Q3 2024 CoreCard Corp Earnings Call
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Ladies and Gentlemen, Greetings and welcome to the core card third quarter 2020 for Orange Conference call.
At this time all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operating assistance during the conference, please press star and zero on your telephone keypad.
As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Matt White, Chief Financial Officer. Please go ahead, sir.
Thank you and good morning everyone. With me on the Call today's Leeland Strange, Chairman and CEO of Corporate Corporation, you'll add some additional comments, probably more than you're typically used to, and answer questions at the conclusions that the conclusion of my prepared remarks.
Before I start, I'd like to remind everyone that during the call we will be making certain forward-looking statements to help you understand core-car corporation
and its business environment. These statements involve a number of risk factors and certain these and other factors that could cause actual results to differ material from our expectations.
Doctors that may affect future operations are included in our filing to the SEC, including our 2023 Form 10K in subsequent filings.
We'll also discuss certain non-gap financial measures, including adjust the deluded EPS and adjust the diva dot, which is adjusted for certain items that affect the comparability of our underlying operational performance.
These non-gap measures are detailed in reconciliation tables, including with our earnings release.
Before I get to the financial highlights for the quarter, I'll comment on the filing this morning regarding the decision by our auditor, not to stand for re-apportment, following the completion of our fiscal 2024 audit.
This is a business decision that our auditor made, give the expense involved in auditing public companies, and the fact that we are currently their only public company client.
They made take on public companies in the future, but for now it didn't make sense for them to have only one public company client. So we will be looking for a new auditor as a result.
and now on to the results for Q3, as we noted in our press release, our third quarter results were better than expected with earlier than expected license revenue.
Tell it all revenue for the third quarter 2024 was 15.7 million dollars, a 17% increase year every year driven by higher and licensed revenue, higher professional services revenue and higher processing of maintenance revenue.
The components of our revenue for the third quarter consisted of license revenue of $1.4 billion. Professional services revenue of $7 million which came in ahead of our previously guided range, processing in maintenance revenue of $6.1 billion and third party revenue of $1.2 million.
Revenue growth, excluding our largest customer, was 7% in the third quarter on a year for your basis.
Revenue growth excluding our largest customer in addition to the impact from Park Mobile and the Legacy Cabbage Business.
As detailed in prior quarters, was 30% in a third order on a year over your basis and is expected to be 25% to 30% for the full year, which is above our previously guided range of 15 to 20%.
We continue to onboard new customers both directly and through various partnerships we have with program managers. As in previous quarters we currently have multiple implementations and progress and new customers to be expected to go live in the coming months.
Processing and maintenance revenues increased 4% in the 3rd quarter of 2024, compared to the 3rd quarter of 2023. Primarily due to higher revenues from existing customers.
and the addition of new customers partially offset by the revenue decline from the Lexi Cabbage business I mentioned above.
and turning to some additional highlights on our income statement for the 3rd quarter of 2024.
Income from operations was $2.8 million for the third quarter of 2024 compared to income from operations of 0.4 million for the same time last year. Our operating margin for the third quarter of 2024 was 18% compared to an operating margin of 3% for the same time last year.
The increase is primarily driven by higher license revenue, higher professional services revenue.
Partially offset by continued investments in our new platform.
The income statement, in fact, of our new platform build was was $0.7 million in the third quarter of 2024 compared to $0.5 million for the prior year period. Our third quarter, 2024 tax rate is 25% compared to 24.5% in the third quarter of 2024.
earnings per diluted share for the quarter was 27 cents compared to a loss per share of three cents.
for Q3-2023, adjusted to Lutter DPS for the quarter, excluding stock compensation expense, was 30 cents compared to 9 cents for Q3-2023, which excluded an impairment loss on a cost-methan investment.
A gestative of dye was $3.9 million compared to $1.9 million for the third quarter of 2023.
We have over $28 million of cash and marketable securities on our balance sheet as a September 30, 2024. And we expect to continue generating operating cash flow for the full year 2024.
who plan to use this excess cash and cash generated from operations.
To continue investing in our new platform into continued buying back shares. We repurchased 134,650 shares in the first quarter 2024 for $1.6 million.
