have significant sources of cash and liquidity and access to a committed credit line, a prolonged period of generating lower cash from operations could adversely affect our financial condition and the achievement of our strategic objectives. Failure to Attract and Retain Our Key Management and Other Highly Skilled Personnel Could Have a Material Adverse Effect on Our Business.
While we have significant sources of cash and liquidity and access to a committed credit line, a prolonged period of generating lower cash from operations could adversely affect our financial condition and the achievement of our strategic objectives. 18 Our Business Is Exposed to Global Market and Economic Conditions. Our business is exposed to global market and economic conditions.
Should we fail to meet our revenue and earnings expectations of the investment community, by even a relatively small amount, it could have a disproportionately negative impact upon the market price of our common stock. 19 Substantial Impairment of Long-lived Assets in the Future May Be Possible.
Should we fail to meet our revenue and earnings expectations of the investment community, by even a relatively small amount, it could have a disproportionately negative impact upon the market price of our common stock. Changes in Tax Laws and Regulations Could Adversely Affect Our Results of Operations and Financial Position.
Our future success depends in large part on the continued service of our key management, sales, product development, professional services, and operational personnel.
Failure to Attract and Retain Our Key Management and Other Highly Skilled Personnel Could Have a Material Adverse Effect on Our Business. Our future success depends in large part on the continued service of our key management, sales, product development, professional services, and operational personnel.
We inform our personnel and third-party sales representatives of the requirements of the FCPA and other anti-corruption laws, including, but not limited to their reporting requirements. We have also developed and will continue to develop and implement systems for formalizing contracting processes, performing due diligence on agents and partners while improving our recordkeeping and auditing practices regarding these regulations.
We have also developed and will continue to develop and implement systems for formalizing contracting processes, performing due diligence on agents and partners while improving our recordkeeping and auditing practices regarding these regulations.
We participate in large projects where various other companies provide services and products that are integrated into systems to meet customer requirements. If any of the services or products that any other company provides have any defects or problems causing the integrated systems to malfunction or otherwise fail to meet customer requirements, our reputation and business could be harmed.
If any of the services or products that any other company provides have any defects or problems causing the integrated systems to malfunction or otherwise fail to meet customer requirements, our reputation and business could be harmed. 15 Risks Related to Our Industry Our Business is Highly Dependent on the Global Communications Industry.
Any significant reduction in demand for these products could have a material adverse effect on our business. 11 The Delivery of Our Solutions is Dependent on a Variety of Computing and Processing Environments and Communications Networks Which May Not Be Available or May Be Subject to Security Attacks.
The Delivery of Our Solutions is Dependent on a Variety of Computing and Processing Environments and Communications Networks, Including our Customer’s Systems and Networks, Which May Not Be Available or May Be Subject to Security Attacks.
Risks Related to Laws and Regulations The Occurrence or Perception of a Security Breach or Disclosure of Confidential Personally Identifiable Information Could Harm Our Business. In providing solutions to our customers, we transmit, use, store and otherwise process, confidential and personally identifiable information (“PII”) including health, financial, and other personal information.
In providing solutions to our customers, we transmit, use, store and otherwise process, confidential and personally identifiable information (“PII”) including health, financial, and other personal information.
We have applied for and been issued money transmitter licenses in a majority of states, and for those states where we have applied and not yet received licensure, we could be subject to enforcement actions and financial penalties and other costs.
We have been issued licenses in all but three of those states, and in those three states where licenses are pending, we could be subject to enforcement actions and financial penalties and other costs.
Removed
Our platforms and solutions are expected to continue to provide a large percentage of our total revenue in the foreseeable future.
Added
Any such development could have a material adverse effect on our financial position and results of operations and/or the trading price of our common stock.
Removed
Our continued growth plans include the implementation of new solutions, as well as migrating both new and existing customers and merchants to our solutions.
Added
These risks will increase as our business continues to expand to include new solutions, technologies, verticals, and markets. Additionally, any of the events described above could cause our customers to make claims against us for damages allegedly resulting from a security breach or service disruption.
Removed
Properties As of December 31, 2022, we were operating in over 25 leased sites around the world, representing approximately 175,000 square feet. In connection with our workplace of the future philosophy, during 2022 we consolidated or closed space at thirteen of our leased real estate locations in Australia, India, Sweden, and the U.S.
Added
We have been and expect to continue to use artificial intelligence (“AI”) in our solutions that support our business. This emerging technology is in its early stages of commercial use and presents a number of risks inherent in its use, including risks related to cybersecurity and data practices as well as intellectual property ownership.
Removed
Our corporate headquarters is located in Denver, Colorado. In addition, we lease office space in the U.S. in Allen, Texas; Atlanta, Georgia; and Omaha, Nebraska. The leases for these office facilities expire in the years 2023 through 2033.
Added
Additionally, AI algorithms are based on machine learning and predictive analytics, which can create accuracy issues and unintended biases. Further, our competitors or other third parties may incorporate AI into their business and solutions more rapidly or more successfully than us, which could hinder our ability to compete effectively and adversely affect our results of operations.
Removed
We also operate in leased facilities internationally in Brazil, Canada, Colombia, France, India, Indonesia, Ireland, Malaysia, Mexico, Portugal, Saudi Arabia, Slovakia, South Africa, Sweden, United Arab Emirates, and the U.K. The leases for these international office facilities expire in the years 2023 through 2026.
Added
Implementing the use of AI successfully, ethically, and as intended, will require significant resources, including having the technical complexity and expertise required to develop, test, and maintain our solutions. In addition, we expect that there will continue to be new laws or regulations implemented concerning the use of AI.
Removed
We utilize these office facilities primarily for the following: (i) customer services, training, and support; (ii) product and operations support; (iii) systems and programming activities; (iv) professional services staff; (v) R&D activities; (vi) sales and marketing activities; and (vii) general and administrative functions. Additionally, we lease three design and delivery centers totaling approximately 330,000 square feet.
Added
It is possible that certain governments may seek to regulate, limit, or block the use of AI in our solutions or otherwise impose other restrictions that may hinder the usability or effectiveness of our solutions.
Removed
These facilities are located in: (i) Omaha, Nebraska; (ii) Crawfordville, Florida; and (iii) Fort Worth, Texas. The leases for these facilities expire in the years 2026 through 2029. We believe that our facilities are adequate for our current needs and that additional suitable space will be available as required.
Added
Any failure to successfully or ethically implement the use of AI, or its incorporation into our products, could cause reputational harm to our business and could result in an adverse material impact to our business. We May Incur Material Restructuring or Reorganization Charges in the Future.
