Csg Systems International Inc (CSGS) Q3 2021 Earnings Call Transcript

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Csg Systems International Inc (CSGS -2.61%)
Q3 2021 Earnings Call
Nov 3, 2021, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon. My name is David and I'll be your conference Operator today. At this time, I'd like to welcome everyone to the CSG Systems International Inc. Q3 2021 Earnings Call. Today's conference is being recorded. [Operator Instructions] Thank you. I'll now turn the call over to John Ray, Head of Investor Relations. You may begin your conference.

John Rea -- Investor Relations

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 in 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 10k 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 8K. with me today on the phone are Brian Shepard, Chief Executive Officer in Raleigh John, Chief Financial Officer.

With that I'd like to now turn the call over to Brian.

Brian Shepherd -- Chief Executive Officer

Thanks, John. For those using the slides today, please join us starting on slide four and five. Many people who know CSE well have commented that something seems to be changing inside our good company. Our market vision is more innovative and global in nature. Our strategic growth aspirations are loftier and more bold. Our senior leadership team and board of directors are more diverse. And our customer base is less concentrated, as we serve bigger brands in a wide variety of large, high growth, industry verticals all around the world. These changes are noticeable and they are real.

The CFT that I see every day is purpose driven, industry impacting and future shaping. And the coolest thing about all of this is that we're just getting started. So the thing that we select it for today's Q3 2021 earnings call is velocity. Everything we do is intentional and focused on creating more philosophy every single day. What matters most is not the boldness of our words, or our vision. What matters most is the quality of the results that this management team delivers day in day out, quarter and quarter out. This is the yardstick by which we will continue to measure our progress at CSG. Delivering for our customers delivering for our employees and delivering for our shareholders. This mindset this relentless determination. This passion for growth and transformation transcends any one quarter and will power CSG to heights in the years ahead. That many people listening to this earnings call might not yet allow themselves to believe that make no mistake about this management team absolutely believes we are all in we're here to turn our beliefs into your reality.

With this as the backdrop I'm pleased to report that Q3 2021 is a quarter that will go down into record books as one of the truly great quarters in the almost four decades of CSGs proud history. So how good was Q3 for CSG? Please turn to slide six for the summary. q3 quarterly year over year revenue growth was 7.8% predominantly driven by organic revenue growth. This represents the highest quarterly organic revenue growth the CSG has delivered in well over a decade. Q3 year-to-date revenue results through nine months through 5.7% year-over-year, which achieved the commitment that I have repeatedly shared that we would more than double organic revenue growth. Equally exciting CSG growth philosophy on the bottom line was even better than our top line growth with non-GAAP year-to-date EPS through nine months in 2021 up double-digits with 13.5% EPS growth year-over-year.

On the customer renewal front, we just announced an exciting 4.5 year renewal with DISH networks our third largest customer. We're honored to have served for over 25 years and now with this renewal we paved the way to celebrate our 30th anniversary with DISH, as we help them achieve their own lofty business objectives. And last, but definitely not least, we announced the largest contract ever signed in the history of CSG with a landmark secure contract renewal and significant expansion of our relationship with our largest customer Charter Communications.

Even better, CSG will become the VSS provider of choice for all 32 million charter customers supported residential and small medium business for high-speed broadband video and voice with over 1 million customers already successfully migrated off of a competitor's platform. I will provide more details on this meaningful win in a few minutes. As impressive as our Q3 results are, what might excite shareholders even more is how these results combined with our strong sales performance has positioned CSG for growth in 2022 and beyond. Over the last three quarters, every time we have been asked about the headwinds, these two renewals might cause I have answered the team CSG is committed to proving that they would become the springboard for CSG accelerated revenue growth, not an excuse for why we couldn't grow in the year following big renewals.

Turning to slide seven, we are pleased to share how this commitment that we made the EU has now been turned into reality. For the first time ever, CSG is providing preliminary 2022 guidance as part of our Q3 earnings. And this preliminary guidance represents year-over-year revenue growth next year. Specifically, as part of our preliminary growth oriented 2022 guidance, we expect 2022 revenue to range from $1.06 billion to $1.1 billion in our adjusted revenue to range from $990 million to $1.02 billion. Further, we expect our 2022 adjusted operating income on an absolute dollar basis to grow year-over-year and our operating margin percentage to remain consistent with our current 16.5% to 17% 2021 guidance.

