Q3 2023 CoreCard Corp Earnings Call

[music].

Greetings welcome to core cards third quarter 2023 earnings conference call.

At this time, all participants are in listen only mode.

A question and answer session will follow the formal presentation.

If anyone should require operator assistance during todays conference. Please press star zero on your telephone keypad.

Please note that this conference is being recorded.

At this time I'll turn the conference over to Matt weight CFO. Mr. White, you may now begin.

Thank you and good morning, everyone.

With me on the call today is Leland Strange chairman and CEO of core car Corporation.

To add some additional comments and answer questions at the conclusion of my prepared remarks.

Before I start I'd like to remind everyone that during the call we'll be making certain forward looking statements to help you understand scorecard and its business environment. These statements involve a number of risk factors.

Certainties and other factors that could cause actual results to differ materially from our expectations factors.

Factors that may affect future operations are included in filings with the SEC, including our 2020 to Form 10-K and subsequent filings.

As we noted in our press release, our third quarter results were in line with our expectations with continued sequential and year over year growth in processing and maintenance revenue.

Total revenue for the third quarter of 2023 was $13 $4 million.

A 7% decrease compared to the third quarter of 2022.

The components of our revenue for the third quarter consisted of professional services revenue of $6 $4 million.

Processing and maintenance revenue of $5 $8 million a year over year increase of 10%.

And third party revenue of $1.2 million.

The 10% year over year growth in processing and maintenance revenue was driven primarily from recently added customers, who are now live and continued growth from existing customers.

That growth was offset by a decline in professional services revenue due to lower demand for development personnel from Goldman.

We did not recognize any license revenue in the third quarter of 2023, our best estimate on the timing of the next licensed here sometime in the first half of 'twenty 'twenty four.

We continue to see nice growth from all customers excluding Goldman.

Which was 18% in the third quarter on a year over year basis. This growth has come through continued onboarding of new customers, both directly and through various partnerships, we have with program managers.

As in previous quarters. We currently have multiple implementations in progress with new customers, who we expect to go live in the coming months.

Turning to some additional highlights for the third quarter of 2023 income from operations was zero point $4 million for the third quarter of 2023 compared to income from operations of $1 $7 million for the same time last year.

Our operating margin for the third quarter of 2023 was 3% compared to an operating margin of 12% for the same time last year.

The decrease is primarily driven by lower revenue and higher costs from hiring in India and in our Columbia Office that we opened in October 2021. In addition to continued infrastructure investments in our processing environment. As discussed previously we are working on the development of a new platform.

And are the costs associated with this project are capitalized.

Anything not capitalized under the accounting rules is expense to development costs we.

We have incurred pretax development expenses of $1 $2 million through the first nine months of Tony twenty-three and zero point $5 million in the third quarter of 2023 related to this project.

Our third quarter 2023 tax rate was 24, 5% compared to 24, 6% in the third quarter of 2022, earning.

Earnings per diluted share for the quarter was a loss of three cents compared to income of 16 cents for the third quarter of 2022.

Okay.

And adjusted earnings per diluted share was nine cents for.

For the third quarter of 2023 compared to 16 cents for the third quarter of 2022.

And that adjustment excludes the impact of an impairment on a cost method investment they were recorded in the third quarter of 2023.

Our operating cash flow for the year through September 30 of 2023 was $18 $3 million compared to $10 $9 million for the 2022 period.

We plan to use this cash for future growth potential acquisitions and share repurchases.

As noted in our press release this morning for the full year 2023, we expect growth in services revenue to be approximately flat in 2023 compared to 2022 <unk>.

The impacts to revenue in the fourth quarter are primarily driven by lower expected professional services revenue from Goldman.

And by the loss of a customer in the parking at space. This customer Park mobile was acquired by a larger competitor recently and has now been fully integrated into their parent company. We've.

We're the program manager for this customer and therefore recorded the interchange revenue generated from their program as gross revenue and any related cost as cost of services. We generated approximately 40 to $45000 of processing revenue and approximately zero point $5 million of third party revenues and costs on a quarterly basis from this customer.

Mark.

Yes, we do not expect any related revenues or costs from this customer in the fourth quarter of 2023, our future periods.

We continue to expect strong growth in processing and maintenance as our customers continue to grow and as we continue to onboard new customers. We anticipate professional services revenue in the fourth quarter of 2023 to be in the range of six to $6 $4 million.

