Brian Shepherd: Yes. Now, thanks so much for the question. Appreciate you joining. Yes, I mean, we try – we have mission-critical enterprise software, not only we got to keep the lights on and just be flawless in our execution. We’ve got to constantly invest in innovation. And so we have made a meaningful investment in AI, the most important areas in our Digital CX business, where we announced and launched the Bill Explainer.AI. We see good traction both in cable, global telco. We’ve already sold and won a couple of early deals, small, but still, it shows the power of how you can actually bring value relatively quickly. This is a solution that can be deployed in a matter of weeks. And so we also see applicability in other industry verticals, more subscription economies even outside of cable and telecom.
So we like the building sales pipeline. I would say we’re still in the early days in terms of where that is but we are super excited about what’s going on in that Digital CX space. We’re also leveraging AI in our payments business. Fraud is one of the biggest areas that most merchants focus on, it’s one of the things we invest a lot in to really reduce the fraud and risk profile, speed on-boarding of new merchants and help. So we’re doing a lot around data and some new solutions with nano sites and micro sites to help merchants make it easier to collect the payments that they have. And then if you come all the way back to kind of our core monetization BSS part of the business, working with our telecom media cable customers to leverage the data that is in their possession to be able to make it easier to predict what customers want and when they want upgrade, downgrade service, cross-sell, deal with promotion roll-off, reduce calls to the call center like the Bill Explainer, great opportunities to just expand the value that we bring.
So love what we’re seeing on the innovation. We spend a little over 14% of our revenue on R&D. So innovation and co-creating with customers and testing that in the market, is a big part of our business model.
George Notter: Great, thank you.
Hai Tran: Thanks, George.
Brian Shepherd: Thanks so much.
Operator: And our next question comes from the line of Shlomo Rosenbaum with Stifel. Shlomo, please go ahead.
Unidentified Analyst: Hi, this is Adam [ph] on for Shlomo. Could you provide an update on what you’re seeing on the M&A front? I mean you are seeing assets with valuations coming more in line with what you consider attractive now and just general commentary there. Thanks.
Brian Shepherd: Yes. No, thanks so much Adam [ph] hope you are well. We are seeing the market improve on that. There is always going to be some degree of separation, I think, between buyers and sellers. But in general, yes, much more in line than what we saw in the back half of 2022, definitely much better than what we saw in 2023. And we think that there are deals that can be done. What we’ve kind of found, though, is you just – with the company our size, you’ve got to constantly be working deal flow. We work with founders, we work with partners, we work with maybe larger companies that would be looking at spinouts of smaller assets, maybe it’s not core to them. So we kind of run the gamut from small, mid and even larger deal size constantly looking at how do we expand our portfolio capability with recurring revenue around CX, payments, and monetization scale for telecom, cable or financial services.
So we tend to be pretty laser-focused on how we can actually pay an attractive price on a pre-synergy basis and do even better in terms of cost synergies and revenue post acquisition. And so we like what we’re seeing. Stay tuned on what we might be announcing in coming quarters.
Operator: Alright, thank you Adam. [Operator Instructions] And it looks like our next question comes from the line of Nehal Chokshi with Northland Capital Markets. Nehal please go ahead.
Nehal Chokshi: Yes, great. Thank you. Thank you for the question. Nice results, especially on the free cash flow. Is that by any chance impacting your calendar 2024 free cash flow guidance?
Hai Tran: No. I mean as you saw in our guidance for 2024 remains very strong, right? We increased our guidance with the midpoint of $115 million. So it’s a nice, sequential progress. And the team has done particularly well, as I highlighted in my prepared remarks, we just got after just similar to how we got after profitability and we’ll continue to go after opportunities to improve our performance over time.
Nehal Chokshi: Okay, great. And my other quick question here is that outside of potential M&A, do you see it as potentially possible to hit the $1.5 billion goal organically?
Brian Shepherd: I love the question. I would love to have that be the case, that’s not what we’ve talked about, though. The reality is, I think at this stage, you’ve seen this year alone in 2023, CSG put up just shy of $80 million of organic incremental revenue, most that have tracked our stock over a longer period of time. That’s not what they would have seen from maybe CSG a few years ago. We love the organic growth. We’re committed to it. It’s built into our executive compensation. So – our money, where our mouth is on this thing, and we are going to consistently grow this thing mid-single digit or better. That said, would we, from a planning standpoint, plan to get to $1.5 billion organic? No. That’s where we would do smart disciplined acquisitions layering on.
