Q4 2024 CoreCard Corp Earnings Call
Ladies and gentlemen, thank you for your patience and we will begin in a few minutes again, we do thank you for your patient we will begin in a few minutes.
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Speaker Change: Greetings and welcome to the core card fourth quarter 'twenty 'twenty four earnings conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
Speaker Change: If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad as a reminder, this conference is being recorded.
Speaker Change: It is now my pleasure to introduce your host Matt White Chief Financial Officer. Thank you you may begin.
Speaker Change: Thank you and good morning, everyone.
Speaker Change: With me on the call today is Leland Strange chairman and CEO of Cork. Our Corporation, you will add some additional comments and answer questions at the conclusion of my prepared remarks.
Speaker Change: 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 core car Corporation and its business environment.
Speaker Change: These statements involve a number of risk factors uncertainties and other factors that cause could cause actual results to differ materially from our expectations.
Speaker Change: Actors that may affect future operations are included in our filings with the SEC, including our 2023 Form 10-K and subsequent filings. We'll also discuss certain non-GAAP financial measures, including adjusted diluted EPS and adjusted EBITDA, which is adjusted for certain items that affect the comparability of our underlying operational performance.
Speaker Change: These non-GAAP measures are detailed in reconciliation tables included with our earnings release.
Speaker Change: As we noted in our press release, our fourth quarter results were above our expectations due to unexpected license revenue and in line with our expectations. Excluding the license revenue with continued year over year growth in processing and maintenance revenue.
Speaker Change: Total revenue for the quarter was $14 $8 million.
Speaker Change: 22% increase year over year.
Speaker Change: Services revenue defined as total revenue excluding license revenue increased 10% in the quarter on a year over year basis with full year growth of 1%.
Speaker Change: The components of our revenue for the fourth quarter consisted of license revenue of $1.4 million professional services revenue was $6 $2 million processing and maintenance revenue of $6 $1 million in third party revenue of $1.1 billion.
Speaker Change: Processing and maintenance revenues grew 11% in the fourth quarter on a year over year basis with full year growth of 7%.
Speaker Change: A majority of our professional services revenues from our largest customer Goldman Sachs.
Speaker Change: As a reminder, we converted the managed services revenue we received from Goldman included in professional services to a fixed monthly fee of approximately $1 million for 2024.
Speaker Change: In October of 'twenty 'twenty, four we extended our managed services contract through the end of 'twenty 30, and guaranteed it through at least the end of 2026 at a higher monthly rate that starts in 2025.
Speaker Change: Revenue growth, excluding our largest customer and the impact from park mobile and the legacy <unk> business.
Speaker Change: It was 29% in the fourth quarter on a year over year basis, and 33% for the full year.
Speaker Change: We continue to onboard new customers, both directly and through various various partnerships, we have with program managers such as deserve it and cartilage. We continue to work on multiple implementations with new customers, who we expect to go live in the coming months.
Speaker Change: As a reminder, these new customers typically build their account base over time paying mostly are our minimum fees of 10 to 15000 per month and the initial 12 to 18 months of their program, we expect our new customers to become more significant as they grow their own businesses and we are seeing the impact of this and the significant growth rates of our non Goldman business.
Speaker Change: <unk>.
Speaker Change: Turning to some additional highlights for the fourth quarter and full year for 2020 for income from operations was $2 $1 million for the fourth quarter of 2024 compared to income from operations of zero point $4 million for the fourth quarter of 2023.
Speaker Change: Our operating margin for the fourth quarter of 2024 was 14% compared to an operating margin of 3% for the same period last year.
Speaker Change: The income statement impact of our new platform build.
Speaker Change: It was zero point $7 million in the fourth quarter of 2024, and $2 $7 million for the full year 2024.
Speaker Change: Compared to zero point $6 million in the fourth quarter of 2023 and $1.8 million for the full year 2023.
Speaker Change: Our fiscal 'twenty 'twenty, four and 2023 tax rate was 21, 1% and 24, 5% respectively.
Speaker Change: We expect our ongoing tax rate to be between 24 and 26%.
