CSGS - NASDAQ

Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the CSG Systems International, Inc. Third Quarter 2022 Earnings Conference Call. [Operator Instructions] I'd now like to turn the conference over to John Rea, Head of Investor Relations. Please go ahead.

Thank you, operator, and thanks to everyone for joining us. Like last quarter, we will be working from a slide deck, which can be found on the Investor Relations section of our website. Please take a moment to locate these slides. Today's discussion will contain a number of forward-looking statements. These include, but are not limited to, statements regarding our projected financial results, our ability to meet our clients' needs through our products, services and performance, and our ability to successfully integrate and manage acquired businesses in order to achieve their expected strategic, operating, and financial goals. While these risks reflect our best current judgment, they are subject to risks and uncertainties that could cause our actual results to differ materially. Please note that these forward-looking statements reflect our opinions only as of the date of this call, and we undertake no obligation to revise or publicly release any revision to these forward-looking statements in light of new or future events. In addition to factors noted during this call, a more comprehensive discussion of our risk factors can be found in today's press release as well as our most recently filed 10-K and 10-Q, which are all available in the Investor Relations section of our website. Also, we will discuss certain financial information that is not prepared in accordance with GAAP. We believe that these non-GAAP financial measures, when reviewed in conjunction with our GAAP financial measures, provide investors with greater transparency to the information used by our management team in our financial and operational decision-making. For more information regarding our use of non-GAAP financial measures, we refer you to today's earnings release and non-GAAP reconciliation tables on our website, which will also be furnished to the SEC on Form 8-K. With me today on the phone are Brian Shepherd, Chief Executive Officer; and Hai Tran, Chief Financial Officer. With that, I'd like to now turn the call over to Brian.