Nehal Chokshi: Great. Thank you.
Brian Shepherd: Thanks.
Operator: Great. Thank you. And our next question comes from the line of Brett Knoblauch with Cantor Fitzgerald. Brett, please go ahead.
Brett Knoblauch: Perfect. Thanks for taking my question. Congrats on the quarter, guys. Maybe to start, what are you expecting from a growth standpoint, from your two largest customers for this year? They grew very nicely in 2023. Is that something that you expect to continue or what is based on your current guide for the full year from them?
Brian Shepherd: Yes. That’s – we don’t break out segments of our business other than to say, we’re committed to the 2% to 6%. We’re on record of saying across the full year, we would expect in a good performance to be mid-point or higher. In terms of that, at least 4% or better. Mid-point is at 4.3%. We expect CX and payments to be strong double-digit growth. We don’t break out beyond that. That said, do we think that there could be growth in all of our customers? Yes, that’s what we plan. That’s where we drive the teams. But then we’ll react. And that’s the portfolio fact of our business and why we talk so much also about constant industry diversification and revenue diversification as one of the exciting parts to our story. But do we think there could be growth in our big two? We think there could be. Let’s see how it plays out.
Brett Knoblauch: Perfect. And that’s a good segue. My second question on breaking out segments. With Charter and Comcast continuously becoming a smaller percentage of the total and payments continuing to grow double digits, is there any plan for you guys to maybe give us a bit more color on the higher growth segments?
Hai Tran: Yes. I mean I think it’s something that we evaluate kind of constantly. I think it is at some point in the future, when those businesses get to a certain scale, it makes sense for us to explore that opportunity to really break them out as separate segments. We’re not quite there yet, but it is something that we constantly evaluate.
Brett Knoblauch: Perfect. Thanks. Really appreciate it.
Brian Shepherd: Thanks, Brett.
Operator: And our next question comes from the line of Michael Berg with Wells Fargo. Michael, please go ahead.
Michael Berg: Hi there, thanks for taking my question. I just wanted to go back to the subscriber question one more time. Looking at my numbers and assuming my percentages and math are correct, it looks like the broadband cable segment declined 4% year-over-year after about flat 1% in Q3 and then Comcast specifically was flat in Q3 and slightly down in Q4. I guess given what you said earlier on the call and script, what can we think about as driving the outcomes there? Thank you.
Brian Shepherd: Yes. I think there’s a couple of things. Let’s just check the data points. If you look at the combined two revenue from our big two, it grew about 5% year-over-year. A majority of that would have come from some of the subscriber conversions that we did. So you neutralize that out, you would have seen, like you said, Comcast kind of flattish, give or take, Charter up a little bit. And so that’d be a combination of the additional services we would do, some of the impacts we saw that are already building into some of the subscriber counts. So I think the main thing that we’re kind of highlighting is, A, there’s additional headroom to grow and win more land mass in these customers, B, even if they continue to face some headwinds, it doesn’t have an outsized impact on CSG and we’ve been able to grow through that nicely.
And what we’re focused on is, how do we help them perform better and respond to some of those challenges they may be facing. They’ve got great homes passed. They’ve got great offers. And we think with our digital CX, our payments, and our monetization, there’s a lot we could do to help them with some of the challenges, and we’ll see how they respond to some of their competitive dynamics in the market. Any other clarification on that, that would be helpful.
Hai Tran: I think the only thing I’d highlight is what you said, Brian. If you look at quarter-to-quarter, there’s always going to be some fluctuations because we do provide some ancillary services to both Comcast and Charter, and that’s what’s going to drive the fluctuations that you’re seeing.
Operator: All right, thank you for the question. And our final question today comes from the line of Matt Harrigan with Benchmark. Matt, please go ahead.
Matthew Harrigan: Thank you. Europe hoping to have a particularly good prism on global economic activity, not the consumer, and obviously corporate planning and that’s probably only enhanced by AI. What are you seeing, especially in Europe, but also in the U.S. right now with all the geopolitical uncertainty, how it’s affecting the consumer? And with AI, do you see that your sensitivity to economic conditions is moderated or is it about the same or do you have any thoughts just on the broad genre there. Thank you.
