All right. Good afternoon, everyone. Really, we're really happy to be hosting CSG Systems at the Citizens Tech Conference again this year. With me on stage is SVP of Finance, Head of IR, Treasury, FP&A, ESG Reporting, and Insurance, John Rea. It's a heck of a title, John. I will turn it over to you for a 15-minute presentation, then we'll do some Q&A.
Perfect. A wesome. Thanks, Aaron. Appreciate being here. We thought we would just give you a quick overview of what our company is and does. Aaron can drill me with a couple of questions. What does CSG do? We are effectively a SaaS platform that has been around for 40 years. What most people know of CSG is being the back-end complex billing system for communications companies like Comcast and Charter. That has historically been the core of CSG. We call this our revenue management digital monetization. It is really so much more than that. To give you an example of what we do for Comcast, it is not just the billing, but it is the customer product order catalog, coming up with the bundles and what Comcast actually sells to end customers.
Once someone like you or I actually purchases a product from Comcast or Charter or the other communications providers that we serve, it's making sure that you're getting what you paid for, lighting up your house for that service, making sure that whatever the broadband speed package is or the pay TV package that you have, that it's the right one going to the right house. That's all of our solutions. We're also in charge of their entire fleet of technicians. If you need to have a technician come to your house, a Comcast or Charter engineer to come in and install items, to fix something, that's all of our communication software scheduling that appointment and sending out appointment reminders to the end customer.
It's that whole ecosystem of once Comcast or Charter or one of our other customers in the comm side, they get a customer of theirs, it's our solutions that really take care of that end customer experience. That's approximately 70% of our business. We also do this complex billing for other industry verticals, including like Formula 1. It's not just specific to the telecommunications space. The second piece of solutions that we have in the middle is our customer experience suite of solutions: customer journey orchestration, customer communications, experience consulting and design. Anything that when it comes to having our customers have a better experience with their end customers, that's where our solutions shine. A couple of key customers that we have here that we highlight: JPMorgan Chase, Walgreens, NRC Health. The column on the right-hand side are digital payments.
We also have a digital payment gateway payment processing where we are physically and professionally doing on the back-end processing that payment. We have 130,000 different active merchants that are utilizing our payment gateway and payment processing for their needs. This is the overview of CSG. We operate in 120 different countries. We are very much global in nature. We have about $1.2 billion in revenue. Where do we fit in in the ecosystem? It is almost important to say, where do not we fit in? The two boxes on the left-hand side, the evaluate and learn and the target and find, we are not trying to attract customers to our existing customers' infrastructure. Where our systems shine is that once one of our customers has a customer, that is when we activate things.
From the minute that a customer purchases something from one of our end customers, that's where we onboard and educate. We try to get them to engage and use. We try to upsell, cross-sell, bill and collect, and then support and retain. Once one of our customers has a customer in their ecosystem, that's when the CSG systems effectively kind of kick in. What are our three value creation priorities? Number one, what you've heard from us for a number of years now is that in any given year, we expect to grow organically between 2% and 6%. We think that 35% of our revenue by the end of 2026 will come from industry verticals outside of our core, cable, and telecommunications and wireless space. Number two, focusing on profitability and cash flow.
We think that going forward, we intend to operate between 18% to 20% non-GAAP adjusted operating margin. That's our main profitability guidance metric. We expect to have free cash flow growing faster than our operating margin is improving. Number three, we're absolutely committed to returning capital to shareholders. This year is no different than previous years where we expect to return over $100 million to shareholders in the forms of dividends and buybacks. To kind of frame that, we've got about a $1.8 billion to $1.9 billion market cap. Fairly significant commitment to shareholder remuneration. Accelerating growth and diversifying our revenue, t his has been a key tenet. On the left-hand side, you'll see that in 2017, we had only 7% of our revenue coming from industry verticals outside of cable and telecommunications. Fast forward to today, that's now 30% of our business.
This has been a huge diversification story where we've taken solutions that have worked really well for our historical core. We realize these are industry-agnostic solutions. We've been able to really accelerate that. Now, where are we accelerating this growth from? It's effectively these six key industry verticals that you can see on the bottom left-hand side. Again, they tie to some of the logos that we present on a quarterly basis. It's the Walgreens'. It's the Formula 1's. It's the JPMorgan Chases. This is probably my favorite slide that we've been able to present this past year. This shows all of the new logo wins and sales expansions that we've had. It goes without saying that we're effectively selling our products and solutions across the globe. A couple of key ones to highlight: Comcast. That is our number two largest customer.