Removed
We also believe that we will be able to either: (i) extend our current leases as they terminate; or (ii) find alternative space without experiencing a significant increase in cost. See Note 6 to our Financial Statements for information regarding our obligations under our facility leases. I tem 3.
Added
We participate in large projects where various other companies provide services and products that are integrated into systems to meet customer requirements.
Removed
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. I tem 4.
Added
There can be no assurance that we will be able to compete successfully with our existing competitors or with new competitors. 16 Risks Related to Laws and Regulations The Occurrence or Perception of a Security Breach or Disclosure of Confidential Personally Identifiable Information Could Harm Our Business.
Removed
Mine Safety Disclosures Not applicable. 20 Executive Officers of the Registrant As of the date of this filing, our executive officers are Brian A. Shepherd (President and Chief Executive Officer), Hai Tran (Executive Vice President, Chief Financial Officer), Kenneth M. Kennedy (Executive Vice President, Chief Operating Officer and President - Revenue Management and Digital Monetization), Elizabeth A.
Added
Further, laws governing payments activities may evolve and changes in such law could affect our ability to provide our solutions or services in the same form and on the same terms as we have historically, or at all.
Removed
Bauer (Executive Vice President, Chief Experience Officer), Rasmani Bhattacharya (Executive Vice President, Chief Legal Officer), Chad C. Dunavant (Executive Vice President, Chief Product and Strategy Officer), and David N. Schaaf (Senior Vice President, Chief Accounting Officer and Treasurer). Brian A. Shepherd President and Chief Executive Officer Mr.
Added
In addition, as we continue to provide new services, these limitations may adversely affect our ability to grow our business.
Removed
Shepherd, 55, joined CSG in 2016 and is the President and Chief Executive Officer of CSG. Mr. Shepherd was appointed President and CEO of CSG and a member of our Board in January 2021.
Added
We require compliance from our personnel and third-party sales representatives with the requirements of the FCPA and other anti-corruption laws, including, but not limited to their reporting requirements.
Removed
He joined the Company in 2016 and before becoming CEO, was Executive Vice President and Group President of CSG, where he led the profit and loss organization for the entire global organization.
Added
General Risks Our Business May Be Disrupted and Our Results of Operations and Cash Flows May be Adversely Affected by a Global Pandemic.
Removed
He also served as Executive Vice President and President of Global Broadband, Cable and Satellite Business from 2016 to 2017, where he focused on accelerating the growth and strategic direction of CSG’s global broadband, cable and direct broadcast satellite business. Mr.
Added
Downturns in these conditions may result in rising inflation rates and interest rates, slower or deferred customer buying decisions, and pricing pressures that may adversely affect our ability to generate profitable revenue and sustain revenue growth.
Removed
Shepherd received his M.B.A. from Harvard Business School and graduated magna cum laude from Wabash College with a B.A. in Economics. Hai Tran Executive Vice President and Chief Financial Officer Mr. Tran, 53, is Chief Financial Officer of CSG, where he oversees the finance, accounting, treasury, and investor relations functions for the organization. Mr.
Added
Macroeconomic conditions, including geopolitical events, or other global or regional events such as pandemics, and foreign exchange rate fluctuations, can impact our customers’ businesses and their willingness to make investments in technology, which in turn may delay or reduce the purchases of our solutions, as well as their ability to pay amounts due.
Removed
Tran joined CSG in November 2021 and brings over 30 years of finance and operational experience, having most recently served as President and Chief Operating Officer (2020-2021) and COO and CFO (2015-2020) at SOC Telemed, the largest U.S. provider of acute care telemedicine solutions.
Added
Additionally, market disruptions may limit our ability to access financing or increase our cost of financing to meet liquidity needs. The combination of these factors could negatively impact our business, operating results, and financial condition as we could experience a reduction in demand for our solutions and increased pressure on our profit margins.
Removed
Prior to that, he served as Chief Financial Officer at a number of companies including BioScrip, Inc., Harris Healthcare Solutions, and Catalyst Health Solutions. Mr. Tran holds a B.S. in Electrical Engineering from the University of Virginia and an M.B.A from the University of Richmond. Kenneth M.
Added
Our operations are subject to tax by federal, state, local, and international taxing jurisdictions. Tax laws are subject to change as new laws are passed and new interpretations of the law are issued or applied.
Removed
Kennedy Executive Vice President, Chief Operating Officer and President - Revenue Management and Digital Monetization Mr. Kennedy, 53, is Chief Operating Officer of CSG and President of Revenue Management and Digital Monetization, responsible for driving revenue and creating scalable monetization solutions that help CSG deepen customer relationships. Prior to becoming COO, Mr.
Added
Such changes may be effective on a prospective or retrospective basis and may have a significant impact on our effective tax rate and/or the amount of taxes we pay. In addition, tax laws and regulations are extremely complex and subject to varying interpretations and examination.
Removed
Kennedy served as President of Technology and Product, where he oversaw all product management, engineering, platform architecture, and operations across CSG’s solutions portfolio. Mr. Kennedy also served as CSG’s Executive Vice President of Product Development from 2016 to 2017, and as Chief Technology Officer and Senior Vice President of Product Management, Development and Operations from 2006 to 2016.
Added
There can be no assurance that our tax positions will not be challenged by relevant tax authorities or that we would be successful in any such challenge. 19 Substantial Impairment of Long-lived Assets in the Future May Be Possible.