Lower expected professional services revenue reflects the change to our Goldman contract converting a portion of their revenue to a fixed monthly fee and lower to lower development professional services from Goldman as.

As a reminder, we converted the managed services revenue we received from Goldman to a.

Fixed monthly fee of approximately $1 million slightly lower than the run rate for the first six months of 2023, while the partial conversion to a recurring revenue structure is beneficial from a visibility perspective. It will result in lower services revenue for the remainder of the year.

With that I'll turn it over to Leland.

Okay. Thanks, Matt Oh, just.

Probably gets us a couple of things.

And then probably turn it over to question because a lot of new things to talk about.

Investors wanted us to.

What were the concentration of our largest customer and we did it but not the way I would like it always should look slower it by just growth by keeping the revenue we have from them and growing other revenues, but we did grow the revenues.

They get upset shovel tabs that you what you ought to look at the company are we growing the other revenues if we stopped growing those that there are problems.

We keep growing those and we've got a great future long term.

The.

The Goldman a cutback in professional services.

Shipyard part of their cost cutting if you will.

Listen to their earnings calls they've made it very clear they're going to try to very very hard to get the platform solutions division profitable it quit losing money.

They've just dictate it all the way down just cut expenses, there, but where you did.

So we ended up with a part of that we do have that longer term well two or three year contract for a major demand for managed services, but professional services are variable and they can.

Wrapped up show up or they can get those back as they wish it didn't apparently those are going to get cut back.

Okay.

We're not immune to what happens in the environment bolt at Goldman as well as Fintech generally and I would say that the private bid type market might be ripe for a shakeout and I think we're in a good position to look at some of that.

Where are we with good the shifts that we've got almost a 32 billion in cash or cash flow as tad. So we'll will continue pretty much doing what we're doing which is growing our processing business outside of the Goldman.

Outside the Goldman business.

Uh huh.

I guess just make sure we have bought back I think a big at a half dollars worth of stock in the first nine months. We if we do if we had known well what's going to happen with the Goldman perpetual services would've been better stock pickers, and probably wouldn't have bought it back at some of the prices in the bid.

So we bought it at we may be back in the market in the next in the months of December It's a stock it takes will be kept this because.

Very comfortable with our long term outlook.

We're just have to settle through to the Goldman issues here and then we'll we'll continue what we're doing.

Yeah don't have a lot of additional comments I think Matt covered about everyday maybe I will focus so one thing he would make sure that we had third party revenue I think you said about 1 million three.

Problem Port mobile.

And that has gone away completely that was very very little profit, but GAAP accounting requires us to put that on the top line as revenue. It's a program we enter into.

Many years ago our.

That and we knew it was it's not going to be a highly profitable, but we wanted to do it is to expand our services. So that goes away not because they left us because they didn't like us, but they were bought by a much bigger company, who has the ability to take care of this little part of what they were doing with us that they couldn't have done with their old platform to the past.

So that will that will be a hit to revenue, but it will not be hit your profit.

I will say that we continue to <unk>.

Not expect well we were no longer really expanding in terms of the Polish it at this point because we are going to have some resources there yourself just using fewer at Goldman.

But we're not rolling debates, we have I think a thousand 60 employees in India as of the end of October that we had a few more than that the previous mark we don't expect that to.

Go down very much because we can use those with the other customers that we're working with.

And with that I'll, just see if there are any questions and as usual, we're always open to a loved the way what you paid tabid suggests the Q and the reports should have other questions. So operator, let's turn it over to questions.

Thank you.

It would be now be conducting a question and answer session.

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One moment, please while we poll for questions once again Thats star one thank you.

Thank you. Our first question is from the line of Hal catch with B Riley Securities. Please proceed with your question.

Hey, good morning, guys. Thanks for the call I wanted to.

Start with two questions one is.

Additional banks what is the kind of environment, we've had with the turmoil in the banking sector done to your pipeline and as it relates to that with a new platform coming out maybe next year.

Is that.

Our perspective customers waiting for that platform.

My first kind of side questions.

Yeah.

It is no wonder whether you're on the platform every day. They just wanted to get the job done I've done the platform or something else, but I will emphasize and thanks for the question. The fact that we're doing we're going to continue to work.

Worked with bad it add more resources to it it will be at least another year before he gets out.

Completely but no one's waiting on that platform. So we're growing the other part of the.