147,000 of 40 shares in the second quarter for $2.1 million and a $123,370 shares in the third quarter for $1.7 million.
For the fully year 2024, we expect total revenue to be approximately flat.
As mentioned earlier, we expect growth from customers, excluding our largest customer, in addition to the impact of park mobile and the legacy cabbage business, and the 0.5 million dollars of accelerator revenue that we recognize in the first quarter.
To beat between 25 and 30% for the full year, above our previously got a range of 15 to 20%.
Within Services, we continue to expect strong goat growth and processing and maintenance as our customers continue to grow as we continue to onboard new customers.
As mentioned in our press release this morning for the fourth quarter of 2024, we expect total revenues to be between 13.3 and 13.7 million dollars and earnings for share between seven and nine cents.
We recently renewed our agreements with Goldman as outlined in our 8K filing with the SEC last week, extending the agreements through December 31, 2030 with our early termination rights starting in January, 2027.
This extension gives us increased managed services fee starting in January 2025, resulting in higher fixed revenue from Goldman and increased visibility on revenues from them for at least the next two plus years.
With this increase visibility we provide a guidance for 2025 of Tilda Revenue between $16 and $64 million, an earnings per share between 88 cents and 94 cents, and Revenue grows excluding the global demand of 30 to 40%.
and with that I'll turn it over to Leeland.
Okay, thanks, Matthew
Guy showed a day like this when both the Russell and this and beer that one half percent I'm going to ask Matt not to schedule our conference calls on days with the market crashes, but nevertheless it is Halloween. So as Matt said, the quarter results did exceed our expectations from our call even a quarter ago.
We do frequently help Wopy revenues that are hard to reject. We've talked about that many times before. It consists of licensed revenue or the lack thereof, and that revenue often distorts period to periods to perishes.
We don't know any vans, it's based on active courage of licensed clients at the other quarter.
We don't really answer into a report to run several days following the quarter-end. Best we can do is give you our predictions given what we know at the time. How they admit we try to be conservative, but also accurate. It's what I call the line of sight view and not a hope of you.
with Matt's comments today. I think we're providing a little more of a forward view of how we see things while noting areas of risk.
My comments today will follow a 4. outlined, be incorporating the four most frequently asked questions we get in conversation with investors.
We certainly don't selectively disclose info so for you who have asked these questions in the past and didn't get a satisfactory answer hopefully you will today.
Now they'll include a lot of opinions, beliefs, and just thoughts as of right now. So they clearly fall under forward-looking statements for safe hover purposes. So you should consume them with that caveat man.
The outline for my comments or questions is first, Goldman Sachr relationship and all of that entails, after all it is a highly concentrated position in at court court. Second, succession or mass situation.
Third, acquisition, or what we do in cash, and then I'll give a brief summary and talk about Grilled Outside of Goldman.
So, for topic number one, the Go-Band Sacrifice Ship. I'll elaborate a little more on the newly amended agreement.
But I need to warn the press or others that are listening to this call that you cannot read anything that what I say to predict in things about go and sex or apple
What I say simply is my belief what core card we'll be doing and expecting. Go in Sax might have a totally different view.
The new amended agreement is very good for core guard and that we have more certain locked in revenue through the end of 2026, the next two plus years.
I've said in each of the earnings calls this year I think that we're likely to be processed in the Apple Car root Goalman through 226.
This new agreement doesn't say that, although I believe it will be true.
It says that Goam will pay us to contract it amount through 2026 whether we are processing or not because they can't cancel the contract before the end.
It also says that past the termination fee, if they can, for December 2030.
Now I believe that will happen. In fact, it's almost certain it will happen.
You can generally assume that termination of bees are usually higher, if cancer or earlier, and smaller, if cancer or the terminal date.
What I think will happen is based on what Dolman has said publicly and what has been said in the press. All for you really done to the new other of my interpretation and opinion. But first talk about the GM program.
He is definitely going to Barclays Bank that is going to announce my Barclays Ed Goatman.
Marks Lace has a current relationship with the legacy processor and is more than likely going to move processing to their current provider.
is a standard credit card with limited innovation.
