Earnings call transcript: CoreCard beats Q4 2024 EPS estimates

Published 20/02/2025, 17:50
 Earnings call transcript: CoreCard beats Q4 2024 EPS estimates

CoreCard Corporation (market cap: $176.75 million) reported its fourth-quarter earnings for 2024, surpassing analyst expectations with an EPS of $0.28, compared to the forecasted $0.18. Revenue for the quarter reached $14.8 million, beating the anticipated $14 million. Following the announcement, CoreCard’s stock saw a modest increase of 0.33% in pre-market trading, reflecting positive investor sentiment. According to InvestingPro data, the company trades at a P/E ratio of 46x, suggesting premium market valuation. InvestingPro subscribers have access to 12 additional key insights about CoreCard’s valuation and growth prospects.

Key Takeaways

  • CoreCard’s Q4 2024 revenue increased by 22% year-over-year.
  • The company exceeded EPS forecasts by $0.10.
  • Stock price rose 0.33% in pre-market trading.
  • Operating margin improved significantly to 14% from 3% a year ago.
  • CoreCard is focusing on scalable credit processing platforms.

Company Performance

CoreCard demonstrated robust performance in Q4 2024, with a 22% year-over-year increase in revenue. The company has shown resilience and adaptability in the competitive financial technology sector, driven by its innovative platform developments and strategic partnerships. CoreCard’s ability to outperform expectations in a challenging market highlights its strong operational capabilities and market position.

Financial Highlights

  • Revenue: $14.8 million, a 22% increase year-over-year.
  • Earnings per share: $0.28, compared to $0.18 forecasted.
  • Operating cash flow for 2024: $5.8 million.
  • Operating margin in Q4 2024: 14% (up from 3% in Q4 2023).

Earnings vs. Forecast

CoreCard outperformed expectations with an EPS of $0.28 against the forecast of $0.18, marking a significant positive surprise of approximately 56%. This performance is a continuation of the company’s trend of exceeding market expectations, demonstrating its effective business strategies and operational efficiencies.

Market Reaction

Following the earnings announcement, CoreCard’s stock price increased by 0.33%, reflecting investor confidence in the company’s strong financial results. The stock has delivered an impressive 99% return over the past year, with management actively buying back shares. The stock’s current trading price remains within its 52-week range, indicating steady market support. Based on InvestingPro’s Fair Value analysis, the stock appears to be trading near its Fair Value.

Outlook & Guidance

CoreCard projects 2025 revenue to be between $60 million and $64 million, with an EPS forecast of $0.88 to $0.94. The company expects revenue growth excluding Goldman Sachs to be between 30% and 40%, with a focus on expanding its processing capabilities and onboarding new clients. InvestingPro analysis shows the company maintains a FAIR overall financial health score of 2.26, with particularly strong scores in cash flow and profitability metrics.

Executive Commentary

Leland Strange, Chairman and CEO, stated, "I believe CoreCard is the only modern processor that can legitimately compete with a legacy processor today for large-scale revolving credit programs." CFO Matt White added, "We expect new customers to be on the processing side rather than the license side."

Risks and Challenges

  • Dependence on key partnerships, such as with Goldman Sachs.
  • Potential for increased competition in the fintech sector.
  • Economic uncertainties that could affect client spending.
  • Challenges in scaling new platforms like CoreFinity.

Q&A

During the earnings call, analysts inquired about the future of CoreCard’s relationship with Goldman Sachs, to which the company confirmed a continued focus on processing services over licensing. There were also questions about operating expenses, which CoreCard expects to remain stable, highlighting the company’s efficient cost management strategy.

Full transcript - CoreCard Corp (CCRD) Q4 2024:

Conference Operator: Greetings and welcome to the CoreCard 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. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Matt White, Chief Financial Officer.

Thank you. You may begin.

Matt White, Chief Financial Officer, CoreCard Corporation: Thank you, and good morning, everyone. With me on the call today is Leland Strange, Chairman and CEO of Pork Car Corporation. He 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 will be making certain forward looking statements to help you understand CoreCard Corporation and its business environment. 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 our filings with the SEC, including our 2023 Form 10 ks 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. These non GAAP measures are detailed in reconciliation tables included with our earnings release. 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. Total (EPA:TTEF) revenue for the quarter was $14,800,000 a 22% increase year over year.