Okay.

Yeah.

Yes.

Uh huh.

Oh on Goldman you know could you just kind of did you say you know right now the contracts.

Two to three year contract at a million dollars a month is that the kind of roughly what you guys said you were just a few minutes ago.

Yeah for the managed services piece of it which is a portion of it professionals.

Two years, two more years on that around 1 million a month run rate and then Uh huh.

Maintenance contract, which is a part of the license agreement that goes through June 30 of 2026.

So what's the big variable is professional services related to development, which are devoted and other things that might be a platform related it from their standpoint things. They wanted to see Doug and that that could end up being from you know.

300000 amount to a million of bonds. So it's very much of a variable.

So they want to keep it down on the lower side now.

Okay.

Okay.

Okay.

In early April.

Part of what Youre doing is not necessarily not getting something done, but yeah. It's just a request to.

To slow it down youth use fewer resources show you extend that date for getting things done by using.

Pure resources on boarded the cost.

Okay.

Okay Alright.

Alright.

In general it's like it's card issue I mean, if you look at Mastercard visa.

Maximo.

Platforms continue to grow cardholders, you know mid to high single digit year over year.

Hum.

So the backdrop for card issuance.

Globally appears to be really really good and I just wanted to get your thoughts on that.

Thanks that you're serving.

What's kind of the risk appetite that issuing debt.

Got it right.

In this time period.

Yeah, I mean, you're right court record issuing is still growing and I've shared before that.

In a bad economy, you may see the number of cards increase or decrease you simply see more delinquencies and you see maybe a smaller.

Credit lines, but you don't shape your record Jim we typically get paid on number of cards. So were not concerned about the dollar value of what goes on cards were concerned about the number of cars, we don't see any decrease in that.

What we what we do see is some of our customers that are or are people, who we talk to they all rehab debit cards taken about getting in the credit card space.

Or.

They were slowing down that process, because they're concerned about the delinquency side, but.

But people who are already in the car in the credit card space issue more cards without a problem as long as you manage the you'll be onboarding in terms of a story, but there will be an increasing number of of course, that's not slowing down.

There's a I guess opportunity again I. Appreciate your question because it it has kind of guess she has to figure out something else and that is number of cards I don't want anyone to take away from this.

We've not had any I should revenue since the first quarter of this year, which which of course does it patches lots its adult profit, but that doesn't mean that the Apple program has slowed down remembered Goldman has two programs.

Apple and general Motors and the reason that we've had no more oh no more Russian revenue. This shifting of the fact that the way we did we get paid on active card numbers and active card numbers have different definitions for different folks in the business.

Just if you were a global shift should you may have one definition proactive gorge, but but then you get also get paper in that regard, but this is a lie should deal with go but so we don't get paid for inactive cards, we get paid for active cards now the active card definition.

It says if if a card is not.

Hit by some shift of meeting somebody went to change the address they went to make a purchase they want to change credit limit. It doesn't really have to be a purchase change the the open to buy limit that's still active or if you do that with a certain month period I'm, how you defend them up but let's say it can be three budge.

We're months by about six months of it so they discovered that they were hitting a lot of cards.

Sure.

More cards for things that they did really need to hit them with and I'm talking about with an API.

And therefore, they were still keeping them active card should show with named manage their cost well, they look and see well how can we not make those car Jackie if she is they haven't been buying anything anyway. It's okay. Cheers. So they did that so therefore, it's taken a while for that to catch up as bad.

We expect to get license revenue in the first half of net next year again, hopefully the first quarter it could it could push out to the second but the the bane toward appropriate Goldman has is really good and continues to grow really well and I will get back on track with that next year, once which we caught up with.

These.

There's this sort of cleanup of cards that have gone inactive down.

The way that I added to that to your question shifted because I felt like I need to make that explanation. So people don't go away with the wrong.

I don't know that there's big programs not growing it's growing is drawing well and doing very well.

So to summarize there is theres still growing new cards, but then there's also.

And inactive card group within the whole portfolio that they're looking to make sure they're not paying for things that are watching our costs really closely.

James Strange: James Strange, Matthew White, Harold Goetsch, CoreCard James Strange, Matthew White, Harold Goetsch, CoreCard Greetings. Welcome to CoreCard's third quarter 2023 earnings conference call. At this time, all participants are in listening only mode.