The reward portion is handled directly by General Motors even today.
So it should be easy to transition.
The press is at will happen in 3rd quarter, 2025.
That in itself should give you an idea of how it takes a transition and that the name Barclays was first printed in the press in April earlier this year.
So April to 3rd quarter-Nissue will be about 2018 March
Actual conversion time however for a program like this would typically be about 12 much.
Note that there's very little revenue impact for this conversion off of core card, due to the fact that it's coming off of licensed software and not a processing agreement.
Speaker Change: Well, a licensing has some disadvantages. It also has some advantages. The conversion off does have a minimized feature license fees. We've met up to a day feature years. So I'm not going to minimize the loss.
Second, about the Apple Program.
I think the progo will be moved to another rank.
A year ago the press said they were talking to Amy Mcs.
Well, I'll speak, John and Bloomberg have recently reported conversations with going on with JP Morgan.
I can neither confirm nor deny that and it would be out of line for me to come in on that speculation.
What I wish speculate is that the Apple program will be processed to the core card platform.
For a longer period, the hottest guarantee to be paid out of the amended contract.
Speaker Change: I believe that the car will be owned to platform until at least mid-2027. And note, I said believe, while I have no information that we can confirm that, believe. And I really don't think anyone knows today.
It could be longer, it could be much longer.
The program might not find a Willie Barer, but I think he will.
Speaker Change: for the Baricad Chuse to still use the platform for short or even long period.
We're certainly open to working with potential biogenetic at half of it.
We will not be making any specific comments about this or any negotiations unless there is a more than likely than not something happening that would materially impact our future financial results that actually differs from what we've said.
Speaker Change: and Peter Collins, I'd like to have a little say about this subject, which is why I'm trying to be as open and comprehensive as possible today.
This is all very positive for core cards.
went in to continue servicing Goldman as a significant and very reliable partner with a high-level service possible.
Speaker Change: Goldman Wright, speaks there and is paying for that kind of attention.
Both Goldman and his partner Apple are first-sized companies that demand an expect, first-sized service for their customers. We're happy to be at that kind of company and definitely the one at Disappoint.
The last comment about this program concerns questions that received about the recent finds and posed by the CFPB of Goldman and Apple.
Court Card was not part of the issue and was not part of the investigations.
and my opinion the agent resulted from the success of the program.
Ask Grove to the National Services often leads to issues.
Yes, they were mistakes as pointed out by the CFPB, but they were not intentional. They were not the result of her mental incisions. They were the result of being overwhelmed by the phenomenal success of the program and having insufficient resources and systems to cope.
I believe that should be a post on many things you feel to respond to problems or those that are
and our highly sensitive to customer success as our Apple Goblin.
and we know from our relationship how much they want to do right for their customers. As they push us for perfection.
The test is Matthew Zehrs.
Two more topics I'll cover because it'll forget cool questions around them. They are about succession and the possibility being acquired or a core card applying another company.
First, let's talk about succession. I don't show away from talking about the fact that I've been doing this a long time.
Speaker Change: and despite the fact that good Lord is blessed me at the age of 83 with good health and the energy of dry to keep pushing. It is in my opinion the time to consider someone else for present and to do what is needed to keep the company on its present good trajectory.
I guess I should caveat the hill coming in that I do need a new knee as my bum one kept me out the ski slopes with my grandchildren for the first time this year breaking my 15 year design to shrink.
The courtyard has for the last several years discussed the session planning and almost every board meeting. So this is not the new. There are no specific plans in place.
I do expect you to move from the discussion and consideration phase to action early next year.
Who knows, and you present might even decide to establish a socials team.
Speaker Change: Now for those who might not know, core court has no shelves people and those very little marketing.
So that last statement was made with a little squint in the eye.
Current non-goalman revenue growth which we think will come in at a 30% comment and a growth rate over three year period comes from growth of existing programs web and bound and referrals.
It may be that a few sales team can speed up that. It may be that our capabilities would remain in the 30% growth rate in a way for the next couple of years.
The last topic is about use of cash and acquisition potential.
We have previously been my next thought, but not in a blackout period, under a plan that was previously approved by the board.
It is our intent to keep doing so.