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%. The components of our revenue for the fourth quarter consisted of license revenue of $1,400,000 professional services revenue of $6,200,000 processing and maintenance revenue of $6,100,000 and third party revenue of $1,100,000 Processing and maintenance revenues grew 11% in the fourth quarter on a year over year basis with full year growth of 7%. A majority of our professional services revenue is from our largest customer Goldman Sachs. As a reminder, we converted the managed services revenue we received from Goldman included in professional services to a fixed monthly fee of approximately $1,000,000 for 2024. In October of twenty twenty four, we extended our managed services contract through the February and guaranteed it through at least the end of twenty twenty six at a higher monthly rate that starts in 2025.

Revenue growth excluding our largest customer and the impact from ParkMobile and the legacy Cabbage business was 29% in the fourth quarter on a year over year basis and 33% for the full year. We continue to onboard new customers both directly and through various partnerships we have with program managers such as Derserve, Verint and Cardless. We continue to work on multiple implementations with new customers to be expected to go live in the coming months. As a reminder, these new customers typically build their account base over time, paying mostly our minimum fees of $10,000 to $15,000 per month in the initial $12,000 to eighteen 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.

Turning to some additional highlights for the fourth quarter and full year for 2024. Income from operations was $2,100,000 for the fourth quarter of twenty twenty four compared to income from operations of $400,000 for the fourth quarter of twenty twenty three. Our operating margin for the fourth quarter of twenty twenty four was 14% compared to an operating margin of 3% for the same period last year. The income statement impact of our new platform build was $700,000 in the fourth quarter of twenty twenty four and $2,700,000 for the full year 2024 compared to $600,000 in the fourth quarter of twenty twenty three and $1,800,000 for the full year 2023. Our fiscal twenty twenty four and 2023 tax rate was 21.124.5% respectively.

We expect our ongoing tax rate to be between 2426%. Earnings per diluted share for the quarter was $0.24 compared to $0.06 for Q4 twenty twenty three. Full year 2024 diluted EPS was $0.67 compared to $0.4 for the full year 2023. Adjusted diluted EPS for the quarter excluding stock based compensation expense was 0.28 compared to $0.06 for Q4 twenty twenty three. Full year 2023 adjusted diluted EPS was $0.79 compared to $0.53 for the full year 2023.

We generated operating cash flows in 2024 of $5,800,000 We used $7,600,000 on share repurchases in 2024, including $2,200,000 of share repurchases in the fourth quarter of twenty twenty four. We continue to have excess cash on our balance sheet as of 12/31/2024, and we expect to continue generating operating cash flow in 2025. We plan to use this excess cash generated from operations to continue investing in our new platform and to continue investing and growing the business. For 2025, we expect revenues of $60,000,000 to $64,000,000 earnings per share between $0.88 and $0.94 and revenue growth excluding Goldman of 30% to 40%. We do not expect any license revenue in 2025.

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. For the first quarter of twenty twenty five, we expect total revenue between $14,400,000 and $15,000,000 and earnings per share between $0.15 and $0.19 We expect professional services revenue to be between $6,800,000 and $7,200,000 for the first quarter twenty twenty five. With that, I’ll turn it over to Leland.

Leland Strange, Chairman and CEO, CoreCard Corporation: Okay. Thanks, Matt. I’ll start off with a live comment. We had a Matt received a text this morning after our earnings release and I received a call. His text said marketing cost of 30%.

Have you lost your mind? Now for those new to us, you know, we don’t spend any money on marketing, personally any money. We don’t spend money and we have no salespeople. So, up 30% or $100,000 is nothing. So that was said in jest.

But, yeah. No. We haven’t lost our mind. We still have no salespeople. We still spend very little on marketing.

And I got a call also this morning after the after the release and from over a long term investor. And he said, I’m surprised you’re still doing this. I thought you said you were looking for younger leadership for the last couple of calls. Well, we are. I told him as long as Matt keeps reporting good results and things keep going really good, maybe I’ll hang around, but not really.