Consistent with our aspiration to grow bottom line as faster than our top line, we also expect EPS growth in 2022 to continue to outpace revenue growth, just as we have delivered so far in year-to-date 2021. And for avoidance of doubt, this preliminary 2022 guidance is based only on the business results, sales winds and acquisitions that we have closed so far through Q3, it has not yet factor in any other new sales winds or future acquisitions, we might close in the fourth quarter or in the early part of 2022. As such, we will provide updated full year 2022 guidance as we normally do during our Q4 earnings call in February. With all this context setting, I hope it is clear to everyone listening why we continue to proudly highlight and CSG has never been healthier our future outlook has never been more encouraging in our accelerated growth and revenue diversification has never been more real.

With that summary, please turn to Slide eight for an update on five important strategic objectives. First, we committed to CSG with more than double our long-term organic revenue growth rate in the 2% to 6% range up from our historical range of 1% to 3%. And our 2021 results prove we're delivering on this commitment. In Q3 CSG delivered 263 million in total revenue, which represents 7.8% year-over-year growth substantially all coming from organic revenue growth. Even better, our adjusted Q3 revenue was 247 million, representing 8.5% year-over-year growth. Both results represent the fastest CSG organic revenue growth in well over a decade. And our year-to-date results have been almost as good with revenue and adjusted revenue growing 5.7% and 6.3% year-over-year, respectively through nine months.

Q3 really was a special quarter. And I want to again thank our talented CSG employees and leaders for their dedication, their continued excellence, and for obsessing over the customer value that we deliver each and every day.

On the right-hand at slide nine second we committed to boldly elevate our market aspirations. And this is exactly what team CSG as doing. Many of you might have heard me on recent Fireside Chats talking about CSGs 2 billion and beyond growth strategy. So let me provide more insights on that.

Our strategic aspiration is to achieve three main business objectives by 2025. First, game scale in the markets where we compete in order to achieve $2 billion in annual revenue. Second, expand CSGs operating leverage and use our strong healthy balance sheet to deliver EPS growth that outpaces revenue growth. Third, consistently deliver better and better business results so that our shareholders are rewarded with the trading multiples that they deserve when they invest in a faster growing, multi-industry vertical, highly recurring revenue SAS platform company like CSG.

You may be asking yourself, how will CSG get there 2 billion revenue, EPS growth that outpaces revenue growth and a true SAS trading multiple sounds ambitious. You're exactly right. It is an ambitious plan. And yet this management team absolutely believes that we can deliver against it with the same discipline and high integrity that consistently defined CSG.

Our discipline strategic plan includes a base case component and a stretch goal components. In our base case, we aspire to exceed $1.5 billion in revenue over the next five years, which means even if we come up a little short, against our stretch case aspirations CSG will still grow revenue by over 50% and add over $500 million in profitable recurring revenue by 2025.

Our stretch case envisions is ramping to $2 billion in annual revenue. Our management plan to achieve both scenarios combined a healthy mix of good organic revenue growth in the 2% to 6% range, which is more than double what CSG has historically delivered. And CSG will continue to be a consistent discipline to acquire within organic growth, amplifying organic growth, just as you have seen as close announced three good acquisitions so far in 2021.

To reach the $2 billion stretch revenue case aspiration over the next five years, we will continue to allocate capital to its most value adding use into eventually close much bigger scale acquisitions that become even more transformational for both CSG and the industry.

On this last point, I would like to reinforce a key point shared on many analyst and investor calls recently. This management team is laser focused on creating value for shareholders, not building empires. We will hold ourselves accountable to adding scale, accelerating growth, expanding our operating leverage in deploying capital to its highest and most productive years all with a focus on rewarding our investors, just like we work hard everyday to delight our customers and our employees.