And Mike.

By taking some cards to inactive status they save money.

That's right, but you can really think of it as a almost a one time cleanup and of course European skills.

Hopefully, but it was a onetime very big cleanup that won't happen again.

And that was a Q3 event.

That in fact, yes, that's right yeah, Yeah, Oh, yeah, okay. Okay.

Thank you to the opposite.

It's bad came into the office. This morning said that it looks good but yet it looks so good I mean, it looks bad at once is but it looks so good where were fine the way we see growth go in longer term here and longer term, we're talking about next year, what we we've.

We've had a couple of these things that have hit us like the the part mobile and likely you will cut in it professional service revenue and then the cleanup of cards.

So those are short term things that we were comfortable with the rest of the business or to ask Julie.

Operator: Any question and answer session will follow the formal presentation. If anyone should require our British assistance during today's conference, please press star zero on your telephone keypad. Please know that this conference is being recorded.

Okay, great I'll get back in the queue. Thanks.

Thanks Al.

Thank you.

Our next question is from the line of Avi Fisher with long cast advisors. Please proceed with your questions.

Hey, good morning.

Matthew White: At this time, I'll turn the conference over to Matt White, CFO. Mr. White, you may now begin. Thank you. Good morning, everyone.

Hi.

<unk> called out.

Our expectation that <unk> will see some at long last possibly some marketing spend.

Matthew White: With me on the call today is Leland Strange, Chairman and CEO of CoreCard Corporation. You will add some additional comments and answer questions at the conclusion of my prepared remarks. Before I start, I'd like to remind everyone that during the call, we'll be making certain forward-looking statements to help you understand CoreCard in its business environment.

Hmm.

You sort of offer some color around that how much wants it or why now what's the appropriate expectation on a pay off from that.

Yeah I will.

Yes, we've we finally have a salesperson.

Matthew White: These statements involve a number of risk factors, uncertainties and other factors that could cause actual results to differ materially from our expectations. Factors that may affect future operations are included in filings with the SEC, including our 2022 form 10K and subsequent filings. As we noted in our press release, our third quarter results were in line with our expectations, with continued sequential and year-over-year growth and processing and maintenance revenue. Total revenue for the third quarter of 2023 was $13.4 million.

Who came from a competitor so get expansion of business and there'll be focus of selling financial institutions. So it will it will not be short term there'll be calling alpha natural institutions.

Who is it many of them will be like credit unions or smaller banks, who either have a credit program with somebody else or water or Warner credit program. So there there'll be looking to try to generate business through that process.

Yeah, Yeah, Yeah, Yeah, Yeah, you're free to tell me you wanted to long lived and Alex Yes.

Matthew White: A 7% decrease compared to the third quarter of 2022. The components of our revenue for the third quarter consisted of professional services revenue of $6.4 million. Processing and maintenance revenue of $5.8 million a year-over-year increase of 10% and third-party revenue of $1.2 million. The 10% year-over-year growth and processing and maintenance revenue was driven primarily from recently added customers who are now live and continue growth from existing customers. That growth was offset by a decline in professional services revenue due to lower demand for development personnel from Goldman.

But.

I shifted more to the sense that that the economic environment changed I think faster than any of US expected based on the bed and all these other things that put a hold on a lot of folks a lot of people in banking and I didn't expect that are we.

We do have it shall we recognize reality and we now have a a vice president of the National institution partnerships fr partnerships.

Alright, and and what you're saying is it's a long term investments.

Matthew White: We did not recognize any license revenue in the third quarter of 2023. Our best estimate on the timing of the next license tier is sometime in the first half of 2024. We continue to see nice growth from all customers excluding Goldman, which was 18% in the third quarter on a year-over-year basis. This growth has come through continued onboarding of new customers built directly and through various partnerships we have with program managers.

I don't expect anything in the near term on that.

I would be very surprised if you take from that in 2024, but I would love to be surprised.

Okay.

I had a quick question you called out there.

The non building revenues roughly $5 $1 million apparently.

Hmm.

Matthew White: As in previous quarters we currently have multiple implementations in progress with new customers who we expect to go live in the coming months. Turning to some additional highlights for the third quarter of 2023, income from operations was $0.4 million for the third quarter of 2023 compared to income from operations of $1.7 million for the same time last year. Our operating margin for the third quarter of 2023 was 3% compared to an operating margin of 12% for the same time last year. The decrease is primarily driven by lower revenue and higher costs from hiring in India and in our Columbia office that we opened in October 2021 in addition to continued infrastructure investments in our processing environment.