Speaker Change: Earnings per diluted share for the quarter was 24 cents compared to six cents for Q4 2023.
Speaker Change: Full year 2024 diluted EPS was <unk> 67 cents compared to <unk> 40 for the full year of 2023.
Speaker Change: Adjusted diluted EPS for the quarter, excluding stock based compensation expense was 28 cents compared to six cents for Q4 2023.
Speaker Change: Full year 2023, adjusted diluted EPS was <unk> 79 cents compared to 53 for the full year 2023.
Speaker Change: We generated operating cash flows in 2024 of $5 $8 million.
Speaker Change: We used $7 $6 million on share repurchases in 2024, including $2 $2 million of share repurchases in the fourth quarter of 2024.
Speaker Change: We continue to have excess cash on our balance sheet as of December 31, 2024, and we expect to continue generating operating cash flow in 2025.
Speaker Change: Plan to use this excess cash and cash generated from operations to continue investing in our new platform and to continue investing and growing the business.
Speaker Change: For 2025, we expect revenues of 60 million to $64 million.
Speaker Change: Earnings per share of between 88 cents and 94 cents and revenue growth, excluding goldman of 30% to 40%.
Speaker Change: We do not expect any license revenue in 2025.
Speaker Change: Within services, we expect continued growth in processing and maintenance and growth in professional services, reflecting the impact of higher managed service rates from Goldman.
Speaker Change: For the first quarter of 2025, we expect total revenue between $14 4 million, a $15 million and earnings per share between 15 and 19 cents.
Speaker Change: We expect professional services revenue to be between $6 8 million and $7 $2 million for the first quarter 2025.
Leland Strange: And with that I'll turn it over to Leland.
Leland Strange: Okay. Thanks, Matt.
Leland Strange: I'll start off with a light comment.
Speaker Change: Matt received Texas boring after our earnings release I received a call his tag said.
Leland Strange: Marketing costs are 30%.
Leland Strange: Lost your mind now for those new to US you know, we don't spend any money on marketing virtually anybody we don't spend money and we have no salespeople. So up 30% to $100000 is nothing so that was said in jest, but no. We haven't lost our mind, we still have no salespeople, we still spent very little marketing and.
Leland Strange: The call also this morning after the.
Leland Strange: After the release for more of a long term investor and he shops surprised youre still doing this I thought you said you were looking for younger leadership for the last couple of calls well. We are at total Nirvana bad keeps reporting good results things keep going really good maybe I'll hang around but not really.
Leland Strange: And I'll say more about that is what we call.
Leland Strange: So.
Just as Matt said, our revenue and profits they exceeded our expectations due to another way should tier payment.
Leland Strange: Nothing else was pretty much what we expected.
Leland Strange: Don't expect another licensure surprised this year about not going to say what might happen.
Leland Strange: Our processing and licensing revenue components grew just shut boat shipped for the year, but leverage up for the quarter and adjusted for a couple of old customers that were acquired by other parties in 2023 and had to leave the platform we were up I believe over 30%.
That's the number that look at it's really what do we what kind of new business are we acquiring outside of our borders customer.
Leland Strange: For 2025, we do see revenue north of 60 million and most importantly for metrics allowed her projections. We believe we will growth that reached <unk> 40 per share excluding our largest customer.
Leland Strange: We see a path for that to continue in future years.
Leland Strange: Total revenue for the year actually could be even at a 64 or higher range. Although we had rather guide to a little bit lower but we don't have that confirmed it under contract at this point.
Leland Strange: Well, we've already set three new customers this quarter typically mid Tex and they'll go live in the next few quarters and there is small and it will take time for them to grow.
Leland Strange: At least one of the items that we said is moving from another show called butter processor, who just could not reconcile accounts, which scorecard of course does every day to the penny.
Leland Strange: I think the newer processors, who are trying to compete in the revolving credit space or button without doubt by surprise many years ago.
Leland Strange: I tried to reconcile route by a revolving credit card balances it really hard.
Leland Strange: With the data from the networks often gets corrected a day later.