Turning to slide 10. Third, we committed that CSG would be the technology provider of choice for the communication service providers globally. And our continued sales success with both North American and global CSPs prove that we are executing well against this strategic priority.

In the cable market becoming the VSS provider of choice for all 32 million charter customers is a huge win in the market. Charter Communications is undoubtedly one of the biggest and best cable operators in the world. And we are extremely proud to serve them in an expanded capacity.

Working hand-in-hand with talented charter colleagues, CSG has already successfully migrated over 1 million customers with 300,000 customers completed in the Kansas City Market in Q2 and approximately 800,000 Customers migrated in the Wisconsin market in August. While the timing could still vary a little, we anticipate migrating all remaining charter customers over the next 12 to 18 months.

Turning the Dish Networks has a long standing leader in payTV and content. And now with his bold expansion into wireless, CSG is honored to earn the right as we've done every year since 1996. To serve dish for another four and a half years, CSG will work harder, smarter and more innovatively every day to try to bring more value to this dynamic industry leader.

And CSG success is not limited to North American. In the global telecom market, we continue to succeed and grow with new ends and contract extensions with leading telecom operators.

During Q3, we announced a revenue management contract renewal and extension with Airtel Africa across all 14 countries where they operate. This is yet another example of how team CSG continues to expand our footprint with our existing customers by helping solve their toughest business problems.

Our global telecom success wouldn't be possible without our innovative technology products. And a good example of the leading edge nature of our technology platforms is CSG being recognized by TM forum as the 2021 catalyst team award winner for visionary impact in the communication service provider marketplace.

Turning to slide 11. We told you that CSG would continue to diversify our industry vertical revenue. And during the first nine months of this year, we are continuing to grow revenue coming from higher growth industry verticals outside of our core CSP customer base.

Since 2017, we have grown CSP revenue from exciting new industry verticals like retail, government, financial services, and healthcare from $55 million, or 7% of total CSG revenue to more than $225 million, or 23% of total revenue last year. And now through the first nine months of 2021 we've continued our industry vertical diversification, being a partner of choice for some of the biggest customers in higher growth industry verticals, where CSG helps them digitize and modernize their customer engagement and cloud payments capabilities is an important driver of our accelerated growth.

In Q3, we signed a good deal with 24 Hour Fitness, and leading fitness center chain to digitize their customer engagement services. This important win proves that our SaaS platforms solve the needs of good brands in many large dynamic industry verticals. We're also proud to announce that in Q3, we've further expanded our relationship with one of the largest software companies in the world as they continue to unlock value in different parts of their business by leveraging CSGs innovative conversational AI, SaaS platform.

In the field service management space, where CSG is the market share leader in North American cable, or SaaS platform is recognized in the 2021 Gartner Magic Quadrant for the first time ever. This product is a global multi industry SaaS based platform that optimizes skilled service operations before during and after the day of service.

The Platform enables technicians in the field and dispatchers to make informed decisions based on real time predictive data that offers intelligent insights increased customer satisfaction. Gardeners ratings are deeply respected in the industry. And it's a tremendous accomplishment to receive this on.

In our payments business, we continue to see positive signs that post COVID growth momentum is beginning to return with strong industry vertical sales results, propelled by our industry leading recurring revenue, chat payment gateway and payment processing platform. We signed key wins the government and healthcare, ISV markets to further extend our payments leadership in these critical biller direct recurring revenue industry verticals.

Also key ISP partnerships that we want and signed earlier this year in the FinTech, government and Property Management verticals are now fully integrated, deployed in beginning to generate new revenue streams for CSG 4k. Looking ahead, we are excited about our payments pipeline and return to strong double-digit organic growth in this area.

Moving to the middle of slide 11. Fifth, we told you that CSG would be a consistent strategic acquire, while maintaining good financial discipline on the strategic SaaS platforms that we buy. And this is exactly what we have accomplished so far in 2021.