We signed a six-year extension with them. They're effectively going to be a customer of ours until the end of 2030. That was a huge outcome and one of the highlights of 2024. A couple of other key ones that we were able to sign: Telenor in Denmark, very much a household name in that market; Lyse in Norway; Claro in Brazil. The list goes on and on. The point is that global telecommunications and other industry verticals outside of telco need our billing solutions, our CX solutions, and our payment solutions. We're really delivering that on the sales front. The other key thing, as I kind of highlighted before, is this increased focus on profitability. In 2022, we were in the mid-16s when it comes to operating margin. We've been able to increase that significantly over a relatively short period of time.
As we sit here today, the midpoint of our guidance for 2025 is 18.3%. We have made commentary that we think we can get to the 19% in a relatively short period of time. In conjunction with that, it is not just profitability showing up for the sake of profitability, but we are turning it into increased free cash flow. This is another great story that investors have really gravitated towards is this ability for us to generate increasing free cash flow that is not only growing as fast as our operating margin improves, but also faster. The midpoint of this year's guidance is for $130 million in free cash flow. This is really coming from a couple of different things. Number one, it is coming from our ability to sell more SaaS-native solutions, so cloud-based solutions that are CX-heavy, complex billing-heavy with our Ascendant cloud-based platform.
That's helping margins kind of at the top of the income statement, but then also finding more operational efficiencies below that. That's what's buoying this operating margin expansion. Then just finding ways to turn that increased profitability into increased free cash flow. It's a really great story to tell and something that the management team is laser-focused on. Going back to the commitment to shareholder returns, we want to share the benefits that we've had with our shareholder base. Again, you can see that over the past five years, we've been able to return $540 million to our shareholders. Over that period of time, our market cap has effectively been averaging about $1.5 billion. So a third of our market cap in five years has gone back to shareholders. I should also note that this past February was the 12th consecutive year of increasing our dividend.
We tend to increase our dividends 6% to 7% every single year. We are a dividend aristocrat for those investors that are interested in that. On the right-hand side, the other key piece of this story is that we are not only interested in returning capital to shareholders, but with our significant free cash flow generation, we are also able to transact upon meaningful and accretive M&A. A couple of things that you have seen from us over the past five years is that we have been able to buy seven different companies, relatively small, but they have added heft. They have added technologies that we did not have. We are also very much geared towards finding strategic assets in an inorganic manner that can help complement our growth story. That is exactly what we kind of continue to see going forward. That is the high-level overview of CSG.
Awesome. That's really helpful. Thanks, John. I've got a bunch of questions to go through. Then we'll open it up to the audience for questions as well, if anyone has any. I think we'll start with kind of the obvious one to me as a research analyst. On January 29, there was a Reuters article reporting that Japanese firm NEC was rumored to be interested in acquiring CSG. Do you have any comment there?
Yeah. We do not comment on M&A rumors. What we can say is that it is great to see the success that we have had kind of spreading outside of CSG. I mean, we are really proud of what we have been able to accomplish. We get it why someone else could theoretically be interested in our business, because we are super interested and proud of and excited about what is happening within our own four walls. The industry that we kind of operate in, I mean, we have kind of been coming at this from the opposite angle, where you have heard us talk for years about our ability and our desires to go out and acquire companies. We think there is a strategic kind of roll-up opportunity in the markets that we play in. We think that we have got a great, healthy balance sheet to go out and transact on these.
We have the financial capacity to do it. That is nothing new from the CSG perspective. We have been talking about that for four or five years every single quarter, quarter in, quarter out. That is how we would think about that.
Got it. Moving on, as you expand into other verticals beyond telecom, cable, broadband, what type of R&D resources are required to tailor those products in the six other verticals that you discussed? Does it differ by vertical? Are there any verticals where you see your products as getting to a point of maturity where it can get widespread adoption within one of those six?
Yeah. One thing that you will have noticed when I was going through the logo wins on the screen was that we have a lot of household names that have gravitated towards our products. It's the JPMorgan Chase's. It's the Walgreens'. It's the Formula 1's. We have had some pretty big success over the past couple of years in attracting some of the biggest names. The great thing about our customer engagement and payment solutions is that they're effectively plug and play. I mean, one of the great things about our Xponent customer engagement suite of products is that customers can get off the ground within 90 days. These aren't big implementations. These are kind of standardized templated approaches that let our customers start using our products in a relatively short period of time. We think that this is a big blue ocean for us.
I mean, we've just started to scratch the surface. As you've seen, 7% of our revenue used to come from these other industry verticals. Now it's 30%. There's not one of those industry verticals that I would say that we're even close to maturity on. In fact, we think we're in the very early innings of success across all six.
That's really exciting. Speaking of the 30% of revenue, I guess we'll jump there. That's from the non-cable telecom. Can you talk about how that side of the business has grown over time? When did you start focusing there rather than on the core business? How do you feel about that goal of getting to 35% of revenue by the end of 2026 that was up on the slides?
