CSG Systems International Reports Fourth Quarter and Full Year 2025 Results

DENVER--( BUSINESS WIRE)-- CSG ® (NASDAQ: CSGS) today reported results for the quarter and year ended December 31, 2025.

Financial Results:

Fourth quarter 2025 financial results:

Full year 2025 financial results:

Shareholder Returns:

Plan of Merger

On October 29, 2025, CSG entered into an Agreement and Plan of Merger (the “Merger Agreement”) with NEC Corporation, a company incorporated under the laws of Japan (“NEC”) and Canvas Transaction Company, Inc., a Delaware corporation and a wholly owned subsidiary of NEC (the “Merger”). On January 30, 2026, CSG’s stockholders approved the adoption of the Merger Agreement at the special meeting of CSG’s stockholders convened for such purpose. The Merger is expected to close by the end of 2026, subject to the satisfaction of the remaining customary closing conditions and required regulatory approvals.

Financial Overview (unaudited)

(in thousands, except per share amounts and percentages):

Quarter Ended December 31,

Year Ended December 31,

2025

2024

Percent

Changed

2025

2024

Percent

Changed

GAAP Results:

Revenue

323,093

316,652

2.0

1,223,289

1,197,248

2.2

Operating Income

29,050

42,294

(31.3

118,749

131,333

(9.6

Operating Margin Percentage

9.0

13.4

9.7

11.0

EPS

0.25

1.21

(79.3

1.98

3.03

(34.7

Cash Flows from Operating Activities

59,201

82,504

(28.2

155,939

135,717

14.9

Non-GAAP Results:

Operating Income

65,791

58,347

12.8

226,234

199,432

13.4

Adjusted Operating Margin Percentage

22.3

20.1

20.3

18.1

EPS

1.53

1.65

(7.3

5.14

4.72

8.9

Adjusted EBITDA

79,339

71,937

10.3

280,631

253,987

10.5

Adjusted Free Cash Flow

55,807

76,611

(27.2

146,391

113,296

29.2

For additional information and reconciliations regarding CSG’s use of non-GAAP financial measures, please refer to the attached Exhibit 2 and the Investor Relations section of CSG’s website at csgi.com.

Results of Operations

GAAP Results: Total revenue for the fourth quarter of 2025 was $323.1 million, a 2.0% increase when compared to revenue of $316.7 million for the fourth quarter of 2024. Total revenue for the full year 2025 was $1,223.3 million, a 2.2% increase when compared to revenue of $1,197.2 million for the full year 2024. The increases in revenue can be mainly attributed to the continued growth of CSG’s SaaS and related solutions.

GAAP operating income for the fourth quarter of 2025 was $29.1 million, or 9.0% of total revenue, compared to $42.3 million, or 13.4% of total revenue, for the fourth quarter of 2024. GAAP operating income for the full year 2025 was $118.7 million, or 9.7% of total revenue, compared to $131.3 million, or 11.0% of total revenue, for the full year 2024. The decreases in GAAP operating income can mainly be attributed to the impact of the Merger transaction-related costs and higher stock-based compensation as a result of accelerating the vesting of certain stock awards.

GAAP EPS for the fourth quarter of 2025 was $0.25, compared to $1.21 for the fourth quarter of 2024. GAAP EPS for the full year 2025 was $1.98, compared to $3.03 for the full year 2024. The decreases in GAAP EPS are mainly attributed to the lower GAAP operating income, discussed above, and a higher GAAP effective income tax rate, as 2024 EPS benefited from a lower effective tax rate due to the release of valuation allowances related to certain U.S. and foreign deferred tax assets and certain one-time benefits.

Non-GAAP Results: Non-GAAP operating income for the fourth quarter of 2025 was $65.8 million, or a non-GAAP adjusted operating margin of 22.3%, compared to $58.3 million, or a non-GAAP adjusted operating margin of 20.1% for the fourth quarter of 2024. Non-GAAP operating income for the full year 2025 was $226.2 million, or a non-GAAP adjusted operating margin of 20.3%, compared to $199.4 million, or a non-GAAP adjusted operating margin of 18.1% for the full year 2024. The increases in non-GAAP operating margin can be mainly attributed to cost efficiency actions taken during 2024 and 2025.