Last quarter, in order to expand our offering individual customer engagement space, we shared that we purchased kite wheel, a SaaS based recurring revenue company that supports real-time interaction management, through omni-channel journey orchestration and journey analytics. I'm pleased to report that the post-merger integration is progressing well, as we just said veiled CSG exponents, a bold and innovative new multi-vertical market offering the combined CSGs proven digital engagement chat platform with our new journey-as-a-service capabilities that they will bring to the table.

This fantastic new micro services based SaaS platform will drive differentiated digital experiences that are personalized, predictive, and proactive for the world's most successful brands. And we're already building sales and market momentum with CSGX components.

In Q3, a leading financial services company, which was an existing cable customer expanded its relationship with CSG and adopted our entire unified cloud engagement hub to help them solve their biggest business needs around customer experience in the revenue management market on top of the policy management acquisition of tango that we acquired in Q2, we also announced in October that CSG acquired Digit, it configure price quote, or CPQ for short in order management technology platform that has strong presence and adoption in the global telecommunications market. Digit is recognized by TM Forum as a leading multi-cloud microservices platform, which has received 11 major industry awards since 2015, including TM forums, most innovative use of assets award, Excellence Award for open API's, and outstanding architectural award.

Put simply, this asset is a perfect fit for our telecom revenue management business and opens the door to bigger growth opportunities in the future. As we look ahead, we will remain laser focused on integrating the teams and the technologies from these acquired companies and unlocking even greater market and shareholder value. And we will continue to be a strategic disciplined and consistent acquire in the quarters and years ahead in order to strengthen and grow CSG.

Up close on slide 12. Across all five of these important strategic priorities, the results speak for themselves. CSG is building meaningful and sustainable philosophy that we fully expect will fuel our continued long-term growth and transformation.

As I wrap up my opening remarks and turn it over to Raleigh, I will leave you with these parting thoughts. CSG purpose is inspiring and bold. Our strategic vision is focused and discipline. We are elevating our culture, our talents and our diversity and team CSG continues to create value for our customers and for our shareholders. And yet as proud as we are with our excellent Q3 results and the velocity that we are generating, we also humbly and resolutely remind you of one simple belief, the best CSG is still to come.

With that I'll turn it over to Raleigh for more detail on the third quarter financial results, and our 2021 and 2022 outlooks.

Rolland Johns -- Chief Financial Officer

Thanks, Brian. As Brian highlighted 2021 continue to be a year of growth for CSG. And our Q3 performance did not disappoint. Let's first start by walking through our Q3 financial results. And I'll share a little more detail about our outlook for the remainder of 2021 and our preliminary guidance for 2022 on the heels of our recently announced contract renewals and expansions with both Charter Communications and Dish Network.

Turning to slide 14, we generated $263 million in revenue and $247 million of non-GAAP adjusted revenue during the third quarter. These results represent 7.8% and 8.5% year-over-year growth respectively, which were substantially driven by organic growth. On a year to date basis Both our revenue and non-GAAP adjusted revenue were up approximately 6% year-over-year. The year-over-year increase in revenue non-GAAP adjusted revenue was driven primarily by continued growth in our revenue management product platforms over serve many of the largest communication service providers in the world.

In addition, we're seeing nice growth in our customer engagement offerings, where we serve customers in large, high growth industry verticals. While our revenue growth was primarily organic, inorganic growth through acquisitions is an important component of our overall growth strategy aimed at advancing our diversification into faster growing new industry verticals, and increasing our leadership position in our core markets.

Over the past few quarters, you've seen us execute on that strategy, as we close multiple new acquisitions, including Tango Telecom, Tight Wheel, and our most recent acquisition Digit Systems. As we accelerate our inorganic growth in the quarters ahead, we will remain disciplined by focusing on strategic, financial and cultural fit with an appropriate risk return profile for each acquisition we close.

Moving to the bottom of the slide, our third quarter non GAAP operating income was $42 million or 16.8% of non-GAAP adjusted revenue as compared to $39 million, or 17.2% in the same prior year period. This year-over-year increase in operating income was primarily related to current year revenue growth. On a year to date basis, our non-GAAP operating margin as a percentage of non GAAP adjusted revenue was 16.8%. Our non-GAAP adjusted EBITDA was $56 million for the third quarter, or 22.8% of non-GAAP adjusted revenue, as compared to $52 million, or 23% in the same prior year period. On a year to date basis, our non-GAAP adjusted EBITDA was $165 million or 22.9% of non-GAAP adjusted revenue.