Yeah. The great piece about that, and I love the story, is that we have been doing customer engagement for a long time. We just haven't called it customer engagement. Taking care of the fleet of technicians, scheduling appointments for Comcast and Charter, sending out appointment reminders, sending out postmortems about how your bill may or may not have changed, that's customer engagement. That's effectively what we've been doing and supporting our core customers with for a long period of time. It was really in 2017 where the management team made the strategic focus to say, these are industry-agnostic solutions. What's the difference between having an appointment set up with your Comcast or Charter technician and scheduling an appointment with Walgreens? What's the difference between getting an appointment about your technician coming out and getting an appointment about a prescription refill? There isn't.
There has been this strategic shift that has come very much organically. We have seen the market really respond to our product suite of solutions. We are super excited about that. In terms of your question on growth, we have talked about it fairly often that this piece of the business is a double-digit grower on the top line. This is a 10% plus grower in CX and payments. We have often classified this as a rule of 40 type business when you kind of combine the two. Not only is it fast growing, but it is also profitable, which I think is another key kind of piece of this. It has really shown its strength when it comes to increasing market presence, new logo wins quarter in, quarter out. It is something that we think we have got a long runway with.
Got it. Digging in on the financial services vertical specifically, you signed an expansion deal with the largest U.S. bank. It was up on the slides as well this year to create an enhanced fraud alert notification system for credit cards. Can you talk about the evolution of that relationship over time? Are there additional use cases you can hopefully grow into? That is a vendor where I spent some time in my career, right? They do not like to buy outside technology unless there is a real ROI on it that they can see.
Yeah. No, for sure. With the credit card alert fraud notification business that we have, it's exactly what it sounds like. We send out credit card alert fraud notifications to end customers whenever a potential fraudulent activity kind of happens. Now, why do customers come to us? Number one, we've got the ability to scale that. However many messages are going out at any given point in time, our systems can absolutely handle it. It's also the agility of those systems. It's not just notifying the end customer that, yes, there was a fraudulent or potentially fraudulent activity on your card. The other thing is, what's the next best action? Should we cancel that card? Should we immediately issue a new card? It's having that flexibility. Again, it's in the spirit of that customer engagement.
How do we help our customers have a better engaged customer on their end and have a better customer experience? That's really where we shine. The other thing that I'll mention too is that we've got a pretty rich history of deploying our CX solutions for a very specific use case. With the bank that you're talking about, we started with credit card alert fraud notifications. It has now grown into other pieces of business that we were able to win, specifically on their mortgage lending desk and auto lending desk, which then brought into play our capabilities on the customer journey orchestration and customer journey analytics. We're helping them have a better relationship with their end customer by having a simpler customer stack. Instead of it taking 40 steps to get a potential auto mortgage or home loan, maybe it only takes 21 steps.
Instead of having a retention at the end of the day where if 100 people clicked on, yes, I'm potentially interested in a mortgage or auto loan, and they only got five of those at the end, how do we simplify that experience? How do we make it more customer-friendly where maybe they can get a bigger capture rate instead of those five customers that turns into 10? We have seen this time and time again where our customers start with one simple use case. We outperform in that use case. Then we are able to get into other pieces of the business. The same thing has gone for the retail pharmacies that we have kind of highlighted. We got in with one simple use case, COVID vaccines. When everybody was crashing their websites trying to sign up for a vaccine appointment, their old systems just did not work.
They would not hold up. We got into these businesses with one specific use case. COVID vaccines turned into every vaccine. Every vaccine turned into every appointment. Every appointment turned into the prescription refill and prescription refill notification side of the house. It is a really great story where we are able to land. We have all these other solutions that we are able to help those customers with. It' s fantastic to see the results.
Yeah. That's great. Then you signed the six-year renewal with Comcast, who I think represents about 20% of revenue in 2024. It runs through 2030. Can you give investors who might not be as familiar with the story the highlights of that renewal and help us understand how you were able to renew on such favorable terms?
Yeah. It was a great renewal with one of our longest-standing customers, Comcast. I gave you the overview in terms of how we've been able to serve them. A couple of the key points of this contract renewal is that it was the first time in CSG's history where one of our big customers, it didn't require a price discount for us to retain that customer. Historically, it was very common to hear CSG's management team talk about a great four, five, six-year renewal with one of the key customers. There was always the asterisk that, oh, there was a 5%, 10%, 15% discount in year one kind of associated with that. That was a great thing that we were able to land that. I think it just shows the value that we bring.
I mean, all the different systems, the billing, the provisioning, the activation, the field service technician management, I mean, we do a lot for our customers. I think that really showed in this latest contract renewal. The other thing is that it was a six-year contract extension. We are locked up with Comcast until the end of 2030. We just continue this great partnership with them. The other thing that was kind of tied to that to a certain extent was that we were able to expand our business with Comcast last year. I think there is a common misperception with investors that we are effectively saturated with Comcast and Charter. There is no other business that we could potentially do, no other problems that we can help them solve. That just is not the case.