Non-GAAP EPS for the fourth quarter of 2025 was $1.53, compared to $1.65 for the fourth quarter of 2024. The decrease in non-GAAP EPS is mainly due to a higher non-GAAP effective tax rate and foreign currency movements. Non-GAAP EPS for the full year 2025 was $5.14, compared to $4.72 for the full year 2024. The increase in non-GAAP EPS for the full year is mainly due the higher non-GAAP operating income, discussed above, offset by foreign currency movements and a higher non-GAAP effective income tax rate in 2025.

Balance Sheet and Cash Flows

Cash and cash equivalents as of December 31, 2025 were $180.0 million compared to $158.4 million as of September 30, 2025 and $161.8 million as of December 31, 2024. CSG had net cash flows provided by operations for the fourth quarters ended December 31, 2025 and 2024 of $59.2 million and $82.5 million, respectively, and had non-GAAP adjusted free cash flow of $55.8 million and $76.6 million, respectively. For the year ended December 31, 2025 and 2024, CSG generated net cash flows from operations of $155.9 million and $135.7 million, respectively, and had non-GAAP adjusted free cash flow of $146.4 million and $113.3 million, respectively.

Additional Information

For information about CSG, please visit CSG’s website at csgi.com. Additional information can be found in the Investor Relations section of the website.

About CSG

CSG empowers companies to build unforgettable experiences, making it easier for people and businesses to connect with, use and pay for the services they value most. Our customer experience, billing and payments solutions help companies of any size make money and make a difference. With our SaaS solutions, company leaders can take control of their future and tap into guidance along the way from our fiercely committed and forward-thinking CSGers around the world.

Want to be future-ready and a change-maker like the global brands that trust CSG? Visit csgi.com to learn more.

Forward-Looking Statements

This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Forward-looking statements relate to future events and typically address our expected future business and financial performance. All statements in this news release that are not historical facts are forward-looking statements. Words such as "expect," "anticipate," "intend," "plan," "aspire," "believe," "seek," "see," "will," "would," "may," "target," and similar expressions and variations or negatives of these words, typically identify such forward-looking statements. These forward-looking statements include, but are not limited to, statements relative to the Company’s future plans and prospects, our financial condition, and our expectations concerning our business and the industries we serve, and the Company’s expectations, plans, intentions, strategies or prospects with respect to the proposed Merger.

Such forward-looking statements are neither promises nor guarantees, but involve a number of known and unknown risks, uncertainties and assumptions that may cause our actual results, performance or achievements to differ materially from those expressed or implied in the forward-looking statements due to various factors, including, but not limited to: we derive a significant portion of our revenue from a limited number of customers; fluctuations in credit market conditions, general global economic and political conditions, and foreign currency exchange rates; our ability to maintain a reliable, secure computing environment; continued market acceptance of our products and services; our ability to continuously develop and enhance products in a timely, cost-effective, technically advanced and competitive manner; our ability to deliver its solutions in a timely fashion within budget, particularly large and complex software implementations; our dependency on the global telecommunications industry, and in particular, the North American telecommunications industry; our ability to meet our financial expectations; increasing competition in our market from companies of greater size and with broader presence; our ability to successfully integrate and manage acquired businesses or assets to achieve expected strategic, operating and financial goals; our ability to protect its intellectual property rights; our ability to conduct business in the international marketplace; our ability to comply with applicable U.S. and International laws and regulations; the ability of the parties to the Merger to complete the proposed Merger on the anticipated terms and timing, or at all; the satisfaction or waiver of other conditions to the completion of the proposed Merger; the risk that our stock price may fluctuate during the pendency of the proposed Merger and may decline if the proposed Merger is not completed; potential litigation relating to the proposed Merger that could be instituted against use or our directors, managers or officers, including the delay, expense or other effects of any outcomes related thereto; the risk that disruptions from the proposed Merger will harm our business, including current plans and operations, including during the pendency of the proposed Merger; our ability to retain, motivate, and hire key personnel; the diversion of management’s time and attention from ordinary course business operations to completion of the proposed Merger and integration matters; potential adverse reactions or changes to business relationships resulting from the announcement, pendency or completion of the proposed Merger; legislative, regulatory and economic developments; potential business uncertainty, including changes to existing business relationships, during the pendency of the proposed Merger that could affect our financial performance; certain restrictions during the pendency of the proposed Merger that may impact our ability to pursue certain business opportunities or strategic transactions; unpredictability and severity of catastrophic events, including but not limited to acts of terrorism, outbreaks of war or hostilities or global pandemics, as well as management’s response to any of the aforementioned factors; the possibility that the proposed Merger may be more expensive to complete than anticipated, including as a result of unexpected factors or events; unexpected costs, liabilities or delays associated with the Merger; the response of competitors to the Merger; the occurrence of any event, change or other circumstance that could give rise to the termination of the proposed Merger, including in circumstances requiring us to pay a termination fee; the ability to realize the anticipated benefits of the Merger, including the expected synergies and cost saving; the possibility that competing or superior acquisition proposals for the Company will be made; the risks identified Part I, Item 1A. “Risk Factors” of our most recent Annual Report on Form 10-K and in other filings we make with the Securities and Exchange Commission.