Finally, non-GAAP EPS for the current quarter was $0.88, up $0.12 year-over-year, due mostly to our operating performance. On a year to date basis, our non GAAP EPS was $2.52 at 13.5% increase from the same prior year period. As proud as we are to be accelerating our top line revenue growth, we are equally excited to deliver strong EPS growth for our shareholders, where our bottom line grew even faster than our top line performance trend that the entire CSG management team is focused on perpetuating going forward.

Turning to the balance sheet or cash flow generation shareholder returns for the quarter are included on slide 15. Our third quarter 2021 cash flow from operations was $46 million as compared to $65 million in the prior year period. Further, we generated non GAAP free cash flow $39 million in Q3 of 2021 as compared to $55 million in Q3 of 2020.

The year-over-year decreases are specifically related to movements in our working capital, mostly connected with the timing of certain receivables anticipated to be collected in Q4. That said, our year to date cash flow generated from operations before working capital movements increased from $126 million in 2020 to $135 million in 2021, which is the highest it's been in the last 10 years.

Moving on, we ended the third quarter with $225 million of cash and short term investments. That along with our outstanding debt, the quarter end results in $155 million of net debt and a net debt leverage ratio of 0.7 times. As a reminder, we refinanced our existing term bank debt and revolving credit agreement in Q3. This transaction had multiple benefits, including extending the tenor of our debt, lowering our borrowing cost, and increasing our currently unused borrowing capacity to $450 million. As we continue to review ways to opportunistically enhance our capital structure. During the third quarter of 2021, we declared $8 million in dividends. In addition, we repurchase $7 billion of our common stock under our stock repurchase program.

Moving on to slide 16. I'll conclude with some key takeaways. First of all, we're pleased with our q3 and year to date 2021 operating results. Our strong year to date results and our outlook for the remainder of the year give us the confidence to reconfirm our 2021 financial guidance that we increased across the board last quarter. In addition, we anticipate closing out 2021 closer to the upper end of those guidance ranges. These targets are outlined on the table on the right of the slide.

In addition with the continuing strength of our business, and following the exciting news of the recent contract renewals with two of our largest customers, we felt well positioned to provide a snapshot of some preliminary 2022 guidance that Brian highlighted earlier.

As Brian outlined, we expect our 2022 revenue to range from 1.0 6 billion to $1.1 billion. And our non GAAP adjusted revenue to range from 990 million to $1.02 billion with growth in our 2022 non GAAP operating income year over year, predicated on a non GAAP operating margin percentage consistent With that of our 2021 guidance range of 16 and a half to 17%.

To also reinforce what Brian mentioned in his comments, this preliminary 2022 guidance is only based on sales wins, partnerships and acquisitions closed as of this earnings call. Any of those types of potential new events in Q4, or in the early part of 2022 would become additive to this full luminary 2022 guidance. As we've done in the past, we'll provide a full set of our 2022 guidance targets during our q4 earnings call this February. As we focus on finishing 2021, strong and look to 2022 and beyond.

We believe that the velocity we are creating in the market, the results we are generating. And the laser focus that our leadership team has on executing well against our strategic priorities, position as well in the marketplace. CSG is committed to accelerating our revenue growth and diversifying our industry vertical revenues, including discipline to acquisitions contributing to our inorganic growth, which in turn will only perpetuate our organic growth. And we believe this investment in our future strategic growth, combined with our consistent capital distribution, in both the form of 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.

Questions and Answers:

Operator

Operator: [Operator Instructions]. We'll take our first question from Tom Roderick with Stifel or I apologize, we'll take our first question from Greg Burns with Sidoti and Company.