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Item 6. [Reserved]
Selected Financial Data — reserved (removed by SEC in 2021)
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Item 6. [Reserved]
Selected Financial Data — reserved (removed by SEC in 2021)
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2022 filing
2023 filing
Biggest changeCONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in thousands) Shares of Common Stock Outstanding Common Stock Additional Paid-in Capital Treasury Stock Accumulated Other Comprehensive Income (Loss) Accumulated Earnings Noncontrolling Interest Total Stockholders' Equity BALANCE, January 1, 2020 32,891 $ 696 $ 454,663 $ ( 867,817 ) $ ( 39,503 ) $ 848,623 $ - $ 396,662 Comprehensive income: Net income - - - - - 58,711 - Unrealized loss on short-term investments, net of tax - - - - ( 3 ) - - Foreign currency translation adjustments - - - - 8,368 - - Total comprehensive income 67,076 Repurchase of common stock ( 878 ) - ( 11,859 ) ( 26,309 ) - - - ( 38,168 ) Issuance of common stock pursuant to employee stock purchase plan 68 - 2,523 - - - - 2,523 Issuance of restricted common stock pursuant to stock- based compensation plans 672 7 ( 7 ) - - - - - Cancellation of restricted common stock issued pursuant to stock-based compensation plans ( 40 ) ( 3 ) - - - - - ( 3 ) Stock-based compensation expense - - 25,237 - - - - 25,237 Dividends - - - - - ( 30,932 ) - ( 30,932 ) BALANCE, December 31, 2020 32,713 700 470,557 ( 894,126 ) ( 31,138 ) 876,402 - 422,395 Comprehensive income: Net income - - - - - 72,331 - Unrealized loss on short-term investments, net of tax - - - - ( 19 ) - - Foreign currency translation adjustments - - - - ( 7,196 ) - - Total comprehensive income 65,116 Repurchase of common stock ( 863 ) - ( 6,258 ) ( 35,980 ) - - - ( 42,238 ) Issuance of common stock pursuant to employee stock purchase plan 64 - 2,610 - - - - 2,610 Issuance of restricted common stock pursuant to stock- based compensation plans 661 6 ( 6 ) - - - - - Cancellation of restricted common stock issued pursuant to stock-based compensation plans ( 80 ) ( 1 ) - - - - - ( 1 ) Stock-based compensation expense - - 21,400 - - - - 21,400 Dividends - - - - - ( 32,673 ) - ( 32,673 ) Noncontrolling interest related to business combination - - - - - - 3,635 3,635 BALANCE, December 31, 2021 32,495 705 488,303 ( 930,106 ) ( 38,353 ) 916,060 3,635 440,244 Comprehensive income: Net income - - - - - 44,060 - Unrealized gain on short-term investments, net of tax - - - - 7 - - Foreign currency translation adjustments - - - - ( 20,483 ) - - Total comprehensive income 23,584 Repurchase of common stock ( 1,635 ) ( 1 ) ( 8,675 ) ( 87,928 ) - - - ( 96,604 ) Issuance of common stock pursuant to employee stock purchase plan 57 - 2,969 - - - - 2,969 Issuance of restricted common stock pursuant to stock- based compensation plans 544 6 ( 6 ) - - - - - Cancellation of restricted common stock issued pursuant to stock-based compensation plans ( 192 ) ( 2 ) 2 - - - - - Stock-based compensation expense - - 27,243 - - - - 27,243 Settlement of convertible debt securities, net of tax - - ( 4,845 ) - - - - ( 4,845 ) Adjustments due to adoption of new accounting standard - - ( 9,802 ) - - 9,802 - - Dividends - - - - - ( 33,707 ) - ( 33,707 ) Write-off of noncontrolling interest - - - - - - ( 3,635 ) ( 3,635 ) BALANCE, December 31, 2022 31,269 $ 708 $ 495,189 $ ( 1,018,034 ) $ ( 58,829 ) $ 936,215 $ - $ 355,249 The accompanying notes are an integral part of these consolidated financial statements . 45 C SG SYSTEMS INTERNATIONAL, INC.
Biggest changeCONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in thousands) Shares of Common Stock Outstanding Common Stock Additional Paid-in Capital Treasury Stock Accumulated Other Comprehensive Income (Loss) Accumulated Earnings Noncontrolling Interest Total Stockholders' Equity BALANCE, January 1, 2021 32,713 $ 700 $ 470,557 $ ( 894,126 ) $ ( 31,138 ) $ 876,402 $ - $ 422,395 Comprehensive income: Net income - - - - - 72,331 - Unrealized loss on short-term investments, net of tax - - - - ( 19 ) - - Foreign currency translation adjustments - - - - ( 7,196 ) - - Total comprehensive income 65,116 Repurchase of common stock ( 863 ) - ( 6,258 ) ( 35,980 ) - - - ( 42,238 ) Issuance of common stock pursuant to employee stock purchase plan 64 - 2,610 - - - - 2,610 Issuance of restricted common stock pursuant to stock- based compensation plans 661 6 ( 6 ) - - - - - Cancellation of restricted common stock issued pursuant to stock-based compensation plans ( 80 ) ( 1 ) - - - - - ( 1 ) Stock-based compensation expense - - 21,400 - - - - 21,400 Dividends - - - - - ( 32,673 ) - ( 32,673 ) Noncontrolling interest related to business combination - - - - - - 3,635 3,635 BALANCE, December 31, 2021 32,495 705 488,303 ( 930,106 ) ( 38,353 ) 916,060 3,635 440,244 Comprehensive income: Net income - - - - - 44,060 - Unrealized gain on short-term investments, net of tax - - - - 7 - - Foreign currency translation adjustments - - - - ( 20,483 ) - - Total comprehensive income 23,584 Repurchase of common stock ( 1,635 ) ( 1 ) ( 8,675 ) ( 87,928 ) - - - ( 96,604 ) Issuance of common stock pursuant to employee stock purchase plan 57 - 2,969 - - - - 2,969 Issuance of restricted common stock pursuant to stock- based compensation plans 544 6 ( 6 ) - - - - - Cancellation of restricted common stock issued pursuant to stock-based compensation plans ( 192 ) ( 2 ) 2 - - - - - Stock-based compensation expense - - 27,243 - - - - 27,243 Settlement of convertible debt securities, net of tax - - ( 4,845 ) - - - - ( 4,845 ) Adjustments due to adoption of new accounting standard - - ( 9,802 ) - - 9,802 - - Dividends - - - - - ( 33,707 ) - ( 33,707 ) Write-off of noncontrolling interest - - - - - - ( 3,635 ) ( 3,635 ) BALANCE, December 31, 2022 31,269 708 495,189 ( 1,018,034 ) ( 58,829 ) 936,215 - 355,249 Comprehensive income: Net income - - - - - 66,246 - Foreign currency translation adjustments - - - - 8,416 - - Total comprehensive income 74,662 Repurchase of common stock ( 2,369 ) ( 2 ) ( 10,156 ) ( 118,021 ) - - - ( 128,179 ) Issuance of common stock pursuant to employee stock purchase plan 74 - 3,284 - - - - 3,284 Issuance of restricted common stock pursuant to stock- based compensation plans 666 7 ( 7 ) - - - - - Cancellation of restricted common stock issued pursuant to stock-based compensation plans ( 99 ) - - - - - - - Stock-based compensation expense - - 28,990 - - - - 28,990 Purchase of capped call transactions, net of tax - - ( 26,353 ) - - - - ( 26,353 ) Dividends - - - - - ( 34,327 ) - ( 34,327 ) BALANCE, December 31, 2023 29,541 $ 713 $ 490,947 $ ( 1,136,055 ) $ ( 50,413 ) $ 968,134 $ - $ 273,326 The accompanying notes are an integral part of these consolidated financial statements . 45 C SG SYSTEMS INTERNATIONAL, INC.