Forward-looking statements are based on management’s beliefs, assumptions and expectations of future events and trends that are subject to risks and uncertainties. Forward-looking statements speak only as of the date made, and actual future results and trends may differ materially from historical results or those reflected in any such forward-looking statements depending on a variety of factors. We assume no obligation to update or revise any forward-looking statements except as required by federal securities laws.

CSG SYSTEMS INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS-UNAUDITED

(in thousands)

December 31,

2025

December 31,

2024

ASSETS

Current assets:

Cash and cash equivalents

180,011

161,789

Settlement and merchant reserve assets

350,390

343,235

Trade accounts receivable:

Billed, net of allowance of $3,277 and $3,041

299,724

266,903

Unbilled

67,888

80,173

Income taxes receivable

3,443

2,600

Other current assets

36,227

46,182

Total current assets

937,683

900,882

Non-current assets:

Property and equipment, net of depreciation of $122,947 and $133,514

42,505

56,595

Operating lease right-of-use assets

16,278

24,166

Software, net of amortization of $154,240 and $154,648

19,716

19,927

Goodwill

324,706

316,041

Acquired customer contracts, net of amortization of $148,567 and $133,279

28,589

39,377

Customer contract costs, net of amortization of $50,245 and $44,587

71,613

60,809

Deferred income taxes

83,630

73,295

Other assets

19,887

9,595

Total non-current assets

606,924

599,805

Total assets

1,544,607

1,500,687

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Current portion of long-term debt

7,500

Operating lease liabilities

4,837

11,067

Customer deposits

47,633

41,448

Trade accounts payable

45,281

36,370

Accrued employee compensation

81,001

67,944

Settlement and merchant reserve liabilities

348,257

341,924

Deferred revenue

50,738

54,424

Income taxes payable

1,116

7,802

Other current liabilities

71,941

46,730

Total current liabilities

650,804

615,209

Non-current liabilities:

Long-term debt, net of unamortized discounts of $10,548 and $12,128

539,452

530,997

Operating lease liabilities

21,152

25,020

Deferred revenue

29,480

26,469

Income taxes payable

2,371

2,732

Deferred income taxes

Other non-current liabilities

17,649

17,597

Total non-current liabilities

610,104

602,909

Total liabilities

1,260,908

1,218,118

Stockholders' equity:

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

Common stock, par value $.01 per share; 100,000 shares authorized; 28,370 and 28,854 shares outstanding

721

718

Additional paid-in capital

532,885

518,215

Treasury stock, at cost; 42,371 and 41,583 shares

(1,243,972

)

(1,194,224

)

Accumulated other comprehensive income (loss):

Cumulative foreign currency translation adjustments

(45,042

)

(62,290

)

