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Introduction & Market Context
CSG Systems International Inc (NASDAQ:CSGS) presented its second quarter and first half 2025 results on August 6, 2025, highlighting strong performance across key financial metrics. The company’s stock closed at $61.88, up 1.26% on the day, continuing its positive momentum after delivering an impressive Q1 earlier this year.
The customer experience and payment solutions provider has been executing on its strategic transformation from a traditional cable/telecom vendor to a diversified SaaS and payments company serving multiple industries. This quarter’s results demonstrate continued progress on this journey, with expanding margins and record cash flow generation.
H1 2025 Financial Performance
CSG reported solid financial results for the first half of 2025, with revenue increasing by 1.9% year-over-year to $597 million. More impressively, the company achieved significant profitability improvements, with non-GAAP adjusted operating margin expanding to 19.5%, representing a 250 basis point increase from the prior year.
As shown in the following financial summary chart, CSG delivered double-digit growth in profitability metrics and earnings per share:
Non-GAAP EPS grew from $2.02 to $2.29, representing a 13% year-over-year increase. This performance builds on the momentum from Q1 2025, when the company reported an EPS of $1.14, exceeding analyst expectations by 11.8%.
Strategic Revenue Diversification
A key focus of CSG’s strategy has been reducing its historical dependence on cable and pay TV customers. The presentation highlighted significant progress in this area, with the company successfully diversifying its revenue streams over time.
The following chart illustrates CSG’s revenue diversification journey, showing how the company has transformed its customer mix since 2017:
Cable and pay TV revenue has decreased from 70% of total revenue in 2017 to 50% in the first half of 2025. Meanwhile, telecommunications revenue has grown substantially from 7% to 32% during the same period. This diversification reduces business concentration risk and positions CSG to capitalize on growth opportunities across multiple sectors.
The company highlighted recent wins with global telecommunications companies Orange Business and Liberty Communications, as well as expansion in the U.S. property management and financial services sectors. This broader customer base demonstrates CSG’s ability to leverage its core capabilities across industries with similar business needs.
Margin Expansion & Cash Flow Generation
One of the most impressive aspects of CSG’s performance has been its consistent margin expansion and cash flow growth. The company has steadily improved its non-GAAP operating margin from 16.6% in 2022 to a projected 18.8% in 2025, while significantly increasing its free cash flow generation.
The following chart demonstrates this positive trajectory in profitability and cash generation:
Particularly noteworthy is CSG’s non-GAAP adjusted free cash flow, which reached $47 million in the first half of 2025—the company’s best H1 performance in a decade. This represents a substantial improvement from just $5 million in H1 2024.
The company attributes these improvements to several factors, including higher revenue from better-margin SaaS solutions, improved operating discipline, and better working capital management.
Shareholder Returns & M&A Activity
CSG continues to demonstrate its commitment to shareholder returns while pursuing strategic acquisitions. The company returned $59 million to shareholders in the first half of 2025 through dividends and share repurchases, and remains on track to deliver on its commitment to return over $100 million to shareholders in 2025.
The following chart illustrates CSG’s consistent history of shareholder remuneration:
Since 2020, CSG has returned more than $600 million to shareholders. This aligns with information from the Q1 earnings report, which noted that the company has maintained dividend payments for 13 consecutive years.
On the M&A front, CSG completed two strategic acquisitions in the first half of 2025: an insurance-centric customer experience company in April and iCG Pay in June, which is expected to contribute to the company’s 10%+ payments growth. The company emphasized its disciplined approach to acquisitions, focusing on strategic fit, financial fit, and cultural alignment.
Balance Sheet Strength & Liquidity
CSG’s financial position continues to strengthen, with net leverage decreasing from 1.9x in Q2 2024 to 1.5x in Q2 2025. The company maintains strong liquidity with $146 million in cash and $475 million in available borrowings on its credit facility.
The following chart provides an overview of CSG’s balance sheet strength and shareholder returns:
This improved financial position gives CSG flexibility to continue investing in growth opportunities while maintaining its shareholder return commitments.
Updated 2025 Guidance & Outlook
Based on its strong first-half performance, CSG has raised certain elements of its 2025 financial guidance. The updated outlook reflects management’s confidence in continued execution of its strategic initiatives.
The following chart details CSG’s updated guidance for 2025:
Key updates to the guidance include:
- Non-GAAP adjusted operating margin increased to 18.6%-19.0% (from 18.4%-18.8%)
- Adjusted EBITDA raised to $261M-$272M (from $258M-$269M)
- Adjusted free cash flow maintained at $120M-$150M
- Effective tax rate improved to approximately 27% (from 28%)
The company remains focused on its three value creation priorities: organic revenue growth of 2%-6%, operating margin of 18%-20% with $120M-$150M in adjusted free cash flow, and returning over $100M to shareholders in 2025 while pursuing disciplined M&A.
Conclusion
CSG Systems’ Q2 and H1 2025 results demonstrate the company’s successful execution of its strategic transformation. With expanding margins, record free cash flow generation, and continued progress in revenue diversification, CSG appears well-positioned to deliver on its full-year commitments.
The company’s ability to win new logos across multiple industries while maintaining strong relationships with existing customers provides a solid foundation for sustainable growth. Combined with disciplined capital allocation and strategic M&A, CSG continues to create value for shareholders while investing in future growth opportunities.
Full presentation:
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