Our 2021 Credit Agreement includes the mandatory quarterly amortization payments on the term loan, interest payments throughout the life of the term loan, interest payments on the used balance of the revolver, and a commitment fee on the unused balance of the revolver.
Our 2021 Credit Agreement includes mandatory quarterly amortization payments on the term loan, interest payments throughout the life of the term loan, interest payments on the used balance of the revolver, and a commitment fee on the unused balance of the revolver.
Our SaaS payments platform solutions are comprised of one performance obligation. Revenue for these services is based primarily on a fee per transaction or a percentage of the transaction principal, and are recognized as delivered over a series of daily service periods.
Our SaaS payments platform solutions are comprised of one performance obligation. Revenue for these services is based primarily on a fee per transaction or a percentage of the transaction principal, and is recognized as delivered over a series of daily service periods.
For our outsourced data center environment agreement, we have concluded that there are lease and non-lease components, and we have allocated the consideration in the agreement on a relative stand-alone price basis.
For our outsourced data center environment agreement, we have concluded that there are lease and non-lease components and have allocated the consideration in the agreement on a relative stand-alone price basis.
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 solutions and services, or the scope of solutions and services that we provide; or (iii) experience significant financial or operating difficulties, it could have a material adverse effect on our financial position and results of operations. 54 4.
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 solutions and services, or the scope of solutions and 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. 4.
Other operating expenses consist of: (i) computing capacity and related services and communication lines for our outsourced cloud-based business; (ii) paper, envelopes, and related supplies for our statement processing solutions; (iii) transaction fees paid in conjunction with the delivery of services under our payment services contracts; (iv) hardware and software maintenance; and (v) rent and related facility costs.
Other operating expenses consist of: (i) computing capacity and related services and communication lines for our outsourced cloud-based business; (ii) paper, envelopes, and related supplies for our statement processing solutions; (iii) transaction fees paid in conjunction with the delivery of services under our payment services contracts; (iv) hardware and software maintenance and other SaaS-based services; and (v) rent and related facility costs.
To mitigate the inherent risks in using this hours-based method, we track our current hours expended against our estimates on a periodic basis and continually reevaluate the appropriateness of our estimates. In certain instances, we sell software license volume upgrades, which provide our customers with the right to use our software to process higher transaction volume levels.
To mitigate the inherent risks in using this hours-based method, we track our current hours expended against our estimates on a periodic basis and continually reevaluate the appropriateness of our estimates. 48 In certain instances, we sell software license volume upgrades, which provide our customers with the right to use our software to process higher transaction volume levels.
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 and are fully offset by corresponding liabilities.
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 and are offset by corresponding liabilities.
Our customers are connected to the outsourced data center environment through a combination of private and commercially provided networks. Our SaaS platforms are generally considered to be mission critical customer management systems by our customers. As a result, we are highly dependent upon Ensono for system availability, security, and response time. Guarantees .
Our customers are connected to the outsourced data center environment through a combination of private and commercially provided networks. Our SaaS platforms are generally considered to be mission critical customer management systems by our customers. As a result, we are highly dependent upon Ensono for system availability, security, and response time. 65 Guarantees .
The fair values of all other financial instruments are based upon pricing provided by third-party pricing services. These prices were derived from observable market inputs. We have chosen not to record our debt at fair value, with changes recognized in earnings each reporting period.
The fair value of all other financial instruments are based upon pricing provided by third-party pricing services. These prices were derived from observable market inputs. We have chosen not to record our debt at fair value, with changes recognized in earnings each reporting period.
We intend to indefinitely reinvest these foreign earnings; therefore, a provision has not been made for foreign withholding taxes that might be payable upon remittance of such earnings. Determination of the amount of unrecognized deferred tax liability on unremitted foreign earnings is not practicable because of the complexities of the hypothetical calculation. Deferred Income Taxes.
We intend to indefinitely reinvest these foreign earnings; therefore, a provision has not been made for foreign withholding taxes that might be payable upon remittance of such earnings. Determination of the amount of unrecognized deferred tax liability on unremitted foreign earnings is not practicable because of the complexities of the hypothetical calculation. 63 Deferred Income Taxes.
From time-to-time, we are involved in litigation relating to claims arising out of our operations in the normal course of business. 12. Stockholders’ Equity 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”).
From time-to-time, we are involved in litigation relating to claims arising out of our operations in the normal course of business. 66 12. Stockholders’ Equity 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”).
All material intercompany accounts and transactions have been eliminated. Translation of Foreign Currency. Our foreign subsidiaries use the local currency of the countries in which they operate as their functional currency. Their assets and liabilities are translated into U.S. dollars at the exchange rates in effect at the balance sheet date.
All material intercompany accounts and transactions have been eliminated. Translation of Foreign Currency. Our foreign subsidiaries generally use the local currency of the countries in which they operate as their functional currency. Their assets and liabilities are translated into U.S. dollars at the exchange rates in effect at the balance sheet date.
Accounting and disclosure requirements for loss contingencies requires us to assess the likelihood of any adverse judgments in or range of potential outcomes for these matters. A determination of the amount of reserves for such contingencies, if any, is based on an analysis of the issues, often with the assistance of legal counsel.
Accounting and disclosure requirements for loss contingencies requires us to assess the likelihood of any adverse judgments in a range of potential outcomes for these matters. A determination of the amount of reserves for such contingencies, if any, is based on an analysis of the issues, often with the assistance of legal counsel.
Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.
Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.
CONSOLIDATED FINANCIAL STATEMENTS INDEX Management's Report on Internal Control Over Financial Reporting 39 Reports of Independent Registered Public Accounting Firm (PCAOB: 185 ) 40 Consolidated Balance Sheets as of December 31, 2022 and 2021 42 Consolidated Statements of Income for the Years Ended December 31, 2022, 2021, and 2020 43 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2022, 2021, and 2020 44 Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2022, 2021, and 2020 45 Consolidated Statements of Cash Flows for the Years Ended December 31, 2022, 2021, and 2020 46 Notes to Consolidated Financial Statements 47 38 Management’s Report on Internal Control Over Financial Reporting Management of CSG Systems International, Inc. and subsidiaries (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) or 15d-15(f) under the Securities Exchange Act of 1934, as amended.