What what are the margins on that are.

You can't just break that out how does it compare to sort of 30% gross profit margins blended.

Well, yeah, we we don't we don't break that out but you know keep in mind that that's not a business. That's at scale yet. So the margins are going to it's going to be a little bit of a drag on the overall margins.

Just given that it's a lot smaller revenue base, that's pretty small revenue used to be to be.

Shared resources. So it's not it's not a it's not just like everyone works on just this part or just that part.

So there are some resources that work on both so it is hard to kind of allocate that and it's it's not something we look at too closely at this at this size.

And in your expectation I mean, I think you gave out some guidance what is the what what I. If you said it I apologize I missed it did you guide to what the ex Goldman revenue growth should be next corner.

Matthew White: As discussed previously, we are working on the development of a new platform. Abortion of the costs associated with this project are capitalized. Anything not capitalizable under the accounting rules is expense to development costs. We have incurred pre-tax development expenses of $1.2 million through the first nine months of 2023 and $0.5 million in the third quarter of 2023 related to this project. Our third quarter 2023 tax rate was 24.5% compared to 24.6% in the third quarter of 2022.

Oh, we didn't talk about it next quarter they will there'll be some some puts and takes you talked about the park mobile.

The revenue the revenue and cost that will go away related to that.

So there'll be some some caveat but.

We didn't give that specific number for the fourth quarter.

But it'll be it'll be Uh huh.

I would say high single digits is what we expect.

Okay.

Matthew White: Earnings for deluded share for the quarter was a loss of three cents compared to income of 16 cents for the third quarter of 2022. And adjusted earnings for deluded share was nine cents for the third quarter of 2023 compared to 16 cents for the third quarter of 2022 and that adjustment excludes the impact of an impairment on an cost method investment that we recorded in the third quarter of 2023. Our operating cash flow for the year through September 30, 2023 was $18.3 million compared to $10.9 million for the 2022 period.

And.

Finally.

There was a.

I I.

Jump in deferred revenue.

On the balance sheet.

Tends to bode well.

Can you just discuss or disclose a little bit about around that does that lead to you know keep the revenues when does that hit et cetera.

It will hit over the next within the next 12 months and most of that is is just related to timing of payments.

Some customers paying invoices, a little bit earlier.

For services that we've invoiced four but haven't yet provided.

L a.

A lot of that will come some of that will come in the fourth quarter, but a lot of it most of it will be in 2024.

Matthew White: We plan to use this cash for future growth, potential acquisitions, and share repurchases. As noted in our press release this morning for the full year 2023 we expect growth and services revenue to be approximately flat in 2023 compared to 2022. The impacts to revenue in the fourth quarter are primarily driven by lower expected professional services revenue from Goldman and by the loss of a customer in the parking app space. This customer park mobile was acquired by a larger competitor recently and has now been fully integrated into their parent company.

And is that is that new customers or existing customers and just timing issue.

Existing customers just timing.

Okay. Thank you.

Thanks Avi.

Thank you.

Like to ask a question at this time you May press star one from your telephone keypad.

Just a moment to assemble the queue.

Once again as a final reminder, even press star one to ask a question.

Matthew White: We were the program manager for this customer and therefore recorded the interchange revenue generated from their program as gross revenue and any related costs as cost of services. We generated approximately 40 to 45,000 dollars of processing revenue and approximately $0.5 million of third-party revenues and costs on a quarterly basis from this customer.

Thank you.

At this time, we have no additional questions and I'll turn the floor to management for closing remarks.

Alright, well just wanted to say thank you everyone for your continued interest in the company and if you have other questions as I always said the here please feel free to contact Matt or myself, we're happy to answer the question Jen, where we're very pleased with where we're headed long term, even though we are disappointed with some of the numbers borne out.

Matthew White: Consumer. We do not expect any related revenues or costs from this customer in the fourth quarter of 2023 or future periods. We continue to expect strong growth in processing and maintenance as our customers continue to grow and as we continue to onboard new customers. We anticipate professional services revenue in the fourth quarter of 2023 to be in the range of $6.4 million. The lower expected professional services revenue reflects the change to our Goldman contract, converting a portion of the revenue to a fixed monthly fee and lower development professional services from Goldman.