Thanks, John. Hi, everyone. We appreciate you joining the call today as we get started on Slide 4. We are extremely proud to share that Team CSG delivered excellent results in Q3. Revenue grew 3.8% year-over-year and 4.2% sequentially quarter-over-quarter coming from good organic revenue growth. Our success is fueled by exciting ongoing market demand for CSG's industry-leading SaaS products and our impressive sales results. We continue to win and wow big new customers in a wide variety of faster-growth industry verticals. Annual contract value sales bookings grew more than 10% year over year in both Q3 and year to date. These sales wins bode well for CSG's continued revenue growth in Q4 and a strong start to 2023. Probably even more exciting for investors is the speed and operating discipline we demonstrated in Q2 and early Q3 to overcome some headwinds we faced earlier this year. The timely actions we took to prioritize every dollar towards revenue growth and customer commitments resulted in one of the most profitable quarters in recent memory with 18.3% non-GAAP adjusted operating margin, well above our revised guidance range of 16.2% to 16.7%. In fact, our non-GAAP adjusted operating margin for the first 9 months of 2022 reached 16.6% year to date, which represents nearly the high end of our revised guidance range for profitability. If anyone doubted CSG's ability to survive and thrive in today's tough economic climate, we believe Q3 should put those doubts to rest. CSG is firing on all cylinders and the best part of our story is that we are just getting started. We fully expect that our biggest and best top and bottom line growth is still to come as we continue the exciting transformation of CSG. With this business momentum as a backdrop, we are pleased to reiterate our 2022 revenue, profitability, and EPS guidance targets that we set at our last earnings call. In fact, as Hai will talk about in a few minutes, we expect full year 2022 financial results to meet or beat the top end on several key metrics. We expect fiscal year 2022 revenue to reach near the midpoint of our original guidance for the year, which would be very good result in today's tough economic environment. We expect to deliver at or above the top end of our revised guidance ranges on non-GAAP adjusted operating margin and non-GAAP EPS, driven by the decisive timely action we took to adjust our cost structure combined with the ongoing size of our 2022 share repurchases. We expect strong CSG-like free cash flow in Q4 to range from $45 million to $60 million in the upcoming quarter, which should give all of us confidence that CSG will continue to be laser focused on strong cash generation and healthy profitable revenue growth. I will cover more details on our 2022 cash flow shortly. I would like to thank every CSGer for bringing more joy, more inclusion, and more impact to what you do every day. Your energy and your efforts delivered fantastic Q3 results for our customers and for CSG. We will continue investing in our people, our products, and our customers to grow faster and to wow leading brands all around the world. And as we do this, we will also demand a higher and more disciplined return on every dollar we invest. This combination is what will enable CSG to expand our operating leverage and accelerate our profitable revenue growth. During the quarter, we had several exciting customer wins. As expected, at the end of Q3, we have migrated approximately 75% of the Charter subscribers off a competitor's billing system with the remaining migrations planned to be completed over the next 6 months. In South Africa, we expanded our footprint by winning a very good digital transformation initiative with a leading telecom operator where we are displacing an incumbent competitor. And in the new industry verticals, we won significantly more business with one of the U.S.'s top 3 pharmacy retailers to help improve their digital customer engagement. Turning to Slide 5. I will reiterate 4 strategic objectives that will help CSG create more shareholder value and allow followers of our story to track our progress. CSG aspires to deliver long-term organic revenue growth in the 2% to 6% range, striving to consistently be at or above the midpoint of this range, combined with highly disciplined, accretive, and strategic inorganic growth. We aim to add operating scale and expand our operating leverage by growing top and bottom line by more than 50% to $1.5 billion in revenue by year-end 2025. We strive to be the #1 SaaS provider of choice for global communication service providers by providing the most value-added technology platforms and by being easier to do business with than our competitors. And finally, we plan to diversify revenue even more as we expand in big, faster-growth industry verticals with more direct sales and channel partner success in retail, government, financial services, healthcare, technology and more. Moving to Slide 6. You can see that we have performed well in the first 9 months against all 4 objectives. On strategic revenue growth, we reported $800 million in total year-to-date revenue through the first 9 months of the year, resulting in 4.2% quarter-over-quarter growth. On the right-hand side of Slide 6, we believe that CSG's high recurring revenue SaaS business model and our strong healthy balance sheet make us a safe, attractive harbor in the midst of macroeconomic uncertainty. By 2025, we aspire to gain scale in the markets where we compete and generate over $1.5 billion in annual revenue, which implies that CSG will add over $500 million in profitable recurring revenue by 2025. We aspire to expand CSG's operating leverage and use our strong balance sheet to deliver non-GAAP EPS growth that meets or exceeds revenue growth exactly as we did in Q3 and for full year-to-date 2022 even with the margin pressure we faced in the first half of the year. On this last point, I will continually reinforce a key principle for the CSG Board of Directors and management team. Investors can be assured that Team CSG is laser-focused on creating shareholder value and growing profitable revenue, not building empires nor adding them to calories. We will maintain a disciplined and high return on invested capital mindset as we explore a wide range of strategic moves to create more value. Turning to Slide 7. We had good successes in Q3 on our goal to be the #1 technology provider of choice for communication service providers globally, and our continued success with both North American and global CSPs proved that we are executing well against this strategic priority. It is great to see that CSG grew revenue 5% sequentially quarter-over-quarter combined at our 2 largest North American cable broadband customers in Q3, a result boosted by continued subscriber migrations and additional spend on ancillary services, and we also won more