Accumulated earnings

1,039,107

1,020,150

Total stockholders' equity

283,699

282,569

Total liabilities and stockholders' equity

1,544,607

1,500,687

CSG SYSTEMS INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME-UNAUDITED

(in thousands, except per share amounts)

Quarter Ended

Year Ended

December 31,

2025

December 31,

2024

December 31,

2025

December 31,

2024

Revenue

323,093

316,652

1,223,289

1,197,248

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

161,397

154,197

623,569

614,463

Other operating expenses:

Selling, general and administrative

86,216

71,519

281,476

258,313

Depreciation

4,208

5,336

18,107

21,622

Restructuring and reorganization charges

2,271

1,283

19,818

13,323

Total operating expenses

294,043

274,358

1,104,540

1,065,915

Operating income

29,050

42,294

118,749

131,333

Other income (expense):

Interest expense

(6,990

)

(7,487

)

(28,954

)

(30,469

)

Interest income

938

2,044

5,204

8,685

Loss on debt extinguishment

(453

)

Other, net

(62

)

4,178

(3,849

)

2,723

Total other

(6,114

)

(1,265

)

(28,052

)

(19,061

)

Income before income taxes

22,936

41,029

90,697

112,272

Income tax provision

(15,935

)

(6,561

)

(34,816

)

(25,420

)

Net income

7,001

34,468

55,881

86,852

Weighted-average shares outstanding:

Basic

27,492

27,957

27,694

28,345

Diluted

28,502

28,523

28,218

28,665

Earnings per common share:

Basic

0.25

1.23

2.02

3.06

Diluted

0.25

1.21

1.98

3.03

CSG SYSTEMS INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS-UNAUDITED

(in thousands)

Year Ended

December 31,

2025

December 31,

2024

Cash flows from operating activities:

Net income

55,881

86,852

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

Depreciation

18,979

22,061

Amortization

53,480

50,447

Loss on debt extinguishment

453

Asset impairments

251

717

Gain on lease modifications

(174

)

(Gain) loss on unrealized foreign currency transactions and other, net

655

(525

)

Deferred income taxes

(9,240

)

(16,503

)

Stock-based compensation

45,264

33,564

Subtotal

165,723

176,439

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

Trade accounts receivable, net

(24,798

)

4,134

Other current and non-current assets and liabilities

(14,664

)

(13,042

)

Income taxes payable/receivable

(7,839

)

2,126

Trade accounts payable and accrued liabilities

41,438

(38,486

)

Deferred revenue

(3,921

)

4,546

Net cash provided by operating activities

155,939

135,717

Cash flows from investing activities:

Purchases of software, property, and equipment

(14,548

)

(22,421

)

Proceeds from sale of software, property, and equipment

412

Business combinations, net of cash and settlement assets acquired of $46,432 in 2024

17,293

Net cash used in investing activities

(14,136

)

(5,128

)

Cash flows from financing activities:

Proceeds from issuance of common stock

2,473

3,072

Payments of cash dividends

(37,396

)

(26,608

)

Repurchases of common stock

(83,177

)

(67,745

)

Deferred acquisition payments

(314

)

(2,488

)

Proceeds from long-term debt

150,625

15,000

Payments on long-term debt

(151,250

)

(22,500

)

Payments of debt financing costs

(2,258

)

Payments on financing obligations

(6,194

)

(2,538

)

Settlement and merchant reserve activity

6,047

23,884

Net cash used in financing activities

(121,444

)

(79,923

)

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

5,064

(7,779

)

Net increase in cash, cash equivalents, and restricted cash

25,423

42,887

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

506,763

463,876

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

532,186

506,763

Supplemental disclosures of cash flow information:

Cash paid during the period for-

Interest

25,391

27,119

Income taxes

52,212

39,944

Non-cash investing and financing activities-

Software, property, and equipment included in current and non-current liabilities.

11,376

8,469

Reconciliation of cash, cash equivalents, and restricted cash:

Cash and cash equivalents

180,011

161,789

Settlement and merchant reserve assets

350,390

343,235

Restricted cash included in non-current assets

1,785

1,739

Total cash, cash equivalents, and restricted cash

532,186

506,763

EXHIBIT 1

CSG SYSTEMS INTERNATIONAL, INC.