CONSOLIDATED FINANCIAL STATEMENTS INDEX Management's Report on Internal Control Over Financial Reporting 39 Reports of Independent Registered Public Accounting Firm (PCAOB: 185 ) 40 Consolidated Balance Sheets as of December 31, 2023 and 2022 42 Consolidated Statements of Income for the Years Ended December 31, 2023, 2022, and 2021 43 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2023, 2022, and 2021 44 Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2023, 2022, and 2021 45 Consolidated Statements of Cash Flows for the Years Ended December 31, 2023, 2022, and 2021 46 Notes to Consolidated Financial Statements 47 38 Management’s Report on Internal Control Over Financial Reporting Management of CSG Systems International, Inc. and subsidiaries (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) or 15d-15(f) under the Securities Exchange Act of 1934, as amended.
Item 6. [Reserved] I tem 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 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.
Item 6. [Reserved] 25 I tem 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 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.
Revenue is generally recognized based on activities performed over a series of daily or monthly periods. We contract for managed services using long-term arrangements whose terms have typically ranged from three to five years .
Revenue is generally recognized based on activities performed over a series of daily or monthly periods. 47 We contract for managed services using long-term arrangements whose terms have typically ranged from three to five years .
In March 2016, we completed an offering of $ 230 million of 4.25 % senior convertible notes due March 15, 2036 (the “2016 Convertible Notes”) to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended.
In March 2016, we completed an offering of $ 230.0 million of 4.25 % senior convertible notes due March 15, 2036 (the “2016 Convertible Notes”) to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended.
The evaluation of these factors, and the ultimate determination of collectability, requires significant judgments to be made by us. Our judgments could have a significant effect to the amount and timing of revenue recognized in any period.
The evaluation of these factors, and the ultimate determination of collectability, requires significant judgments to be made by us. Our judgments could have a significant effect on the amount and timing of revenue recognized in any period.
Revenue by geographic region for 2022, 2021, and 2020, as a percentage of our total revenue, was as follows: 2022 2021 2020 Americas (principally the U.S.) 85 % 85 % 86 % Europe, Middle East and Africa (principally Europe) 11 % 11 % 10 % Asia Pacific 4 % 4 % 4 % Total revenue 100 % 100 % 100 % We generate our revenue primarily from the global communications markets; however, we serve an expanding group of customers in markets including retail, financial services, healthcare, insurance, and government entities.
Revenue by geographic region for 2023, 2022, and 2021, as a percentage of our total revenue, was as follows: 2023 2022 2021 Americas (principally the U.S.) 86 % 85 % 85 % Europe, Middle East, and Africa (principally Europe) 10 % 11 % 11 % Asia Pacific 4 % 4 % 4 % Total revenue 100 % 100 % 100 % We generate our revenue primarily from the global communications markets; however, we serve an expanding group of customers in markets including retail, financial services, healthcare, insurance, and government entities.
That report appears immediately following. 39 Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors CSG Systems International, Inc.: Opinion on Internal Control Over Financial Reporting We have audited CSG Systems International, Inc. and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
That report appears immediately following. 39 Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors CSG Systems International, Inc.: Opinion on Internal Control Over Financial Reporting We have audited CSG Systems International, Inc. and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
The loss was recorded to other income (expense) in our 58 Income Statements with the remaining amount paid above par of $ 4.8 million, net of tax, recorded to additional paid-in capital.
The loss was recorded to other income (expense) in our Income Statements with the remaining amount paid above par of $ 4.8 million, net of tax, recorded to additional paid-in capital.
In September 2021, we entered into a new $ 600.0 million credit agreement (the “2021 Credit Agreement”) with a consortium of banks to replace our $ 350.0 million credit agreement (“2018 Credit Agreement”).
In September 2021, we entered into a $ 600.0 million credit agreement (the “2021 Credit Agreement”) with a consortium of banks to replace our $ 350.0 million credit agreement (“2018 Credit Agreement”).
Our judgments and estimates could: (i) have a significant effect on revenue recognized in any period by changing the amount and/or the timing of the revenue recognized; and/or (ii) impact the expected profitability of a project, including whether an overall loss on an arrangement has occurred. Our contracts are subject to modification via amendment, change requests, and/or statement of works.
Our judgements and estimates could: (i) have a significant effect on revenue recognized in any period by changing the amount and/or the timing of the revenue recognized; and/or (ii) impact the expected profitability of a project, including whether an overall loss on an arrangement has occurred. Our contracts are subject to modification via amendment, change requests, and/or statement of works.
We also terminated approximately 40 employees, which resulted in restructuring charges related to involuntary terminations of $ 0.6 million. • We reduced our workforce by approximately 100 employees, mainly in North America, as a result of organizational changes and efficiencies, to include a margin improvement initiative that began in the second quarter of 2022.
We also terminated approximately 40 Mexico-based employees, which resulted in restructuring charges related to involuntary terminations of $ 0.6 million. • We reduced our workforce by approximately 100 employees, mainly in North America, as a result of organizational changes and efficiencies, to include a margin improvement initiative that began in the second quarter of 2022.
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 to meet 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 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.
While we attempt to maximize natural hedges by incurring expenses in the same currency in which we contract revenue, the related expenses for that revenue could be in one or more differing currencies than the revenue stream. During the year ended December 31, 2022, we generated approximately 88% of our revenue in U.S. dollars.
While we attempt to maximize natural hedges by incurring expenses in the same currency in which we contract revenue, the related expenses for that revenue could be in one or more differing currencies than the revenue stream. During the year ended December 31, 2023, we generated approximately 88% of our revenue in U.S. dollars.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ KPMG LLP Omaha, Nebraska February 17, 2023 40 Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors CSG Systems International, Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of CSG Systems International, Inc. and subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements).
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ KPMG LLP Omaha, Nebraska February 16, 2024 40 Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors CSG Systems International, Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of CSG Systems International, Inc. and subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively, the consolidated financial statements).
The years open for audit vary depending on the taxing jurisdiction. We estimate that it is reasonably possible that the amount of gross unrecognized tax benefits will decrease by up to $ 0.6 million over the next twelve months due to completion of tax audits and the expiration of statute of limitations. 10.
The years open for audit vary depending on the taxing jurisdiction. We estimate that it is reasonably possible that the amount of gross unrecognized tax benefits will decrease by up to $ 0.7 million over the next twelve months due to completion of tax audits and the expiration of statute of limitations. 10.