But either way, we're going to keep doing what we're doing even though we've now added a salesperson. So thank you everyone for your attention and we'll be we'll be talking to you later thanks.

This will conclude today's conference you may disconnect your lines at this time and we thank you for your participation.

Matthew White: As a reminder, we converted the managed services revenue we received from Goldman to a fixed monthly fee of approximately $1 million, slightly lower than the run rate for the first six months of 2023. While the partial conversion to a recurring revenue structure is beneficial from a visibility perspective, it will result in lower services revenue for the remainder of the year.

Leland Strange: With that, I'll turn it over to Leland. Okay, thanks, Matt.

Leland Strange: I'll just probably emphasize a couple of things Matt said and probably turn it over to Quasia because there are a lot of new things to talk about. Investors wanted us to lower the concentration of a more discusher and we did it but not the way I would like and I always said let's lower it by just by keeping the revenue way out from them and growing other revenues. Well, we did grow other revenues and that's again, I've said several times that's the way you ought to look at the company.

Leland Strange: Are we growing the other revenues? If we stop growing those, then there are problems. If we keep growing those, then we've got a great future long term. The Goldman cutback and professional services was simply a part of their cost cutting. If you listen to their earnings call, they might be very clear. They're going to try very, very hard to get the platform solutions division profitable and quit losing money and they've just dictated all the way down, just cut expenses everywhere you can.

Leland Strange: So we ended up with a part of that. We do have a long term, a two or three year contract for a million amount, for many services but professional services are bearable and they can wrap those up or they can cut those back as they wish and apparently those are going to get cut back. We're not immune to what happens in the environment, both at Goldman as well as Fintech. Generally, I would say the private Fintech market might be right for a shakeout and I think we're in a good position to look at some of that.

Leland Strange: We're good in the sense that we've got almost 32 meeting cash. Our cash flow is tied. So we'll continue pretty much doing what we're doing, which is growing our processing business outside of the Goldman business. I guess I just mentioned we have bought back of I think a million and a half dollars for the stock in the first nine months. If we had known what was going to happen with the Goldman professional services, we'd have been better stock pickers and probably wouldn't have bought it back at some of the prices in the mid-20s that we bought it at.

Leland Strange: We may be back in the market in the next in the month of December. If the stock takes a big hit due to this because we're very comfortable with our long term outlook. We just have to settle through the Goldman issues here and then we'll continue what we're doing.

Leland Strange: David. Again, don't have a lot of additional comments. I think Matt covered about everything.

Leland Strange: Maybe I will focus on one thing. He mentioned that we had third-party revenue. I think you said about a million three from Port Mobile, and that is going away completely. That was very, very little profit, but gap accounting requires us to put that on the top line as revenue. It's a program we entered into many years ago, and we knew it was not going to be a highly profitable, but we wanted to do it as to expand our services.

Leland Strange: That goes away not because they left us because they didn't like us, but they were bought by much bigger company who has the ability to take care of this little part of what they were doing with us that they couldn't have done with their own platform in the past. That will be a hit to revenue, but it will not be a hit to profit.

Leland Strange: I will say that we continue to not expect, well, we're no longer really expanding in terms of employees at this point because we're going to have some resources and results just using pure at Goldman, but we're not growing the base. We have, I think, 1,060 employees in India as of the end of October, that we had a few more than that the previous month. We don't expect that to go down very much because we can use those with the other customers that we're working with.

Leland Strange: And with that, I'll just see if there are any questions, and as usual, we're always open to a lot of the way once you've had time to adjust the queue and the reports and have other questions, so I'll bring it over to questions. Thank you.

Operator: We'll be now being conducting a question and answer session. If you'd like to ask a question, please press star one from your telephone keypad. And a confirmation tone will indicate your line as in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions, we're going to have star one. Thank you.

Hal Ketch: Our first question is from the line of Hal Ketch with B-Ridey Securities.

Leland Strange: Please issue your third question. Good morning, guys. Thanks for the call. I wanted to start with two questions. One is additional banks. What is the kind of environment we've had with the turmoil and the banking sector done to your pipeline, and as it relates to that with a new platform coming out maybe next year, is that our perspective, customers waiting for that platform to come out? That's my first kind of question.