business in the global telecom market. At the beginning of Q3, we signed a giant win with a leading telecom operator in Latin America and the Caribbean. This deal highlights the power of our holistic offering for global CSPs. This deal includes our leading revenue management solution, CSG Encompass product catalog and our CSG Xponent customer engagement offering. It is a powerful example of how we're truly helping the world's largest global telecom operators solve both their back-end revenue management needs and their front-end customer engagement needs to deliver fantastic digital experiences. In South Africa, we expanded our business by winning a meaningful new digital transformation deal with a leading wireless operator, which will include displacing an incumbent competitor to become this operator's wholesale charging and monetization provider of choice. During the quarter, we launched CSG Xponent Ignite, which brings over 100 prepackaged customer experience journey templates, connectors, and reports that will turbocharge unforgettable outcomes for communication service providers, financial services, retail, healthcare, and life sciences. This leading SaaS platform leads to quantifiably better business results with improved customer conversion, engagement, and loyalty across the brand's digital channels. What does this mean for brands in a wide range of industry verticals? Low-entry price points, rapid launch in 90 days or less, turning customer data into powerful insights, and faster return on investment. The investment we have made in this innovative digital customer engagement SaaS platform continues to translate into very good sales wins in a wide variety of industries. We closed a key win for our Xponent suite of products at a leading pay-TV company. In today's world, where streaming is gaining market share, CSG is delivering new approaches to engage, retain, and grow customers. Specifically, our customer journey orchestration tool will help this customer improve their already award-winning customer satisfaction across many use cases, including their consumers' promotion roll-off experience. Turning to Slide 8. Since 2017, CSG has grown revenue from exciting new industry verticals from 7% of total 2017 CSG revenue to 25% in Q3 2022. Being a partner of choice for big brands in higher-growth industry verticals where we help them digitize and modernize their customer engagement and integrated payments continues to be a big gamechanger for CSG and for our customers. Last year, we won and later expanded deals with 2 of the largest drug store chains in the U.S. and one of the largest retailers in the world, who all selected CSG software to power their retail and clinic customer engagements. Our solution is increasingly important to all 3 of these large customers given the unprecedented number of inbound requests, the healthcare providers, retail pharmacies, and government agencies are getting related to vaccinations, appointments, and prescriptions. I'm pleased to report that during Q3, we won and signed a large new expansion to our relationship with one of the top 3 U.S. drugstore chains. Specifically, our CSG Xponent suite of solutions will power critical engagement programs for this brand, including their storefronts and with the loyalty rewards program. Additionally, our solution will layer on customer engagement intelligence, enabling this retailer to gain critical insights into individual consumer experiences. Two other great digital customer engagement wins from this quarter came in the healthcare space. Exact Sciences, a medical company that specializes in the detection of early-stage cancers, engaged us to help digitize their customer experience and implement our customer journey orchestration tool, which allows them to offer a more personalized patient experience. We also had a great win at eClinicalWorks, a cloud-based healthcare software company that focuses on improving healthcare outcomes. eClinicalWorks is now using our solutions to increase patient engagement while digitizing and creating new customer journeys. In the payments market, our growth is a testament to our industry-leading SaaS integrated payments platform. CSG Forte provides award-winning payment platforms to nearly 95,000 active merchants and ISV partners who need ACH, credit, payment gateway, and payment processing capabilities serving a wide range of recurring revenue industry verticals. As a leader in ACH processing, we continue to add scale by signing ISV partners in fast-growing industry verticals like property management. Looking ahead, we've built an exciting sales pipeline in our payments business that we believe will continue good double-digit organic revenue growth. Before wrapping up, let me provide some color on our aspirations for 2023 prior to us sharing detailed 2023 financial guidance on our February earnings call. With the excellent sales bookings and customer retention results, we expect organic revenue growth next year to be better than our 2022 performance and be at the midpoint of our 2% to 6% organic revenue growth ambitions. We expect our non-GAAP adjusted operating margin performance to continue into next year, and we expect to deliver good cash flow that builds off our Q4 cash flow results. Specifically, we also plan to reduce our CapEx spend in 2023 by over $10 million from the approximate $35 million we plan to spend this year to help ensure CSG's cash flow remains strong and healthy. To wrap up on Slide 9, I hope you see why Team CSG is so excited by our outlook. We will do whatever it takes -- do that one again. To wrap up on Slide 9. I hope you see why Team CSG is so excited by our outlook. We will do whatever it takes to turn today's challenges into tomorrow's breakthrough business results. We are attracting, retaining, and developing the best and most diverse talent in the industry. We are dreaming bigger every day. We are helping transform the industries we serve. Our good sales win rate proves that the market wants more of what CSG has to offer. Our optimism is not based on wishful thinking. It is backed by a relentless, sweat-every-detail passion to consistently outperform. And when any part of our business underperforms our lofty expectations, then you see CSG's accountability, resiliency, agility, and operating intensity kick into high gear just like we did in Q3 to significantly improve our non-GAAP adjusted operating margin to 18.3% and non-GAAP EPS growth of 20.5% year-over-year. And yet, as excited as we are by these great results, we also believe that our employees, our customers, and our investors have just begun to be rewarded for the value that we will create in the quarters and years ahead. So please stay tuned to CSG because you haven't seen anything yet. And with that, I'll turn it over to Hai to provide more detail on Q3 and year-to-date 2022 results.