We believe the current stop price inevitably undervades the company, but due to either a standalone enterprise given the future we see, as well as the value of my brain as part of the larger organization with a standard Salesforce.
I can admit we do lose some deals now due to our small scientists.
Speaker Change: It's for us using cash to fund an acquisition in the fifth X-Base.
Speaker Change: We're regularly approached the possibilities but almost in every case it's for companies losing money for the cash burn and hockey stick projections. That is really not appealing to us as a company that has grown while staying consistently profitable.
Matt and I also filled regular inquiries and reachouts for private equity groups and investment bikers with all sorts of companies that might be or are interested in acquiring us and even we get to directing for the companies themselves.
Speaker Change: Howard, a shareholder owned so far so the wanted to see shareholders rewarded.
We have had Lord Private Equity Groups, names you would all recognize, visit our offices, both the gain more information and also the pitchers.
While we work with shareholders we also have responsibility to employ the customers and we strive to balance the short-term and long-term contracts which is for each of these constituents.
We have concluded that the likelihood of a private equity transaction is very limited.
We're not interested in any type of squeeze for oil shareholders and that's usually a component of a private equity proposal.
We've had several management teams from interested in acquiring companies, both domestic and international. Come to Norse Cross over the past several years and even as recently as this month.
Speaker Change: We have also reached out to some in our Mac�or's of business, looking for partnerships and have had some serious conversations.
Typically the conclusion is that our team and take knowledge at first class, but we unknown surrounding the Gobern relationship and it knows around in the future of the Apple program. Plus our will start price, the optics meeting what we believe would be the right balance for shareholders is a hurdle.
Speaker Change: Notice I said optics as the real substance that you've used it as usually confirmed. It may be that some enters has been returned over the recent amended agreement with Goldman, providing a little bit more certainty.
Speaker Change: I digress a second and talk about the neuro cloud, agnostic native successor platform we're building that is called corpinity or corp ion for sure.
We're almost four years into it and have another year to go before it will be ready for production.
Ready by the end of 2025, but probably not 40 U.S. until 2026.
Speaker Change: Now the current platform is very good, the core five second advantage of all the newest tools would go to the most flexible, feature rich, cloud-dated, active, active, real-time credit platform in the world with the lowest maintenance operating cost.
It's truly superior to anything we'll wear, be concerned today, and it's well positioned to compete with other like-see-processors.
But that's a decoration but it has something to do with that so I suspect some of you're going to ask, what do I think the value is?
I'm not going to put this specific number on it, but we have a festival that 130 million built in the current and co-authentic platforms.
and just as important as the dollars invested, or even more.
is the fact that it would take someone four or more years if they started now to get where we are.
We have thousands of test cases for reviving credit.
Speaker Change: No other modern processor possesses that. We have the proven scale that no other processor has. All other modern processor combined we believe have less than a may-revolving cards and we have around 15 million.
You learn a lot as you skill up to really are.
and our people make up the real value with a thousand team members with heavy and detailed knowledge of the credit court of mining and all she's in Atlanta, Romania, India, Colombia and Dubai. Over 350 of them have been with court clerk for more than five years.
Many more than 10 years. Just this year we began issuing restricted shares that have three year besting to some long tender employees, those with more than five years.
Speaker Change: As it's said, time to keep them focused on building by you and strong customer support.
Laws for Gat Cospers such as Goalland, American Express for Fall Business Loans, Gemini, Cutter Airways for Great Pornership, the Cardless, deserve, Avan, Pregsale, Emerald and Aestal Bank, Elements Sorry, Alpha Orange, Fried Bank, and Onion Out.
Tobacco Vaya Glass Summer will be traded in the 20s. The market's up a lot.
The top is much better and has more visibility on feature revenue than a year ago in all respects.
Speaker Change: So as a personal observation, speaking is probably the largest shareholder, I don't expect to vote a support ED acquisition offer that would value the company for less than something north or 200 million.
and I thought it was a worthy company buying back and share for they just cash given the current stock price.
The by-back, limits the shareholder delusion that comes for the providing the restrictives thought grants that I mentioned earlier.
