CSG Systems International, a company known for its billing and customer experience solutions, has been quietly building a formidable presence in the global telecom market. While analysts focus on the company's performance with its two largest North American cable customers, Comcast and Charter, a closer look at the Q1 2024 earnings transcript reveals a different story - a story of international expansion and significant new logo wins that could propel CSG to a new level of growth and profitability.

While North American cable broadband faces headwinds from subscriber losses, CSG has strategically diversified its revenue, with over 30% now stemming from industries outside the communication service provider space. This diversification has allowed the company to weather the storm in North America while simultaneously capitalizing on a burgeoning opportunity in the global telecom market.

The transcript reveals a string of impressive new logo wins in geographically diverse regions. CSG closed a deal with one of the largest telecom operators in Brazil, a move that positions the company to tap into the vibrant wireless MVNO market in South America's largest economy. This win was bolstered by a business expansion with MTN, Africa's largest mobile network operator, further solidifying CSG's presence on the continent.

CSG's success wasn't limited to the Americas and Africa. The company also secured a contract with Banglalink, a leading telecom operator in Bangladesh, showcasing its growing leadership in the Asia Pacific region. This win, following on the heels of successful deals with Airtel Africa, M1, and PLDT in 2023, paints a compelling picture of CSG's aggressive international expansion.

What's fueling this international success? It appears to be a combination of factors. CSG recognized early on that global telecom operators were struggling with the cost and complexity of their business operations. The company responded with a product-based, often SaaS-driven approach, offering solutions that simplified processes, streamlined technology stacks, and facilitated digital transformation. This strategy has resonated with operators in regions facing economic pressure, leading to the impressive new logo wins we're now witnessing.

Interestingly, the same economic pressures that initially drove international adoption of CSG's solutions are now emerging in Western Europe and North America. As competition intensifies and the need for cost optimization becomes paramount, CSG is well-positioned to capitalize on this trend, leveraging its proven track record and innovative solutions to gain market share in these more mature markets.

Here's where the sleeping giant analogy comes into play. CSG's global telecom business, while not yet broken out as a separate segment, is already generating significant growth. In fact, the recent convertible debt deal, which lowered interest rates and freed up the company's revolver for future M&A, could be seen as a strategic move to prepare for further expansion in this promising market.

But the story doesn't end there. CSG also possesses a secret weapon - its Ascendon platform. Traditionally used for monetization and order price quoting in the telecom space, Ascendon has recently made its debut in the financial services sector with a landmark win at one of the largest banks in the APAC region. This breakthrough deal demonstrates the platform's versatility and opens up a whole new avenue for growth, potentially transforming CSG from a telecom-focused company into a multi-industry powerhouse.

Hypothetical Revenue Growth

Based on the recent international wins and Ascendon's entry into the financial services market, CSG's global telecom business, combined with Ascendon's broader applications, could become a significant growth engine for the company. If we assume a conservative 10% annual growth rate for this business unit (given the current double-digit growth in CSG's other non-CSP segments), it could contribute an additional $100 million in revenue by 2025. This, combined with the company's projected organic growth, could propel CSG well beyond its $1.5 billion revenue target.

CSG's strategic focus on global telecom and Ascendon's expansion beyond its traditional market could be a potent combination, unlocking a new level of growth and shareholder value. While analysts are distracted by the near-term challenges in North American cable, a sleeping giant is awakening in the global telecom market, and CSG appears poised to lead the charge.

"Fun Fact: CSG Systems International processed over $27 billion in payments volume in 2023, highlighting the massive scale of their operations and their increasingly important role in the global payments ecosystem."