SUPPLEMENTAL REVENUE ANALYSIS

Revenue by Significant Customers: 10% or more of Revenue

Quarter Ended

December 31, 2025

September 30, 2025

December 31, 2024

Amount

% of

Revenue

Amount

% of

Revenue

Amount

% of

Revenue

Charter

61,781

58,859

59,733

Comcast

52,248

53,204

58,935

Year Ended

December 31, 2025

December 31, 2024

Amount

% of Revenue

Amount

% of Revenue

Charter

235,910

240,281

Comcast

209,626

225,004

Revenue by Vertical

Quarter Ended

December 31,

2025

September 30,

2025

December 31,

2024

Broadband/Cable/Satellite

Telecommunications

All other

Total revenue

100

Year Ended

December 31, 2025

December 31, 2024

Broadband/Cable/Satellite

Telecommunications

All other

Total revenue

100

Revenue by Geography

Quarter Ended

December 31, 2025

September 30, 2025

December 31, 2024

Americas

Europe, Middle East and Africa

Asia Pacific

Total revenue

100

Year Ended

December 31, 2025

December 31, 2024

Americas

Europe, Middle East and Africa

Asia Pacific

Total revenue

100

EXHIBIT 2

CSG SYSTEMS INTERNATIONAL, INC.

DISCLOSURES FOR NON-GAAP FINANCIAL MEASURES

Use of Non-GAAP Financial Measures and Limitations

To supplement its condensed consolidated financial statements presented in accordance with generally accepted accounting principles (GAAP), CSG uses non-GAAP operating income, non-GAAP adjusted operating margin percentage, non-GAAP EPS, non-GAAP adjusted EBITDA, and non-GAAP adjusted free cash flow. CSG believes that these non-GAAP financial measures, when reviewed in conjunction with its GAAP financial measures, provide investors with greater transparency to the information used by CSG’s management in its financial and operational decision making. CSG uses these non-GAAP financial measures for the following purposes:

These non-GAAP financial measures are provided with the intent of providing investors with the following information:

Non-GAAP financial measures are not measures of performance under GAAP, and therefore should not be considered in isolation or as a substitute for GAAP financial information. Limitations with the use of non-GAAP financial measures include the following items:

CSG compensates for these limitations by relying primarily on its GAAP results and using non-GAAP financial measures as a supplement only. Additionally, CSG provides specific information regarding the treatment of GAAP amounts considered in preparing the non-GAAP financial measures and reconciles each non-GAAP financial measure to the most directly comparable GAAP measure.

Non-GAAP Financial Measures: Basis of Presentation

The table below outlines the exclusions from CSG’s non-GAAP financial measures:

Non-GAAP Exclusions

Operating Income

Adjusted Operating

Margin Percentage

EPS

Transaction fees

—

Restructuring and reorganization charges

Executive transition costs

Acquisition-related expenses:

Amortization of acquired intangible assets

Earn-out compensation

Transaction-related costs

Stock-based compensation

Gain (loss) on debt extinguishment/conversion

—

Gain (loss) on acquisitions or dispositions

—

Unusual income tax matters

—

CSG believes that excluding certain items in calculating its non-GAAP financial measures provides meaningful supplemental information regarding CSG’s performance and these items are excluded for the following reasons:

CSG also reports non-GAAP adjusted EBITDA and non-GAAP adjusted free cash flow. Management believes non-GAAP adjusted EBITDA is a useful measure to investors in evaluating CSG’s operating performance, debt servicing capabilities, and enterprise valuation. CSG defines non-GAAP adjusted EBITDA as income before interest, income taxes, depreciation, amortization, stock-based compensation, foreign currency transaction adjustments, acquisition-related expenses, and unusual items, such as restructuring and reorganization charges, executive transition costs, gains and losses related to the extinguishment of debt, and gains and losses on acquisitions or dispositions, as discussed above. Additionally, management uses non-GAAP adjusted free cash flow, among other measures, to assess its financial performance and cash generating capabilities, and believes that it is useful to investors because it shows CSG’s cash available to service debt, make strategic acquisitions and investments, repurchase its common stock, pay cash dividends, and fund ongoing operations. CSG defines non-GAAP adjusted free cash flow as net cash flows from operating activities before earn-out compensation payments related to acquisitions less the purchases of software, property, and equipment.