Greg Burns -- Sidoti and Company -- Analyst

Morning or afternoon, sorry. So congratulations on the contract extensions, just have a couple about charter. You know, when you add the contract essentially with Comcast, I guess at the time, there was a New York delegating following that you lower revenue guidance, lower margin guidance for the following year. Obviously, we're not seeing that in the preliminary 2022 results. So can you just help us understand how you're still able to drive your top line growth and consistent margins in 2022 even following the recent contract renewals?

Brian Shepherd -- Chief Executive Officer

Yeah, no happy to Greg. Appreciate you joining today love the question. So first is we are accelerating as we've been talking about the last several quarters. Our overall sales performance, our sales pipeline is as large and has as many large late stage deals in that pipeline. And our closure rate continues to be quite strong, and we love what we're seeing in the market. So one is just the underlying performance of our sales teams.

Secondly, when you look at the renewals, and you see what's going on in the North American broadband industry with the number of subscribers that our customers are adding, it's fantastic to see their success and their growth. And CSG is a main partner and platform provider, we're benefiting from the overall rising water level of the industry.

And then third, we continue to expand the offerings in the business that we win with our existing and our new customers. And so with the charter announcements, what's also factored in, along with the any discount we gave him was the fact that we're gaining significant number of subscribers. And we'll be migrating those onto our platforms like we've done in 2021, but in an accelerated fashion over the next 12, 18 months. So it's really all of those things are going into the growth in the guidance that we gave preliminarily for 2022 for both top line, adjusted revenue and the operating margin as well staying consistent with that 16.5% to 17% range.

Greg Burns -- Sidoti and Company -- Analyst

Okay, great. And definitely was surprised to see the timeline, you laid out in terms of porting over all those charter subscribers, I think it was a multi-year process with the Comcast. So in that 12 to 18 months, is there, like a target number of subs per quarter? Like, how should we think about that, is that backend loaded? Is it equally prorated over that time period? How should we think about the timing of those ports?

Brian Shepherd -- Chief Executive Officer

Yeah. So first, it's one of the things that Charter Communications has done is they've invested a lot in their infrastructure and their technology platforms, and they really get a lot of credit for the work they're doing, and trying to deliver that excellent customer experience for their spectrum customers. And that's a benefit and a testament to them.

And so from our standpoint, what you could expect, is a steady progression of the conversion or the migration of the additional customers that they serve from their existing platform that they use on to the CSG SaaS platform, and fairly consistent over that 12 to 18-month period, and can't really comment more than that at this stage.

Greg Burns -- Sidoti and Company -- Analyst

Okay. And just the absolute number, I guess you said you reported $1 million, so that would be $13 million, is that the number we should be thinking about. That's not on your platform?

Brian Shepherd -- Chief Executive Officer

That's correct.

Greg Burns -- Sidoti and Company -- Analyst

Okay, OK. And then in terms of the acquisitions you've been doing of late, I think all of them have been prior partners of yours. So is that kind of -- I'm just trying to get a feel for maybe, do you have a handful of partners that are looking to vertically integrate these, or how should we think about these like little tuck-ins going forward, you have a number of partners, you're still working with that might make a sense to bring in house and then it also sounded like, now with these deals out of the way, you might be looking at bigger opportunities going forward. So maybe you could just give us a little bit more color on your thought process in terms of acquisitions going forward?

Brian Shepherd -- Chief Executive Officer

No, perfect, great question. So our acquisition approach, we really have used four main criteria, we focus on strategic fit, financial fit, cultural fit, and integration, and the risk return profile. So we really target deals across the spectrum from an M&A standpoint, we look at large scale that could just add operating leverage to our business is one category.

The second big category are fantastic, innovative new SaaS platforms, where we see our large enterprise customers in every industry vertical, wanting to buy more from a one-stop shop from partners they trust, like CSG. And so when we can add innovative high growth, multi-vertical SaaS platforms thats a second big category.

A third one is, exactly what you said, a lot of times were more partner friendly, easier to integrate, easier to do business with than some of our customers. And so by actually partnering with more and more companies to bring greater value to our global customer base, often we see great companies, great talent, great SaaS platforms, and we decide, hey, if we've had success in the market, why not go ahead and acquire.