Leland Strange: Cardholders pay the wrong about that usually and then they claim they paid on time, so human has to decide whether a change of payment received data or not.
Leland Strange: Or sometimes taken several months later and they end up being partial reserves for which interest has already been charged in some cases, a portfolio, which hold the credit has actually been sold off.
And then the regulators has proved to be the interest conforms to the published charge permanent conditions that's hard.
Leland Strange: You have to keep all those details with sleek new card for seven years with sub count regulator going back to a transaction made several years past to prove or disprove it Helane nothing.
Leland Strange: Not easy.
Leland Strange: Not primarily a technology challenge, but a business knowledge challenge that has to be transformed into technology outcomes.
Leland Strange: That's why the legacy processors, who have had no real competition 40 years. They know how to do this and they know how to do it at scale.
Leland Strange: Any smart coder could do it for a few hundred a few thousand accounts you just mainly a joke for air but it didn't work when you've got millions of accounts.
I believe scorecard is the only butter processor that can legitimately compete with the legacy process today for large gift revolving credit program.
Leland Strange: No no other about our processor that it has EBIT.
Leland Strange: Half a million active revolving credit card scorecard has rub 50 million of their platform.
Leland Strange: But a comment about our new platform called Corp entity or court by <unk>.
Leland Strange: Incorporating all of the complexity and features on the current platform, but using the latest technologies and Architected for the cloud Moshe.
Leland Strange: Most importantly, it's factored in time travel testing that will speed up adding unique programs for innovative issuers.
Speaker Change: I guess that breakthrough Bolshoi club opening comments, a previously talked about <unk>.
Leland Strange: Company's enquiring about scorecard as a possible acquisition candidates.
Leland Strange: Our bid forever open and regularly Shay, we always strive to do what's best for shareholders and that might mean shoveled the company towards larger enterprise that can more easily scale the value from our platform.
Leland Strange: While at the same time, we get up every day and run the company resumed its going to be independent forever.
Leland Strange: We have over the last few budge and dialogue with different parties and more recently focused on discovery of what interest might be in the financial services market for a first class revolving credit platform.
Leland Strange: Both our current proven scalable shimmer motor platform as well as a new record by platform.
Leland Strange: The board.
Leland Strange: To make a decision to either do a transaction or quit talking about it and focus of finding a new approach to it.
Leland Strange: I'm not going to be a priority and it gets to take advantage of the future Corporately platform as bill either partner with someone else rather soon or will go find the right person to keep building.
Leland Strange: That said, we've put in place an informal but comprehensive process to discover interest in order to maximize value for our shareholders.
Leland Strange: We'll know the next few months the future growing.
Leland Strange: It may shift maybe turning this great company over to a successor President Canadian building or it may be accepting that an acquisition offer.
Leland Strange: I guess finally.
Leland Strange: Because I know I get question. All this talk about the status of the Goldman Sachs relationship.
Leland Strange: Matt talked we've talked about the amended contract last call that goes through 2030, but does have termination rights with compensation. After the end of the 2026 year.
Leland Strange: Nothing has changed on that Ed and I continue to speculate as I have in the past just based on news, we all read the Goldman would get out of the issuing business as soon as it can and a new Bay will take all the Apple program.
Leland Strange: The press reports that conversation are going on with different bikes and I would certainly expect that to be true.
Leland Strange: I have no information.
Leland Strange: That would provide any certainty whatever debate gets chosen we keep the probe scorecard.
Leland Strange: All banks have existing agreements with process either F I S.
Leland Strange: Payment departure, while J P. Morgan Chase, mostly desert oil processing.
Leland Strange: For card would hope to maintain the processes and we'll do whatever we can to keep the valuable plaza and introduce the most successful new credit card effort in the market.
Leland Strange: I know any of the legacy processors could eventually code to the current car specs.
Speaker Change: I also believe you would take two to three years of dredges Zap.
Leland Strange: Apple expects perfection and they'd go through a bunch of testing.