In 2014, in conjunction with the execution of an amendment to our current agreement with 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”) as an additional incentive for Comcast to convert customer accounts onto our solutions based on various milestones.
In July 2014, in conjunction with the execution of an amendment to our agreement with 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”) as an additional incentive for Comcast to convert customer accounts onto our solutions based on various milestones.
Alternatively, the exercise of the stock warrants may be settled with cash based solely on our approval, or if Comcast were to beneficially own or control in excess of 19.99% of the common stock or voting of the Company. As of December 31, 2022, 1.0 million Stock Warrants were outstanding, none of which were vested.
Alternatively, the exercise of the stock warrants may be settled with cash based solely on our approval, or if Comcast were to beneficially own or control in excess of 19.99% of the common stock or voting of the Company. As of December 31, 2023, 1.0 million Stock Warrants were outstanding, none of which were vested.
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 December 31, 2022 and 2021, our cash equivalents consist primarily of institutional money market funds, commercial paper, and time deposits held at major banks.
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 December 31, 2023 and 2022, our cash equivalents consist primarily of institutional money market funds, commercial paper, and time deposits held at major banks.
As of December 31, 2022 , we have an employee stock purchase plan whereby 2.9 million shares of our common stock have been reserved for sale to our U.S. employees through payroll deductions. The price for shares purchased under the plan is 85 % of market value on the last day of the purchase period.
As of December 31, 2023 , we have an employee stock purchase plan whereby 2.9 million shares of our common stock have been reserved for sale to our U.S. employees through payroll deductions. The price for shares purchased under the plan is 85 % of the market value on the last day of the purchase period.
In addition, we had $238.7 million 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.
In addition, we had $274.7 million 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.
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles.
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.
To the extent we believe that it is more likely than not that a deferred income tax asset will not be realized, a valuation allowance is established. As of December 31, 2022 , we believe we will generate sufficient taxable income in the future such that we will realize 100 % of the benefit of our U.S.
To the extent we believe that it is more likely than not that a deferred income tax asset will not be realized, a valuation allowance is established. As of December 31, 2023 , we believe we will generate sufficient taxable income in the future such that we will realize 100 % of the benefit of our U.S.
Agreements with significant customers As discussed in Note 3 to the consolidated financial statements, the Company generated 40% of its revenue from its two largest customers (significant customers). The agreements with these significant customers are complex and subject to modification in the form of amendments, change requests, or statements of work, which can occur frequently.
Agreements with significant customers As discussed in Note 3 to the consolidated financial statements, the Company generated 39% of its revenue from its two largest customers (significant customers). The agreements with these significant customers are complex and subject to modification in the form of amendments, change requests, or statements of work, which can occur frequently.
Such estimates require significant judgement by us and may impact the amount and/or timing of the revenue recognized. 27 Impairment Assessments of Long-Lived Assets. Long-lived assets relate primarily to property and equipment, operating lease right-of-use assets, software, acquired customer contracts, and customer contract costs.
Such estimates require significant judgement by us and may impact the amount and/or timing of the revenue recognized. 28 Impairment Assessments of Long-Lived Assets. Long-lived assets relate primarily to property and equipment, operating lease right-of-use assets, software, acquired customer contracts, and customer contract costs.
As a result, we incurred restructuring charges related to involuntary terminations of $ 3.4 million. • We modified one of our real estate leases resulting in an earlier termination date. As a result, we incurred restructuring charges related to the accelerated depreciation of furniture and fixtures and leasehold improvements of $ 1.2 million.
As a result, we incurred restructuring charges related to involuntary terminations of $ 3.4 million. • We modified one of our real estate leases in the U.S., resulting in an earlier termination date. As a result, we incurred restructuring charges related to the accelerated depreciation of furniture and fixtures and leasehold improvements of $ 1.2 million.
As of December 31, 2022, 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.
As of December 31, 2023, 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.
We did not capitalize any R&D costs in 2022, 2021, and 2020, as the costs subject to capitalization during these periods were not material. We did not have any capitalized R&D costs included in our December 31, 2022 and 2021 Balance Sheets. Realizability of Long-Lived Assets.
We did not capitalize any R&D costs in 2023, 2022, and 2021, as the costs subject to capitalization during these periods were not material. We did not have any capitalized R&D costs included in our December 31, 2023 and 2022 Balance Sheets. Realizability of Long-Lived Assets.
Under the Security Agreement and 2021 Credit Agreement, certain of our domestic subsidiaries have guaranteed its obligations, and have pledged substantially all of our assets to secure the obligations under the 2021 Credit Agreement and such guarantees. During 2022, we made $ 7.5 million of principal repayments on our 2021 Term Loan.
Under the Security Agreement and 2021 Credit Agreement, certain of our domestic subsidiaries have guaranteed its obligations, and have pledged substantially all of our assets to secure the obligations under the 2021 Credit Agreement and such guarantees. During 2023 , we made $ 7.5 million of principal repayments on our 2021 Term Loan.
Based on our assessment, management believes that the Company maintained effective internal control over financial reporting as of December 31, 2022. The Company’s independent registered public accounting firm, KPMG LLP, has issued an attestation report on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022.
Based on our assessment, management believes that the Company maintained effective internal control over financial reporting as of December 31, 2023. The Company’s independent registered public accounting firm, KPMG LLP, has issued an attestation report on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2023.
Our financial instruments as of December 31, 2022 and 2021 include cash and cash equivalents, short-term investments, 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.
Our financial instruments as of December 31, 2023 and 2022 include cash and cash equivalents, short-term investments, 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.
These costs are amortized over the contract period based on the transfer of goods or services to which the assets relate, which as of December 31, 2022 , range from 2023 to 2036 , and are included in cost of revenue in our Income Statements.
These costs are amortized over the contract period based on the transfer of goods or services to which the assets relate, which as of December 31, 2023 , range from 2024 to 2036 , and are included in cost of revenue in our Income Statements.
Significant fluctuations in key operating assets and liabilities between 2022 and 2021 that impacted our cash flows from operating activities are as follows: Billed Trade Accounts Receivable Management of our trade billed accounts receivable is one of the primary factors in maintaining strong cash flows from operating activities.
Significant fluctuations in key operating assets and liabilities between 2023 and 2022 that impacted our cash flows from operating activities are as follows: Billed Trade Accounts Receivable Management of our trade billed accounts receivable is one of the primary factors in maintaining strong cash flows from operating activities.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
As a result, we have not recorded any liabilities related to such indemnifications as of December 31, 2022. 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.