And you'll also see us doing some innovative, early stage investments in companies even pre-crossing the CASM to really support this initiative, we have to deliver category defining SaaS platforms, and so the acquisitions can fall in any one of those. And it could lead us to do much larger acquisitions, midsize, or smaller. And we really lacked the discipline nature of our process, drive which acquisitions we end up closing, it wasn't -- we weren't waiting to do midsize and bigger acquisitions this year until the renewals were done. We all know that the valuations in the market are quite high these days. So we've tried to stay very disciplined on the companies we buy.

And it just turns out that the last three have been more of those in those partner categories. Like you said, we expect to do more of those, but also in the other categories as well. But we like discipline and strong value creation drive, how we think about that. No, perfect, great question. So our acquisition approach, we really have used four main criteria, we focus on strategic fit, financial fit, cultural fit, and integration, and the risk return profile. So we really target deals across the spectrum from an M&A standpoint, we look at large scale that could just add operating leverage to our business is one category. The second big category are fantastic, innovative new SaaS platforms, where we see our large enterprise customers in every industry vertical, wanting to buy more from a one-stop shop from partners they trust, like CSG. And so when we can add innovative high growth, multi-vertical SaaS platforms thats a second big category. A third one is, exactly what you said, a lot of times were more partner friendly, easier to integrate, easier to do business with than some of our customers. And so by actually partnering with more and more companies to bring greater value to our global customer base, often we see great companies, great talent, great SaaS platforms, and we decide, hey, if we've had success in the market, why not go ahead and acquire. And you'll also see us doing some innovative, early stage investments in companies even pre-crossing the CASM to really support this initiative, we have to deliver category defining SaaS platforms, and so the acquisitions can fall in any one of those. And it could lead us to do much larger acquisitions, midsize, or smaller. And we really lacked the discipline nature of our process, drive which acquisitions we end up closing, it wasn't -- we weren't waiting to do midsize and bigger acquisitions this year until the renewals were done. We all know that the valuations in the market are quite high these days. So we've tried to stay very disciplined on the companies we buy. And it just turns out that the last three have been more of those in those partner categories. Like you said, we expect to do more of those, but also in the other categories as well. But we like discipline and strong value creation drive, how we think about that.

Greg Burns -- Sidoti and Company -- Analyst

Okay. And the maximum leverage you'd be willing to put on the balance sheet?

Brian Shepherd -- Chief Executive Officer

I don't know if there's a maximum, but I love where we target is, we target two times net debt leverage for the right deal or for the right larger deal, doesn't mean we would not go above that. But I think the higher we go the bigger the deal. The more we need to have that much conviction had and have done that much deep due diligence to ensure that we can actually deliver value creation, for our business for our customers and for our shareholders. So there isn't a limit that we put on that. There's obviously plenty of capital in the market, but we like to discipline and our strategic vision kind of drive us on those. But to 2x net debt is our target operating, this is our target, kind of capital structure range and plan.

Greg Burns -- Sidoti and Company -- Analyst

Okay. Thank you.

Operator

Thanks, Greg. [Operator Instructions] Next, we'll go to Tom Roderick with Stifel.

Max Osnowitz -- Stifel -- Analyst

Hi, guys. It's on for Tom. I would like to start by just going to congrats, because this is truly an impressive quarter. And I know those two big contract renewals are kind of an overhang for a little bit.

Brian Shepherd -- Chief Executive Officer

Thanks, Max.

Max Osnowitz -- Stifel -- Analyst

For starters, yeah -- you're welcome. I guess. For starters, I just want to kind of go back to those renewals. And the upside for Charter is a little more clear, just based on the amount of subscribers that we are able to get kind of one over the platform. But could you kind of go into more detail on the expand business with DISH?

Brian Shepherd -- Chief Executive Officer

Yeah. So the DISH contract is a four and a half year extension of the contract. We provide all their platform for their pay TV business. Obviously, DISH is a fantastic innovative leader in the industry, in pay TV, in content, the bold move into wireless and what they're doing. Today, CSG is a main partner and provider for their pay TV business. We'd love the opportunity to extend and expand even further with DISH, that's not something they decided to do at this stage. So we continue to focus on bringing them value and innovative solutions every day, and see if there's an opportunity to expand with that fantastic customer over time. But it is it is the similar business to what we have today extended for four and a half years on a term.