Thanks, Brian. Let's walk through our third quarter and year-to-date financial results, and then I'll wrap it up with some key conclusions. Starting on Slide 11, we generated $273 million of revenue and $255 million of non-GAAP adjusted revenue during Q3. These results represent 3.8% and 3.3% year-over-year growth, respectively. For Q3, our increase in revenue and non-GAAP adjusted revenue was mainly attributed to the continued growth of our revenue management solution as approximately 3/4 of the increase was attributed to organic growth. This growth was in the face of 3% to 5% discount headwinds for 2 of our 3 largest customers. Our Q3 non-GAAP operating income was $47 million, or 18.3% of non-GAAP adjusted revenue, as compared to $42 million, or 16.8%, in the same prior year period. The increases in non-GAAP operating income and non-GAAP operating income margin can be mainly attributed to higher revenue along with the timely operating margin improvement initiative we took in Q2 and the beginning of Q3. Specifically, we have seen margin benefits from our decision to dissolve our controlling interest in MobileCard, a Latin American business that was focused on creating solutions for the underbanked in the region; a continued streamlining of our office space footprint; a rationalization of our headcount and hiring practices; and the strengthening of the U.S. dollar to most international currencies. We now expect full year non-GAAP adjusted operating margin to be at or above the high end of our previous guidance of 16.2% to 16.7%. This does imply that our Q4 non-GAAP adjusted operating margin will be down sequentially, primarily due to an increase in employee bonus related compensation due to our improved profitability performance in the second half of 2022. Moving on, our non-GAAP adjusted EBITDA was $60 million for Q3, or 23.5% of non-GAAP adjusted revenue, as compared to $56 million or 22.8% in the same prior year period. Lastly, our Q3 non-GAAP EPS was $1.06, a 20.5% year-over-year increase as compared to $0.88 in the prior year period. In addition to this result being positively impacted by our increased profitability in Q3, it also benefited from our share repurchase activity over the last 12 months. Turning to Slide 12. I'll go through the balance sheet, our cash flow generation, and shareholder return. Our Q3 2022 cash flows from operations was $23 million as compared to cash flows from operations of $46 million in the prior year period. Further, we had non-GAAP free cash flow of $11 million in Q3 2022 as compared to $39 million of free cash flows generated in Q3 2021. On a year-to-date basis, we saw free cash outflows of $22 million in 2022 as compared to free cash inflows of $66 million in the prior year period. The main drivers of the year-to-date year-over-year variance of free cash flows are related to certain items, which we believe are primarily timing related over the near to medium term. The drivers of these changes include: unfavorable changes in working capital, resulting primarily from the accrual of our 2022 annual employee bonuses, which are significantly lower than in the previous year and the timing of payment of employee wages; higher tax obligation, of which the primary negative impact was from Section 174 of the 2017 Tax Cuts and Jobs Act, which deals with the amortization of R&D spending beginning in 2022. As a result of this, we will not get the previously anticipated amount of tax deduction benefit related to our R&D investment in 2022. We had previously expected this legislation to be repealed, but because the legislation is not repealed, we now anticipate higher cash taxes going forward. However, over a 5-year period, we believe this tax change will be neutral to our free cash flow generation. Slightly elongated cash conversion cycles from a couple of our recently signed large global telecom new logo wins that will result in good long-term profitable revenue as we continue to gain market share from competitors. And the negative cash impact of our operating margin improvement plan that we initiated in Q2 that included increased restructuring charges, continued streamlining of our office space footprint, headcount reduction, and enhanced scrutiny regarding new hires. The cash flows generated from operations before changes in working capital in Q3 of 2022 were $36 million compared to $42 million in Q3 of 2021. Similarly, on a year-to-date basis, cash flows generated