We signed a great new deal and a new piece of business that we historically had not served on the billing side of things with Comcast last year. I think it just speaks volumes when you're number two, effectively tied for number one customer in terms of revenue that we generate from them. When they trust you, when they're signing six-year contracts with better terms, and they're giving you more business at the same time, I think that speaks volumes for what we're able to do for our customers.
Absolutely. Saurabh Joshi joined as your new Head of Payments in November, brings experience from PayPal, Better, Western Union. Can you talk about some of the skills he brings selling internationally and also selling to ISVs, which I think is a focus point? Can you talk about his top two or three strategic priorities as he settles into his seat?
Yeah. Absolutely. We could not have been more excited to bring Saurabh on late last year to effectively head our payments business. When you think about the different suites of solutions that we have, payments tends to be the smallest, but it's one of the fastest growing. I think we've built this fantastic payments business that effectively started when we bought a company called Forte back in 2018 for $70 million. We've been able to grow that business organically and then also inorganically. One of the acquisitions that we did last year was with a company called ICG Pay, added heft and scale to the payments business. We kind of got to this point where we're no longer this small kind of call it mom-and-pop payments business. We're kind of ready for that next leg of growth.
To bring over somebody with the background that Saurabh has with the companies that he's worked for, including PayPal and Western Union, we're ready to take this business to the next kind of level in terms of growth, in terms of our ambitions. We couldn't be more excited. A couple of things that I think Saurabh is going to be focusing on, it's not that different from what we've been focusing on, but it's getting bigger. It's getting bigger deals, no longer necessarily focusing on the small kind of regional ones. Is there a chance to get bigger contracts with bigger customers? We couldn't be more excited for that. Keep in mind, we're starting with a really strong base. We've got 130,000 active merchants that are processing their payments through our rails and through our systems.
We couldn't be more excited to see what Saurabh is able to bring with his experience, his background to that business.
Awesome. On the map you showed up there of all the different places you've landed around the world, one that jumped out to me was the Oklahoma Turnpike Authority. Can you talk a little bit about the use case there? What's the product-market fit? Is that something where, I mean, every U.S. state has a similar use case?
Every U.S. state, and sometimes it's almost multiple jurisdictions in different states, have this. There is a lot of runway for growth here. Think about the tolling situation in terms of the tolling authority with their end customer. It's the people utilizing the tolls. What are some of their pain points? It's paying your toll. It's once you get that bill, once you get the notification, signing up for tolling. That's one of the pain points for tolling authorities, is actually getting paid. Where do our solutions come in? It's once you get a customer, the CSG systems are kind of activated around that in terms of customer engagement and making sure that the end customer, which is the tolling authority on our side of things, is able to monetize their customer base.
It's things like message reminders, keeping track of the different bills that are kind of outstanding, and helping our customers with collections of those bills through our customer engagement platforms and channels. That's really where we are. This is the perfect example where a lot of outsiders view our business. They're like, wait, now they're talking about tolling. Wait, you were just talking about Formula 1 on the streaming side of things. Wait, you're talking about broadband. You're talking about JPMorgan Chase. You're talking about Walgreens. All of these different industry verticals have common problems that we are able to solve regardless of what industry that they're in. It's how do I have a better relationship with my end customer. How do I monetize that customer? How do I upsell that customer? How do I make that customer happier?
That is a common theme and a common problem across industries. We think that we have the industry-leading solutions to solve this. The tolling win that we just had is the latest example of that.
Got it. We've got a couple of minutes left. I'll open it up to the audience. If anyone has questions in the audience to make sure you guys get a chance.
On a tolling opportunity like that, what's the unit of measure that you're billing against? How do you get paid?
Yeah. Exactly. What our solutions are doing for that customer, it's effectively per transaction. It's effectively every single time that we have to engage with that end customer in whatever medium it is, we're getting paid for that. It's kind of a per-transaction relationship, if you will.
Can you talk a little bit more about the average customer? When you go in, how often are you competing with a solution in-house versus external? How do you compete against another third party?
Yeah. In kind of the core complex billing side of things, there's a handful of players. We're the number two in terms of market share. Amdocs, our biggest competitor, is number one. Netcracker, which is a part of NEC, is kind of the number three player. That's how we kind of see the market. We run into the same types of competitors quite often. We also run into in-house solutions. It really is kind of across the board in terms of the competitors that we're dealing with. The long stickiness of these product solutions means that every four to five to six years, one of these big telecommunications opportunities comes up. We're absolutely around the hoop. That's how we've been able to land a lot of the new logo wins that you saw up on the board.
That's kind of the sales cycle, if you will, in that industry.
All right. I think that's.