Leland Strange: Yeah, no one's waiting on the platform. They just want to get the job done. I've done the platformers for something else, but I will emphasize, and thanks for the question, the fact that we're going to continue to work on that and add more resources to it, it will be at least another year before it gets out completely, but no one's waiting on that platform. So we're growing the other part of the plan.

Leland Strange: Okay. Anything else you want?

Leland Strange: and on Goldman. You know, could you just kind of reach out? Did you say, you know, right now the contract's to the three-year contract and a million dollars a month? Is that kind of roughly what you guys said you're just two minutes ago? Yeah, for the management services piece, which is a portion of the professionals two years, two more years on that around a million a month, run rate and then the maintenance contract, which is a part of the license agreement that goes through June 30, of 2026.

Leland Strange: So what's been variable as professional services and which is development and other things that might be a platform related from their standpoint, things they want to see done, and that that can end up being from, you know, 300,000 a month to a million a month. So it's very much for a variable. They want to keep it down on the lower side now. Part of what you're doing is not necessarily not getting something done, but it's just a request to to slow it down use pure resources.

Leland Strange: So you extend the date for getting things done by using pure resources and lower the cost. All right, and in general is like, you know, it's card issue. I mean, if you look at bass card, these, even amax, you know, these giant platforms continue to grow cardholders, you know, made the high school digit year over a year. So the backdrop for card issuances globally appears to be really, really good. And it's one of the get your thoughts on the banks that you're serving on what's kind of the risk appetite to you issuing the credit in this time period.

Leland Strange: I mean, you're right. Card card issuing is still growing. And I've said before that in a bed economy, you may see the number of cards increases decrease. You simply see more delinquencies and you see maybe a smaller credit lines, but you don't see if you're a card to we typically get paid on number of cards. So we're not concerned about the dollar value of what goes on cards. We're concerned about the number of cards.

Leland Strange: We don't see any decrease in that. What we what we do see is some of our customers that are our people that we talked to, they already have debit cards and we're thinking about getting the credit card space. They are they are slowing down that process because they're concerned about the delinquency side. But people who are already in the car in the credit card space issue more cards is not a problem as long as you manage to do the onboarding in terms of scoring.

Leland Strange: But there will be an increase in error. That's not slowing down. And there's a I guess opportunity to again, I appreciate the question because it has kind of just to think about something else. And that is number of cards. I don't want anyone to take away from this.

Leland Strange: The fact that we've not had any license revenue since the first quarter of this year, which which of course does impact a lot since that's all profit. But that doesn't mean that the Apple program has slowed down. Remember Gowin has two programs. They have Apple and general motors. And the reason that we've had no more license revenue. This simply the fact that the way we get paid on active card numbers and active card numbers have different definitions for different folks in the business.

Leland Strange: If you're a global sister, you may have one definition for active cards. But but then you also get paid for inactive cards. But this is a license deal with Gowin. So we don't get paid for inactive cards. We get paid for active cards. Now the active card definition, says if a card is not hit by some system, meaning somebody went to change the address, they went to make a purchase, they went to change credit limit, it doesn't really have to be a purchase.

Leland Strange: It changed the open to battle limit. That's still active if you do that with a certain month period. I mean, to find the month, but let's say it can be three months, four months, five months, six months, something. So they discovered that they were hitting a lot of cards, many of more cards for things that they didn't really need to hit them with, and I'm talking about with an API, and therefore they were still keeping on active cards.

Leland Strange: And so when they managed their cost well, they look and see, well, how can we not make those cards active since they haven't been buying anything anyway for in some case years. So they did that. So therefore, it's taken a while for that to catch up. As Matt said, we expect to get licensed revenue in the first half of next year again, hopefully in the first quarter, he could push out to the second, but the main card program going has is really good and continues to grow really well.

Leland Strange: And we'll get back on track with that next year once we caught up with these, this sort of cleanup of cards that have gone inactive now. Anyway, I added that to your question simply because I feel like I need to make that explanation so people don't go away with the wrong stuff out there's big progress not growing, just growing and growing well and doing very well. So to summarize, there's still growing new cards, but then there's also an inactive card group within the whole portfolio that they're looking to make sure they're not paying for things that the Washington are constantly closely and by taking some cards to inactive status, they paid money.