Max Osnowitz -- Stifel -- Analyst

Got it? That makes sense. And then just thinking about the industry, vertical diversification, and then it's in the presentation other has grown incredibly, from 2017 to 2020. How important are those industries in the kind of journey to 2 billion? And what is it that's driving that so much? I mean, is it is it these customers that are realizing cloud transitions and software and need someone like you or they just put displacing old providers as they move? Or is it kind of a new Greenfield opportunity in a lot of cases?

Brian Shepherd -- Chief Executive Officer

It's really a combination of both. And the industry vertical diversification is a huge focus going from 7% to 23%. Last year, we have a stated goal to get to 30% or more. And that growth will come as we also continue to grow nicely in both our North American cable and our global telecom business. So we want to continue to expand as a leading highly recurring revenue, SaaS platform company, serving multi vertical kinds of companies, financial services, retail, government, healthcare, technology, and many others. Our platforms have what those big brands all around the world need. It lets us serve a much larger addressable market than just our cable and telecom base. And it lets us also participate in higher growth industry verticals, where the water levels rising even faster. And that is a meaningful part of our strategy. It's also a meaningful part of our current growth, acceleration, and what we see in the years to come. So it's something that we're extremely excited about. We announced this quarter the rollout of our SaaS platform, brand names, CSG exponents, where we're serving great brands and many verticals. And it's a huge opportunity for growth. And we just need to continue to bring great good value. In some cases it's a new Greenfield deployment and solution. In some cases, we're displacing competitors. It's kind of across the board, Max.

Max Osnowitz -- Stifel -- Analyst

Got it. And then just one more, quick question from me, just thinking about, as you just mentioned, exponent and you said the Forte payments pipeline is returning strong. Is there anything that's kind of really driving a lot of activity lately that maybe hasn't been the past?

Brian Shepherd -- Chief Executive Officer

I don't know if I would say compared to the past, that the big trend, there is a couple of big trends that we see in every industry vertical is number one, the world going digital. And as the world goes, digital brands have to work that much harder to really use real time analytics and insights to improve the experience and the engagement that they offer to their customers on a real time, individualized basis.

And we all know customer satisfaction and great experience is becoming table stakes, and the use of data and insights and breaking down the silos in that experience is critical. And so those are some of the main drivers that's, really causing, you know, great brands to want to do business with CSG.

We've talked about last quarter the three fantastic wins where COVID with three large pharmacy retailers, where they are wanting to go more digital with COVID appointment scheduling appointment, vaccinations, your prescriptions are ready. And our solutions with some of the partner providers are solving those needs with our SaaS platforms.

And that's also true in financial services where we've talked about JPMorgan Chase and how we're helping improve the efficiency and the customer experience of some of their processes from mortgage lending, to auto lending, to how they're doing fraud alert notifications, that that's what excites us about our customer engagement offer and some of these diversifications and other industry verticals.

Max Osnowitz -- Stifel -- Analyst

Make sense? Thanks for taking the question and congrats again.

Brian Shepherd -- Chief Executive Officer

Thanks so much Max.

Operator

I showed that there are no further questions at this time. I'll turn the call back over to Brian Shepherd for any additional or closing remarks.

Brian Shepherd -- Chief Executive Officer

And I would just say we're proud of the quarter Thank you to Team CSG and all the employees all around the world and our leaders. We are focused on obsessing over our customer success and the value we bring them. And we're laser focused on making sure that every quarter, we accelerate the results and deliver for our investors as well. So thank you for joining today.

Operator

[Operator Closing Remarks]

Duration: 47 minutes

Call participants:

John Rea -- Investor Relations

Brian Shepherd -- Chief Executive Officer

Rolland Johns -- Chief Financial Officer

Greg Burns -- Sidoti and Company -- Analyst

Max Osnowitz -- Stifel -- Analyst

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