Non-GAAP Financial Measures

Non-GAAP Operating Income and Non-GAAP Adjusted Operating Margin Percentage:

The reconciliation of GAAP operating income to non-GAAP operating income, and calculation of CSG’s non-GAAP adjusted operating margin percentage, for the indicated periods are as follows (in thousands, except percentages):

Quarter Ended

December 31,

Year Ended

December 31,

2025

2024

2025

2024

Non-GAAP Operating Income

GAAP operating income

29,050

42,294

118,749

131,333

Restructuring and reorganization charges (1)

2,271

1,283

19,818

13,323

Executive transition costs

352

Acquisition-related expenses:

Amortization of acquired intangible assets

3,420

3,840

13,805

14,014

Earn-out compensation

699

2,228

14,019

5,644

Transaction-related costs

10,517

138

13,717

381

Stock-based compensation (1)

19,834

8,564

46,126

34,385

Non-GAAP operating income

65,791

58,347

226,234

199,432

Non-GAAP Adjusted Operating Margin Percentage

Revenue

323,093

316,652

1,223,289

1,197,248

Less: Transaction fees (2)

(28,175

)

(26,064

)

(106,275

)

(97,857

)

Revenue less transaction fees

294,918

290,588

1,117,014

1,099,391

Non-GAAP adjusted operating margin percentage

22.3

20.1

20.3

18.1

Restructuring and reorganization charges include stock-based compensation, which is not included in the stock-based compensation line in the tables above and following, and depreciation, which has not been recorded to the depreciation line item on CSG’s Income Statement.

Transaction fees are primarily comprised of fees paid to third-party payment processors and financial institutions and interchange fees under CSG’s payment services contracts. Transaction fees are included in revenue in CSG's Income Statement (and not netted against revenue) because CSG maintains control and acts as principal over the integrated service provided under its payment services customer contracts. However, CSG excludes expense associated with transaction fees from the numerator and denominator in calculating its non-GAAP adjusted operating margin percentage in order to provide comparability with historical and future periods and with its peer group and competitors.

Non-GAAP EPS:

The reconciliations of GAAP EPS to non-GAAP EPS for the indicated periods are as follows (in thousands, except per share amounts):

Quarter Ended

December 31, 2025

December 31, 2024

Amounts

EPS (4)

Amounts

EPS (4)

GAAP net income

7,001

0.25

34,468

1.21

GAAP income tax provision (3)

15,935

6,561

GAAP income before income taxes

22,936

41,029

Restructuring and reorganization charges (1)

2,271

1,283

Acquisition-related expenses:

Amortization of acquired intangible assets

3,420

3,840

Earn-out compensation

699

2,228

Transaction-related costs

10,517

138

Stock-based compensation (1)

19,834

8,564

Non-GAAP income before income taxes

59,677

57,082

Non-GAAP income tax provision (3)

(16,112

)

(9,956

)

Non-GAAP net income

43,565

1.53

47,126

1.65

Year Ended

December 31, 2025

December 31, 2024

Amounts

EPS (4)

Amounts

EPS (4)

GAAP net income

55,881

1.98

86,852

3.03

GAAP income tax provision (3)

34,816

25,420

GAAP income before income taxes

90,697

112,272

Restructuring and reorganization charges (1)

19,818

13,323

Executive transition costs

352

Acquisition-related expenses:

Amortization of acquired intangible assets

13,805

14,014

Earn-out compensation

14,019

5,644

Transaction-related costs

13,717

381

Stock-based compensation (1)

46,126

34,385

Loss on extinguishment of debt

453

Non-GAAP income before income taxes

198,635

180,371

Non-GAAP income tax provision (3)

(53,631

)

(45,093

)