Leland Strange: That's right. But you can really think of it as a almost a one-time cleanup. Now, of course, you'll continue closely, but it was a one-time very big cleanup that won't happen again. And that was a Q3 of that. Bad in fact, yes, that's right. Yeah. Oh yeah. Okay. His back came in the office this morning and said, then it looks good, but yet it looks so good. I mean, it looks bad.

Leland Strange: It wasn't so good. We're fine. The way we see growth going from our term here. And as long as we're talking about next year, whatever we've had, we've had a couple of these things that have hit us like the the Department mobile and like the you'll cut in and professional service revenue and then the cleanup of cards. And so those are short-term things that we that we're comfortable with the rest of the visitors as early. Yeah. Okay, great. I'll get back into Q. Thanks. Thanks, Al. Thank you.

Avram Fisher: Our next question is from the line of the Fisher with one cast of visors. We'll just use their questions.

Leland Strange: Hey, good morning. The 10Q calls out expectations that 4Q will see some at long last, possibly some marketing spend, and you sort of offer some color around that. How much? What's it for? Why now? What's the appropriate expectation on a payoff from that? Yes, we finally have a salesperson who came from a competitor, so I've got experience in the business, and they'll be focused on selling financial institutions. So it would not be short-term.

Leland Strange: They'll be calling on financial institutions, who in many of them will be like credit unions or smaller banks who either have a credit program or someone else or will want a credit program, so they'll be looking to try to generate business through that process. Now, again, you're free to tell me you are ready to long-lead them, and I'll accept that. But I accept it more in the sense that the economic environment changed, I think, faster than any of us expected based on the bad and all these other things.

Leland Strange: They've put a hold on a lot of folks, a lot of people in banking, and I didn't expect that. We do have it, so we recognize reality, and we now have a vice president of the National Institution Partnerships, FI Partnerships. All right, and what you're saying is, it's a long-term investments. Don't expect anything in the New York term on that. I would be very surprised if you get anything from that in 2024, but I would love to be surprised.

Leland Strange: Right, okay.

Matthew White: A few other quick questions. You called out the non-golding revenues, roughly 5.1 million apparently. What are the margins on that, or if you can't just break that out? How does it compare to a sort of 30% gross profit margins blended? Well, yeah, we don't break that out, but keep in mind that that's not a business that's that scale yet, so the margins are going to be a little bit of a drag on the overall margins just given that it's a lot smaller revenue base.

Matthew White: That's pretty small revenues to be fair to you. There's shared resources, so it's not just like everyone works on just this part or just that part. So there are some resources that work on both, so it is hard to kind of allocate that, and it's not something we look at too closely at this size. And in your expectations, I think you gave out some guidance. What is the, what, if you said it, I apologize, I missed it.

Matthew White: What did you guys, what the ex-golding revenue growth should be next quarter? We didn't talk about it next quarter. There'll be some puts and takes. We talked about the park mobile, the revenue and cost that will go away related to that, so there'll be some caveats, but we didn't give that specific number for the fourth quarter, but it'll be, I would say, high single digits is what we expect.

Matthew White: Okay, and finally there was a Jumph in deferred revenue on the balance sheet, which tends to bode well. Can you just discuss or disclose a little bit about around that? Is that lead to future revenues? When does that et cetera? It'll hit over the next, within the next 12 months. And most of that is just related to timing of payments. So, some customers paying in voices a little bit earlier for services that we've invoiced for, but haven't yet provided.

Matthew White: So, a lot of that will come in the fourth quarter, but most of it will be in 2024. And is that new customers or is there existing customers in just timing issue? Just in customers, just timing.

Matthew White: Okay.

Matthew White: Thank you.

Avram Fisher: Thanks, Avi.

Operator: Thank you.

Operator: If you like to ask a question at this time, you may press star one from your telephone keypad. We'll pause a moment to assemble the queue. Once again, the final reminder, press star one to ask a question. Thank you.

Leland Strange: At this time we have no additional questions, and I'll turn the floor to management for closing remarks. All right. Well, just want to say thank you, everyone, for your continued interest in the company. And if you have other questions, as I always said at the end, please feel free to contact Matt or myself. We're happy to answer the questions, and we're very pleased with where we're headed on term, even though we're disappointed with some of the numbers going out. But either way, we're going to keep doing what we're doing, even though we've not had a salesperson.

Operator: So thank you, everyone, for your attention, and we'll be talking to you later. Thanks.

Operator: This will conclude today's conference. Let me disconnect your lines this time, and we thank you for your participation.