from operations before changes in working capital were $122 million as compared to $134 million in the prior year period. Importantly, absent the aforementioned impact from Section 174, we would have shown positive growth in cash flows from operations before changes in working capital during the first 9 months of 2022 on a year-over-year basis. Moving on, we ended the third quarter with $147 million of cash and short-term investments. That, along with our outstanding debt at September 30, 2022, results in $285 million of net debt, and our net debt leverage ratio sits at 1.2x. Moving to the bottom right of the slide, we declared $25 million in dividends during the first 9 months of 2022. In addition, we repurchased $66 million of common stock under our stock repurchase program. In total, we returned $91 million to our shareholders through the first 9 months of this year. On the right-hand side of Slide 13, you can see our latest 2022 guidance outlook. We are pleased to reiterate our 2022 revenue, profitability, and EPS targets. Additionally, we now expect to come in close to the midpoint of our original 2022 revenue guidance and to come in at or above the high end of our adjusted operating margin and non-GAAP EPS range. As Brian alluded to earlier, we are also revising our 2022 free cash flow expectations. While we expect to deliver strong CSG-like Q4 free cash flow in the range of $45 million to $60 million, which is similar to our Q4 2021 free cash flow result of $48 million, the full year 2022 cash flow is expected to be between $25 million and $40 million for the full year due to some operating optimization actions and factors impacting timing. The reduction from our previous guidance are primarily driven by the aforementioned slightly elongated cash conversion cycle from a couple of our recently signed large global telecom new logo wins, increased restructuring and severance costs related to our operating margin improvement initiatives, and increased cash spend related to certain business inventory in a tight supply chain environment and other timing-related items. With respect to 2023 free cash flow, this is a major focus for the CSG leadership team, and we expect significant improvement over our 2022 results, primarily due to the cash collections from the aforementioned timing headwind. Additionally, we will see an approximately $10 million reduction in CapEx spend next year as our 2022 spend was elevated due to modernization investments to drive improved efficiencies and forward buying of IT-related equipment. Also, with respect to 2023 free cash flow, please keep in mind that we do have a few headwinds, including the continued impact from Section 124 and cash outflows related to restructuring charges incurred in 2022, stemming from our operating margin improvement plan. As we look to the long term, the cash generation of the business has not changed, but we will experience some transitory cash flow drag over the near- to mid-term as the business digests the temporary impact of the change in tax treatment from Section 174, working capital timing, and the impact of the restructuring charges to ensure increased operating leverage over time. Going forward, the current challenging inflationary environment means we must relentlessly prioritize every investment we make, and be disciplined in the allocation of resources, including those around our new business ventures. Innovation and adherence to a risk/reward framework with continuous learning are 2 cornerstones of how we run the business. We remain devoted to a disciplined approach to managing our capital. In closing, our business is well positioned with a strong sales pipeline, robust sales bookings momentum, and extremely high-quality customer base and a very high percentage of committed revenue. We remain committed to accelerating our revenue growth and diversifying our industry vertical revenue, which may include closing and integrating disciplined, value-added acquisitions. Additionally, we are pleased with the results of our operating margin improvement initiatives to date, and we'll continue to be very careful stewards of our capital, especially in this uncertain environment. We believe this approach, combined with our consistent capital distribution in the form of both dividends and share buybacks, will serve our shareholders well. With that, I'll turn it over to the operator to facilitate the question-and-answer session.