Leland Strange: I'd say that also believing that keeping core card would be the best outcome for whatever bank ends up with a program I can be less risk and no more costly.
Leland Strange: Other than that I have nothing more to add so at that point I'll take questions that you might have a better ROI.
Leland Strange: Yeah.
Leland Strange: Thank you.
Leland Strange: Now be conducting a question and answer session.
Speaker Change: If you would like to ask a question. Please press star one on your telephone keypad.
Leland Strange: A confirmation tone will indicate your line is in the question queue.
April: April starts to remove yourself from the queue for.
April: Participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys.
Speaker Change: One moment, please while we poll for question.
April: Yeah.
Speaker Change: Our first question comes from the line of how gosh with BYD Securities. Please proceed with your question.
April: Okay.
Speaker Change: Thanks, Thanks for the chance to ask a question here just want to make sure I heard you correctly there in your forecast there was no plane license.
April: These expected in 2025 is that right.
Speaker Change: That's right yeah.
Speaker Change: Yeah.
Speaker Change: Is that to be conservative.
Speaker Change: You would think you know maybe you had some.
Speaker Change: So new issuers in the pipeline and what might make that initial.
Speaker Change: Livestock.
Speaker Change: An initial first license revenue program Blayne, So I hope it doesn't mean, you don't have a problem.
Speaker Change: A good funnel that you've been working on can you give.
Speaker Change: Give us your thoughts on that.
Speaker Change: That's the Goldman situations. They told me get the license to you we're not alone in the licensing business.
Speaker Change: Yeah, with the private equity business down.
Speaker Change: We expect new customers to be on the processing side, rather than on the license side, you know something big did come in we would still we would still bring on a license customer yes, that's not our best at the moment so inventory growth.
Speaker Change: If you were to onboard a new customer it would show up in both maybe some professional services launch and maybe some third party for cars and then you get the processing afterwards.
Speaker Change: Yeah, Okay, alright, okay, mostly I'll stay on the processing and maintenance line.
Speaker Change: Okay. Okay. Okay.
Speaker Change: You know how long this thing about you know.
Speaker Change: Total dollars of cost to run the business this year.
Speaker Change: It's.
Speaker Change: Oh.
Speaker Change: Yeah.
Speaker Change: Your marketing G&A and R&D kind of been quite variable in terms of booth was $3 million in Q1, but I must say $4 5 million in Q4.
Speaker Change: Yes.
Speaker Change: Any any points there on just kind of.
Speaker Change: Dollars or spending to run the businesses as you're kind of cute in 'twenty one.
Speaker Change: Well, we do expect some increases in costs.
Speaker Change: In 2025.
Speaker Change: But you know we don't need to add a lot of personnel and we don't need to.
A lot of equipment to support the growth that we're expecting in 2025.
Speaker Change: And we think we have the people that we need so.
Speaker Change: Primarily the increase in overall costs will be just normal.
Speaker Change: Our cost of living adjustments for them.
Speaker Change: Hillary.
Speaker Change: You know just other cost that come along that to run the business.
Speaker Change: But we're not expecting a significant increase year over year and operating expenses from 24% to 25%.
Speaker Change: Okay.
Speaker Change: Hey.
Speaker Change: And in.
Speaker Change: Then you have about 15 million cards right now on the platform, but that would be one.
Speaker Change: No I I should I shed theres nobody.
Speaker Change: Nobody that we know of in terms of the modern processors that have you got a half a million dollars revolving credit cards that we have.
Speaker Change: Around $50 million revolver, that's what I would look towards.
Speaker Change: One and one initiative to actually yeah.
Speaker Change: If I heard that number right, yes, I heard that the others don't have happened to any of that yet that's why that makes sure.
Okay, that's right.
Speaker Change: Yeah, Yeah sure. So ahead of these other modern processors at various numbers and scales important building scale.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: But that's those are my questions are follow ups all after with you guys.
Speaker Change: With respect to your question I'll get back in the queue. Thanks.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: We have reached the end of our question and answer session and this also concludes today's conference you may disconnect. Your lines at this time, we do thank you for your participation.
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