As a result, we have not recorded any liabilities related to such indemnifications as of December 31, 2023. 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.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013) .
Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2023. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013) .
The Stock Warrants have a ten-year term and an exercise price of $ 26.68 per warrant. Of the total Stock Warrants issued, 1.9 million Stock Warrants have vested and been exercised. As of December 31, 2022, 1.0 million Stock Warrants remain issued, none of which have vested.
The Stock Warrants have a ten-year term and an exercise price of $ 26.68 per warrant. Of the total Stock Warrants issued, 1.9 million Stock Warrants have vested and been exercised. As of December 31, 2023, 1.0 million Stock Warrants remain issued, none of which have vested.
Revenue from these customers represented the following percentages of our total revenue for the following years: 2022 2021 2020 Charter 20 % 21 % 21 % Comcast 20 % 21 % 22 % As of December 31, 2022 and 2021, the percentage of net billed accounts receivable balances attributable to these customers were as follows: As of December 31, 2022 2021 Charter 22 % 23 % Comcast 17 % 20 % We expect to continue to generate a large percentage of our future revenue from our significant customers.
Revenue from these customers represented the following percentages of our total revenue for the following years: 2023 2022 2021 Charter 21 % 20 % 21 % Comcast 18 % 20 % 21 % As of December 31, 2023 and 2022, the percentage of net billed accounts receivable balances attributable to these customers were as follows: As of December 31, 2023 2022 Charter 23 % 22 % Comcast 17 % 17 % We expect to continue to generate a large percentage of our future revenue from our significant customers.
Due to the potential significance of these issues, such an adjustment could be material. Detailed Discussion of Results of Operations The following discussion includes a comparison of our results of operations and liquidity fo r 2022 compared to 2021 .
Due to the potential significance of these issues, such an adjustment could be material. Detailed Discussion of Results of Operations The following discussion includes a comparison of our results of operations and liquidity fo r 2023 compared to 2022 .
These arrangements consist of a series of multiple services delivered daily or monthly, to include such things as: (i) revenue management platforms; (ii) related products and services (e.g., field service management tools, consumer credit verifications, etc.); (iii) digital enablement and delivery functions; and (iv) customer statement invoice printing and mailing services.
These arrangements consist of a series of multiple services delivered daily or monthly, to include: (i) revenue management platforms; (ii) related products and services (e.g., field service management tools, consumer credit verifications, etc.); (iii) digital enablement and delivery functions; and (iv) customer statement invoice printing and mailing services.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements), and our report dated February 17, 2023 expressed an unqualified opinion on those consolidated financial statements.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively, the consolidated financial statements), and our report dated February 16, 2024 expressed an unqualified opinion on those consolidated financial statements.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 17, 2023 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 16, 2024 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
We believe that our current cash, cash equivalents and short-term investments 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 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.
As a result, we incurred restructuring charges related to involuntary terminations of $ 7.1 million. During 2021 we implemented the following restructuring and reorganizational activities: • We reduced our workforce by approximately 100 employees, mainly in North America, as a result of organizational changes and efficiencies.
As a result, we incurred restructuring charges related to involuntary terminations of $ 7.1 million. 61 During 2021 we implemented the following restructuring and reorganizations activities: • We reduced our workforce by approximately 100 employees, mainly in North America, as a result of organizational changes and efficiencies.
In addition to the $ 2.6 million, $ 2.9 million, and $ 1.4 million of liability for unrecognized tax benefits as of December 31, 2022, 2021, and 2020 , we had $ 0.6 million, $ 0.7 million, and $ 0.6 million, respectively of income tax-related accrued interest, net of any federal benefit of deduction.
In addition to the $ 1.9 million, $ 2.6 million, and $ 2.9 million of liability for unrecognized tax benefits as of December 31, 2023, 2022, and 2021 , we had $ 0.9 million, $ 0.6 million, and $ 0.7 million, respectively of income tax-related accrued interest, net of any federal benefit of deduction.
The net deferred financing costs are presented as a reduction from the carrying amount of the corresponding debt liability on our Balance Sheets. Interest expense for 2022, 2021, and 2020 includes amortization of deferred financing costs of $ 1.0 million, $ 1.9 million, and $ 1.9 million, respectively.
The net deferred financing costs are presented as a reduction from the carrying amount of the corresponding debt liability on our Balance Sheets. Interest expense for 2023, 2022, and 2021 includes amortization of deferred financing costs of $ 1.7 million, $ 1.0 million, and $ 1.9 million, respectively.
As of December 31, 2022, we are exposed to various market risks, including changes in interest rates, fluctuations and changes in the market value of our cash equivalents and short-term investments, and changes in foreign currency exchange rates. We have not historically entered into derivatives or other financial instruments for trading or speculative purposes. Interest Rate Risk Long-Term Debt.
As of December 31, 2023, we are exposed to various market risks, including changes in interest rates, fluctuations and changes in the market value of our cash equivalents 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.
One of the more complex items within our income tax expense is the determination of our annual research and experimentation income tax credit (“R&D tax credit”). We have incurred approximately $120 - $140 million annually in R&D expense over the last three years.
One of the more complex items within our income tax expense is the determination of our annual research and experimentation income tax credit (“R&D tax credit”). We have averaged approximately $140 million annually in R&D expense over the last three years.
Leases We have operating leases for: (i) real estate which includes office space and our design and delivery centers; (ii) our outsourced data center environment, as discussed further in Note 11 ; and (iii) operating equipment. Our leases have remaining terms through 2031, some of which include options to extend the leases for up to an additional ten years.
Leases We have operating leases for: (i) real estate which includes office space and our design and delivery centers; and (ii) our outsourced data center environment, as discussed further in Note 11 . Our leases have remaining terms through 2033, some of which include options to extend the leases for up to an additional ten years.
We have performance guarantees in the form of surety bonds and money transmitter bonds, both issued through a third-party that are not required to be on our Balance Sheet. As of December 31, 2022 , we had performance guarantees of $ 3.4 million. We are ultimately liable for claims that may occur against these guarantees.
We have performance guarantees in the form of surety bonds and money transmitter bonds, both issued through a third-party that are not required to be on our Balance Sheet. As of December 31, 2023 , we had performance guarantees of $ 4.9 million. We are ultimately liable for claims that may occur against these guarantees.
In the normal course of business, we are exposed to credit risk. The principal concentrations of credit risk relate to cash deposits, cash equivalents, short-term investments, and accounts receivable. We regularly monitor credit risk exposures and take steps to mitigate the likelihood of these exposures resulting in a loss.