[Operator Instructions] First question will come from the line of Matt Stotler with William Blair.

Maybe just first on profitability. It's good to see the results in the quarter and helpful commentary on how you're thinking about some of those dynamics you talked about last quarter. There's a couple other things you talked about last quarter that I'd love to get an update on as well. One would be the upfront staffing of deals, some of these large deals that you talked about in terms of where you're at in terms of the staffing process and how those heads are ramping to productivity? And then number 2 would just be the synergies from recent acquisitions. Would love to get an update there and how those are expected to [realize the model] going forward.

So on the staffing, first, these big projects gaining market share, big, complicated deployments, we are ramping up our staffing. We've been adding hundreds of technical staff all around the world. We like where the projects are going. As Hai commented on, we still see some inflationary pressure around that, which is why we're proud of the margin on how we were able to offset some of the inflationary wages. We continue to ramp. We continue to deliver the programs. And this is one of the real strengths of CSG where we differentiate from competitors, and we just got to keep going with the big successes we're having. Specifically on the integration, both culturally and from a financial standpoint on the acquisitions, we love what we're seeing on these. We've acquired good assets over the last 12 to 15 months. And you've seen us launch exciting new products in the market that's enabled us to both accelerate sales and revenue growth, but also that contributes to the profitability. And so we launched CSG Xponent. After we acquired Kitewheel, we launched CSG Encompass, an award-winning API-driven solution for global telecom with configure, price, quote, order management. We're seeing good market traction in sales, and we like what we're seeing. These are good gross margin businesses that also contribute to our healthy 18.3%. So integrations, these are part of CSG. They're CSG teams globally. They're fully integrated. And we like what we're seeing, and we just got to keep driving more sales wins.

Great. That's very helpful. And then maybe just one more from me. It was helpful the initial guidance, the outlook that you gave for 2023. Obviously, you guys have done a lot of work to establish a great renewal base and some of your largest customer contracts over the past couple years. Would love to maybe get your thoughts, obviously, it's still early, but in terms of the new customer pipeline specific to new verticals, how is that layering into your expectations for growth going forward in the context of the macro uncertainty that we're seeing? Are you seeing any changing in spending behavior, prioritization, or timing when it comes to some of those new vertical customers?

Yes. This is probably one of the things that excites us the most in terms of what we're seeing in the business, both from market, market demand, and our sales pipeline and sales performance. We're planning as if there's going to continue to be storm clouds for the next year, but we actually see some of the best sales growth. We see some of the best revenue growth that we've seen in a long time, probably ever, in our business across all aspects. So on the global telecom space, on both consumer side of wireless and enterprise, we see big growth in the market, and we like the pipeline, we like the sales win rate, we like the market share gains. We know there's challenges out there in the market, but we're not seeing that materialize in any dampening on our demand. If anything, we're just seeing accelerated growth. Same is also true in the new industry verticals. So when we talk about the CSG Xponent Ignite launch in the market, this is a customized solution for really starting out with 4 industry verticals, communication service providers, financial services, retail, healthcare life science, we're seeing fantastic market receptivity to our new market launch, and we're seeing just fantastic wins like the couple we announced in the life sciences space and like we announced with the big expansion of one of the top 3 U.S. pharmacy retailers. And that's largely up until now, we've been focused on proving this growth and market and sales success in North America. Now you're going to see us really start through channel sales and some targeted direct sales expanding globally because we just see the market demand for these solutions. So we are continuing to focus on driving that percentage of our revenue that comes from higher growth industry verticals. 25%, this quarter was a little over 26%, almost 27% last quarter. We expect that to continue as we diversify our revenue and win more exciting deals in these new verticals.

Your next question will come from the line of Greg Burns with Sidoti & Company.

The sequential increase in revenue at Charter, how much of that was from the new subscribers versus maybe some incremental services and -- any color on the added services that Comcast and Charter are adding?