Non-GAAP net income

145,004

5.14

135,278

4.72

The GAAP effective income tax rates for the fourth quarters of 2025 and 2024 were approximately 69% and 16%, respectively, and for the years ended December 31, 2025 and 2024 were approximately 38% and 23%, respectively. The increase in the GAAP effective income tax rate for the fourth quarter of 2025 is mainly due to the tax impact of accelerated vesting of certain stock awards and the disallowance of transaction-related costs associated with the Merger. The 2025 full year GAAP effective income tax rate is also reflective of the impact of earn-out compensation recognized in 2025, for which a valuation allowance has been established for income tax purposes. The 2024 full year GAAP effective tax rate benefited from the release of valuation allowances related to certain U.S. and foreign deferred tax assets and certain one-time benefits recognized in 2024.

The non-GAAP effective income tax rates for the fourth quarter and year ended December 31, 2025 were 27% in each period and for the fourth quarter and year ended December 31, 2024 were 17% and 25%, respectively. The increases in the fourth quarter and full year 2025 non-GAAP effective income tax rates are primarily due to 2024 rates reflecting the benefits of the release of valuation allowances related to certain U.S. and foreign deferred tax assets and the utilization of foreign tax credits.

(4)

The outstanding diluted shares for the fourth quarter and year ended December 31, 2025 were 28.5 million and 28.2 million, respectively, and for the fourth quarter and year ended December 31, 2024 were 28.5 million and 28.7 million, respectively.

Non-GAAP Adjusted EBITDA:

CSG’s calculation of non-GAAP adjusted EBITDA and the reconciliation of CSG’s non-GAAP adjusted EBITDA measure to GAAP net income is provided below for the indicated periods (in thousands, except percentages):

Quarter Ended

Year Ended

December 31,

2025

2024

2025

2024

GAAP net income

7,001

34,468

55,881

86,852

GAAP income tax provision

15,935

6,561

34,816

25,420

Interest expense (5)

6,990

7,487

28,954

30,469

Loss on debt extinguishment

453

Interest income and other, net

(876

)

(6,222

)

(1,355

)

(11,408

)

GAAP operating income

29,050

42,294

118,749

131,333

Restructuring and reorganization charges (1)

2,271

1,283

19,818

13,323

Executive transition costs

352

Acquisition-related expenses:

Amortization of acquired intangible assets (6)

3,420

3,840

13,805

14,014

Earn-out compensation

699

2,228

14,019

5,644

Transaction-related costs

10,517

138

13,717

381

Stock-based compensation (1)

19,834

8,564

46,126

34,385

Amortization of other intangible assets (6)

3,379

3,087

15,007

11,671

Amortization of customer contract costs (6)

5,961

5,167

21,283

21,262

Depreciation (1)

4,208

5,336

18,107

21,622

Non-GAAP adjusted EBITDA

79,339

71,937

280,631

253,987

Non-GAAP adjusted EBITDA as a percentage of revenue less transaction fees (2)

26.9

24.8

25.1

23.1

(5)

Interest expense includes amortization of deferred financing costs as provided in Note 6 below.

(6)

Amortization on the statement of cash flows is made up of the following items for the indicated periods (in thousands):

Quarter Ended

Year Ended

December 31,

2025

2024

2025

2024

Amortization of acquired intangible assets

3,420

3,840

13,805

14,014

Amortization of other intangible assets

3,379

3,087

15,007

11,671

Amortization of customer contract costs

5,961

5,167

21,283

21,262

Amortization of deferred financing costs

846

886

3,385

3,500

Total amortization

13,606

12,980

53,480

50,447

Non-GAAP Adjusted Free Cash Flow:

CSG’s calculation of non-GAAP adjusted free cash flow and the reconciliation of CSG’s non-GAAP adjusted free cash flow measure to cash flows from operating activities are provided below for the indicated periods (in thousands):

Quarter Ended

Year Ended

December 31,

2025

2024

2025

2024

Cash flows from operating activities

59,201

82,504

155,939

135,717

Earn-out compensation payments

5,000

Purchases of software, property, and equipment

(3,394

)

(5,893

)

(14,548

)

(22,421

)

Non-GAAP adjusted free cash flow

55,807

76,611

146,391

113,296