Speaker Change: You can do your own math and run stop prides. I emphasize with this comment on speaking personally of the way I currently feel.
Speaker Change: I thank our results, thank for the sales.
We're taskable continuing on our current trajectories.
The company's well position to continue to grow as non-golden business at a 30% compounded and widespread.
Speaker Change: With the Krisic earnings the next few years as a lot of that revenue drops straight to the bottom line.
Our expansions are increasingly slowly, we're not as scale as the processor, but margin will start going up.
All Internal Planning and Focus, focused on making that happen. While we're still trying to balance the interest of our shareholders, employees and customers, I'm being open to a transaction.
With that, I'm happy taking any questions and why you're taking any questions. I guess I should be through death.
We don't update progress numbers like Timothy's discussion between quarters unless mandated and don't come in unless and till there's something Substance to talk about so let's open for questions and we'll conclude at that
Thank you, all ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star and one on your telephone keypad. A confirmation tone will indicate your line is in the question queue.
You may press star and 2 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.
The East Endowment will wait for a moment while we pull for questions.
Speaker Change: Episode 2
The question comes from the line of how goch from B-Riley's abilities. Please go ahead.
Thanks guys, and thanks for your commentary and the stories of your family. That's terrific. Good luck with your knee.
One of the asks, if you could help us bridge the change in non-golden revenue growth from the prior guidance. What's kind of going on in the last quarter and a half that allow you to take that guidance up and give us as much detail as you can.
I'm gonna admit I thought that was a bit
You're talking about just from taking it from 15 to 20 to 25 to 30. You know, a lot of that is some of the new programs that have come on. Some of that's reflected in the third party revenues being higher than expected. And really that's hopefully an anticipation of
Speaker Change: Excuse your processing revenue. So, you know, I think that speaks to the numbers for next year as well. But that was a big driver I would say of, you know, why the number came up from Q2 to Q3 for the full year to 25 to 30 percent excluding Goldman.
Speaker Change: Okay, on next year's guidance, can you give us any feel for how much of it that is a license, revenue, or use the two, two, two to guide us at.
It's really too soon given that the license revenue came in a little sooner than we expected here in Q3. And then the timing of the decenversion of the GM program will have a big impact on license revenue. So we're really not counting on...
License revenue in 2025, you know, given those dynamics. Yeah, our, I think the story is that it's a good growth in the non-goldment stuff. So, life will revenue, you know, if we get in in somewhere along the way, that's fine, but it's not something we're telling you. We're telling you, I'm just continuing to grow the company.
and the first one that I've heard from the nine-gallon shot.
Speaker Change: Okay
Speaker Change: and...
If you were last question from me, I was like, I'm like, I'm back in the queue. If JP Morgan...
I think J.B. Morgan will take this program in house, given their vast processing businesses and payments businesses.
Speaker Change: Well, how long have you been before an decision for ourselves? As we mentioned, there's been multiple parties in the Apple card.
and he thought so on the Italian there.
Speaker Change: I think as I said, I don't think anybody and I literally mean that anybody knows timing. There may be some people guessing right now but I don't think it's at a poor worry about it. You can know the timing and the difference there, you rightly, surmise that it makes sense for J.P. Morgan to take it inside.
Another hand, it might not. It actually could be described. The Apple program has some unique things to it.
and it's a secret, we're not going to be party too. So I'm just sort of speculating here. I mean that will be happening outside of.
of any conversation with my help as to where it goes. I would say, yeah, common sense as they might take it home, but also you could also make a good argument. It might be cheaper unless the rub disruptive to work with someone like ourselves.
To continue it going if it's going to JP Morgan, which we're not privy to or what ever coming about.
Speaker Change: Okay, thank you.
Speaker Change: Big shout.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, this concludes our question on session. I would now hand the conference over to Mr. Leyland Strange for the closing comments.
Okay, well, that does conclude our call today. We appreciate the interest in the company and as I usually say, if you have any further questions, please let me out of right now and we thank you for your interest in the company. Have a good day. Thanks.
Thank you. The conference of call card has now concluded, thank you for your participation. You may now disconnect your lines.
The New York Times, Matthew White The New York Times, Matthew White