Greg, one thing I want to clarify. The 5% sequential growth was combined for both Charter and Comcast when you combine the revenue of both from last quarter to this quarter. And I would say a good portion of that was driven by some of the subscriber migrations and the expansion we did there. But we also saw a nice pickup in ancillary products and services and demand. So it really came from a combination, and we're excited about both.

Okay. And then the annual contract value, the bookings that you referenced, how long does it typically take for that to convert into revenue for some of those projects to scale up?

Yes. It really depends on which parts of our business it comes from. There are some that can activate the revenue within one to two months. There's others that then would go on a percentage of completion if the project is scheduled to be deployed over 12 to 18 months, then you would actually see revenue being spread either on the percentage of the completion, or if it's a SaaS deal, it would actually be spread over the length of that contract term on what it is. So it really varies. But one thing that we've had good success on is timely activation of new revenue and having high quality of our sales bookings actually convert dollar for dollar into actual revenue that drives the business. So it just varies. There's not really a better answer. Hai, is there anything else you'd add around that?

No. That's absolutely right. It will just vary depending on the solution and how we deploy those solutions by customer.

Okay. And then with the telecom win where you were displacing an incumbent, can you just talk about maybe the factors that enabled you to win that deal? What differentiated you and why you feel that you won that deal?

Sure. I think it's the same trends we've been talking about for the last several quarters. What we see in the global telecom market is, one, they've been under some pressure to recoup their investment in 5G. They've also been under some pricing and margin pressure, so they need to expand margin and offer an improved customer experience. And so what we see a lot of global telecom operators wanting to do, simplify their business process, move to a less customized platform, and move to a lower cost, more cost-effective platform that CSG offers, lowers costs, improves customer experience, high-quality conversions that makes their platform and their business more agile, and we're seeing a lot of global telecoms say, now is the time to switch. And we see that both on the consumer side of the business where CSG has a lot of strength, but we also see it on one of their fastest growing, more profitable segments in enterprise, which has been an area that CSG just excels at over the last 10 or 15 years. So it's really those drivers that we see driving it. And it's a way for them to respond to what their consumers and markets are demanding. And the more we win, the more we successfully deploy, the more they become our best sales references, that helps us win more. This is one of the areas that our market share gains we're most excited about across the business, along with our North American cable and these new industry verticals on digital customer experience.

Okay. So it sounds like -- I guess, is there more RFP activity going on now? Are you seeing -- like is there just generally more willingness by the cable -- the telecom operators to put out an RFP and look for a new solution?

Yes. That's exactly right, Greg. I've been in the industry for two decades. I haven't seen a higher level of activity in my almost two decades in this industry in terms of telecom operators wanting to launch new business, revisit platform decisions, and being willing to change out their platforms. And it's coming from what's going on in the market. They need to accelerate revenue growth. They need to simplify their business. They need to take cost out. They need to recruit investment with their 5G charging and 5G investments in their network. And the market is extremely attractive, and we love what we're seeing in the market. With this, what do we have to do? We have to consistently win more and more of these big deals. We have to deliver extremely well and bring them the value that they're counting on. And then as we do that, we think this is something that will continue in the market in the coming quarters and years. We love what we're seeing on the demand side, notwithstanding some of the macroeconomic challenges that we all know are real. If anything, possibly some of those macroeconomic challenges are actually increasing demand for us exactly because of the value proposition we can bring them.

Okay. And just so I'm clear. So is this what you're talking about now beyond -- historically, you would talk about telco as converting these customers to managed service deals. This is incremental and beyond that? This is like expansions as opposed to just maybe converting to a different model with these customers.