In the normal course of business, we are exposed to credit risk. The principal concentrations of credit risk relate to cash deposits, cash equivalents, and accounts receivable. We regularly monitor credit risk exposures and take steps to mitigate the likelihood of these exposures resulting in a loss.
As of December 31, 2022 and 2021 , we have an acquired U.S. Federal net operating loss (“NOL”) carryforward of approximately $ 13 million and $ 18 million, respectively, which will begin to expire in 2029 and can be utilized through 2033 . The acquired U.S. Federal NOL carryforward is attributable to the pre-acquisition periods of acquired businesses.
As of December 31, 2023 and 2022 , we have an acquired U.S. Federal net operating loss (“NOL”) carryforward of approximately $ 8 million and $ 13 million, respectively, which will begin to expire in 2029 and can be utilized through 2033 . The acquired U.S. Federal NOL carryforward is attributable to the pre-acquisition periods of acquired businesses.
The weighted-average interest rate on our debt borrowings, including amortization of OID, amortization of deferred financing costs, and commitment fees on the revolving loan facility, for 2022, 2021, and 2020 , was approximately 4 %, 5 %, and 5 %, respectively. 6.
The weighted-average interest rate on our debt borrowings, including amortization of OID, amortization of deferred financing costs, and commitment fees on the revolving loan facility, for 2023, 2022, and 2021 , was approximately 7 %, 4 %, and 5 %, respectively. 6.
For a discussion of the 2021 compared to 2020, please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 18, 2022. Total Revenue.
For a discussion of the 2022 compared to 2021, please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 17, 2023. Total Revenue.
Based on the net carrying value of these acquired customer contracts, the estimated amortization for each of the five succeeding fiscal years ending December 31 will be: 2023 – $ 9.7 million; 2024 – $ 8.5 million; 2025 – $ 7.7 million; 2026 – $ 5.9 million; and 2027 – $ 3.1 million. Software .
Based on the net carrying value of these acquired customer contracts, the estimated amortization for each of the five succeeding fiscal years ending December 31 will be: 2024 – $ 8.6 million; 2025 – $ 7.7 million; 2026 – $ 5.9 million; 2027 – $ 3.1 million; and 2028 – $ 2.5 million. Software .
Customer contract incentives are amortized ratably over the contract period to include renewal periods, if applicable, which as of December 31, 2022 , have termination dates that range from 2024 to 2026 . The amortization of customer contract incentives is reflected as a reduction of revenue in our Income Statements.
Customer contract incentives are amortized ratably over the contract period to include renewal periods, if applicable, which as of December 31, 2023 , have termination dates that range from 2024 to 2027 . The amortization of customer contract incentives is reflected as a reduction of revenue in our Income Statements.
These fees are amortized over the contract period based on the transfer of goods or services to which the assets relate, which as of December 31, 2022 , range from 2023 to 2028 , and are included in selling, general and administrative (“SG&A”) expenses in our Income Statements.
These fees are amortized over the contract period based on the transfer of goods or services to which the assets relate, which as of December 31, 2023 , range from 2024 to 2029 , and are included in Selling, General, and Administrative (“SG&A”) expenses in our Income Statements.
All contributions are subject to certain IRS limits. The expense related to these contributions for 2022, 2021, and 2020 was $ 13.2 million, $ 12.4 million, and $ 12.1 million, respectively. We also have defined contribution-type plans for certain of our non-U.S.-based employees.
All contributions are subject to certain IRS limits. The expense related to these contributions for 2023, 2022, and 2021 was $ 12.8 million, $ 13.2 million, and $ 12.4 million, respectively. We also have defined contribution-type plans for certain of our non-U.S.-based employees.
Transaction Price Allocated to Remaining Performance Obligations As of December 31, 2022, our aggregate amount of the transaction price allocated to the remaining performance obligations is approximately $ 1.7 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).
Transaction Price Allocated to Remaining Performance Obligations As of December 31, 2023 , our aggregate amount of the transaction price allocated to the remaining performance obligations was approximately $ 1.5 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).
During the Conversion Period, $ 229.1 million principal amount of the 2016 Convertible Notes were converted. On March 15, 2022, we paid each converting holder that exercised their conversion right, cash in an amount equal to $ 1,053.68 per each $ 1,000 principal amount of 2016 Convertible Notes being converted, for a total cash payment of $ 241.4 million.
On March 15, 2022, we paid each converting holder that exercised their conversion right, cash in an amount equal to $ 1,053.68 per each $ 1,000 principal amount of 2016 Convertible Notes being converted, for a total cash payment of $ 241.4 million.
We expect to recognize approximately 75 % of this amount by the end of 2025 , 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.
We expect to recognize over 75 % 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.
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.
On October 4, 2021 , we acquired DGIT, a provider of configure, price and quote (CPQ), and order management solutions for the telecommunications industry.
We also issue restricted stock shares to key members of management that vest upon meeting pre-established financial and operational performance objectives (“Performance-Based Awards”). The structure of the performance goals for the Performance-Based Awards has been approved by our stockholders.
We also issue restricted stock shares to key members of management that vest upon meeting pre-established financial and operational performance objectives (“Performance-Based Awards”) over a defined measurement period. The structure of the performance goals for the Performance-Based Awards has been approved by our stockholders.
If recognized, the $ 2.6 million of unrecognized tax benefits as of December 31, 2022, would favorably impact our effective tax rate in future periods. We file income tax returns in the U.S. Federal jurisdiction, various U.S. state and local jurisdictions, and many foreign jurisdictions. The U.S., U.K., India, and Australia are the primary taxing jurisdictions in which we operate.
If recognized, the $ 1.9 million of unrecognized tax benefits as of December 31, 2023, would favorably impact our effective tax rate in future periods. We file income tax returns in the U.S. Federal jurisdiction, various U.S. state and local jurisdictions, and many foreign jurisdictions. The U.S., U.K., India, and Australia are the primary taxing jurisdictions in which we operate.
As of December 31, 2022 , net deferred financing costs related to the 2021 Credit Agreement were $ 2.7 million and are being amortized to interest expense over the related term of the 2021 Credit Agreement (through September 2026).
As of December 31, 2023 , net deferred financing costs related to the 2021 Credit Agreement were $ 2.4 million and are being amortized to interest expense over the related term of the 2021 Credit Agreement (through September 2026).
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, amortization of OID, impairments, gain/loss from 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.
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.
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