Yes. This is us, CSG, winning market share. It's exactly right. CSG winning market share, helping large global telecom operators digitize their business, improve customer experience, and switch platforms from a competitor's incumbent platform to ours. And in many cases, it's not just replacing the monetization engine, it's actually selling other solutions around it. So, for example, the big win in the Caribbean and Latin America is, it was deploying our monetization solutions. It was also deploying CSG Encompass product catalog. It was also deploying CSG Xponent to improve the digital customer experience. So one of the things Hai has been talking about how we get operating leverage is doing a better job of cross-selling and up-selling inside of both new customers, selling them more of our full stack offer as well as cross-selling and up-selling inside the existing base. It's all of the above.

Our next question comes from the line of Matthew Harrigan with Benchmark.

You just alluded to gaining share in some rapidly growing [TAMs] like customer engagement and various verticals. But I'm curious how you see this environment affecting your competitors, whether it be some companies that are overextended, they're smaller, they don't have your balance sheet or some businesses that are more or less sidecars of larger companies that people might be tempted to rationalize in this environment. It feels like this environment is probably working in your favor, both organically and inorganically, if you can execute the way that you aspire to.

Matt, appreciate you joining and appreciate the questions. I think on a couple different fronts, from an organic side in the market, we actually think the market is benefiting us because we -- typically what we see is even if companies are wanting to dial back some of their OpEx from a customer base standpoint, what that often means is they want to consolidate the spend they give with fewer vendors or fewer partners. So where we've proven ourselves and we perform well with mission-critical software, it typically means even if they're cutting costs, they're cutting other competitors or other vendors, and they're consolidating more with those who deliver best for them. I think that's moving in our advantage. I think the fact that digital customer experience is a gamechanger and the main competitive advantage for all these brands. They know they've got to improve their customer engagement. They have to improve their NPS, and they actually have to take cost out. So if you have a proven SaaS platform like CSG does in a lot of these spaces, we can help them take costs out, improve customer experience, improve cross-sell and retention. So this whole move of digital engagement is playing to our advantage on the organic side. So again, we love what we're seeing on the demand side of the business, and it bodes well for our ongoing growth organically next year, which we think will be higher than what we've had in 2022. On the inorganic, I'd say it's probably a little mixed. And I'll tell you what I mean by that. Because on the one hand, we do think healthy balance sheet gives us complete optionality in terms of when there's a good deal to acquire a company with a great offering, great customer base, it can be accretive at the right price, we can move quickly and timely to be a high-quality acquirer, and we integrate well. The flipside is, if we don't like the price, we can wait because we think, if anything, that will put pressure on some of these companies that just don't have the same balance sheet or maybe they're relying on more debt and the higher interest rate costs are going to play on them over time. And so the reason it's mixed, though, is buyers are wanting to factor in the potential risk over the next 3 or 4 quarters and be disciplined, which is exactly how we're thinking about it. We still see some sellers that might be very attractive for us. We're seeing they could get the price from 12 months ago. And therefore, that creates a dichotomy, if you will, between a disciplined buyer and the timing of when a seller might really want to pull the trigger. And so we view this as time is on our side, and we want to stay highly disciplined, but ready to move when it comes into our strike zone on the acquisition side.

And how much are you seeing from the inverse dollar play effect? Because I know you've got a number of software engineers and other people in some markets like India and you're probably even while you're directly benefiting a little bit from the strength in the dollar when you look at things from that perspective.

Yes. I think that the strengthening dollar, generally speaking, hurts our top line because it's a headwind for us. We still have roughly 15% of our revenue now comes outside the U.S. But you're right, we have made some broad-based investments in technical resources outside the U.S. that we did benefit from that. I think we called that out in our prepared remarks. But that is something we're continuing to monitor. It is a lever for us to drive efficiencies over time regardless of what currency does.

We have no further questions at this time. I'll turn the conference back over to management for any closing remarks.

Thanks so much. Thanks for joining the call today. Hopefully, you can tell we're excited about the focus. We're laser focused, faster growth, more discipline, driving better and better non-GAAP adjusted operating margins, delivering on strong cash flow in Q4, and building momentum so the 2023 is even better, faster growth, and better results across the board than what we're going to deliver when we finish a strong 2022. Thank you for joining us tonight.