And I’ll say more about that if people will call. So just as Matt said, our revenue and profits, they exceeded our expectations due to another license to your payment. Everything else is pretty much what we expected. I don’t expect another licensure surprise this year, but I’m not going to say it will not happen. Our processing and license revenue components grew just 7% of the year, but 11% of 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%. And that’s the number that I look at. It’s really what are we what kind of new business are we acquiring outside of our largest customer. For 2025, we do see revenue north of $60,000,000 and most importantly for metrics and long term projections, we believe we will grow 30% to 40% excluding our largest customer. We see a path for that to continue in future years.

Total revenue for the year actually could be even in the 64% or higher range, although we had Brother Guide to a little bit lower as we don’t have that confirmed and under contract at this point. I will say we’ve already signed three new customers this quarter, typically fintechs and they’ll go live in the next few quarters and they’re small and it will take time for them to grow. At least one of those that we’ve said is moving from another so called modern processor who just could not reconcile accounts, which CoreCard of course does every day to the pity. I think the newer processors who are trying to compete in the revolving credit space are finding what I found to my surprise many years ago that trying to reconcile revolving credit card balances is really hard where the data for the network often gets corrected a day later. Cardholders pay the wrong amount days late and then they claim they paid on time, so a human has to decide whether to change the payment received date or not.

Returns are sometimes taken several months later and they end up being partial returns for which interest has already been charged and in some cases the portfolio which is holding the credit has actually been sold off. Then the regulator says prove to me the interest conforms to the published cards, terms and conditions. That’s hard. And then that you have to keep all those details, which legally required for seven years, but sometimes regulators going back to a transaction made several years past to prove or disprove a claim. Not easy.

It’s not primarily a technology challenge, but a business knowledge challenge that has to be transformed into technology outcomes. That’s why the legacy processors have had no real competition in forty years. They know how to do this and they know how to do it at scale. Any smart encoder can do it for a few hundred or a few thousand accounts. You just manually adjust for error, but it doesn’t work when you’ve got millions of accounts.

I believe, CoreCard is the only modern processor that can legitimately compete with a legacy processor today for large scale revolving credit program. I know no other modern processor that has even half a million active revolving credit cards. CoreCard has around $15,000,000 on their platform. I comment about our new platform called Corefinity or CoreFi. It’s incorporating all of the complexity and features of the current platform, but using the latest technologies and architected for the cloud.

Most importantly, it’s factored in time travel testing that will speed up adding unique programs for innovative issues. I guess that brings me full circle of my opening comments. I previously talked about companies inquiring by CoreCard as a possible acquisition candidate. I’ve been forever open and regularly say, we always strive to do what’s best for shareholders and that might mean selling the company to a larger enterprise that can more easily scale the value from our platform. While at the same time, we get up every day and run the company as if it’s going to be independent forever.

We have over the last few months had dialogue with different parties and more recently focused on discovery of what interest may be in the financial services market for a first class revolving credit platform. Both our current proven scalable semi minor platform as well as our newer Corpao platform. The board wants to make a decision to either do a transaction or quit talking about it and focus on finding a new president. I’m not going to be the President who gets to take advantage of future corefiniti platform as we’ll either partner with someone else rather soon or we’ll go find the right President to keep building. That said, we put in place an informal but comprehensive process to discover interest in order to maximize value for our shareholders.

We’ll know in the next few months the future direction and it might simply be turning this great company over to a successor president to continue building or it may be accepting an acquisition offer. I guess finally, because I know I get question on this, talk about the status of the Goldman Sachs relationship. Matt talked and we’ve talked about the amended contract last call that goes through 02/1930, but does have termination rights with compensation after the end of the 2026 year. Nothing has changed on that end and I continue to speculate as I have in the past just based on news we all read that Goma will get out of the issuing business as soon as it can and a new bank will take on the Apple (NASDAQ:AAPL) program. The press reports that conversations are going on with different banks and I would certainly expect that to be true.

I have no information that would provide any certainty that whatever DuBanc is chosen would keep the program on core card. All banks have existing agreements with processors, either FIS, Mobile Payments or Fiserv (NYSE:FI), while JPMorgan Chase (NYSE:JPM) mostly does their own processing. CoreCard would hope to maintain the processing and will do whatever we can to keep the valuable plan to introduce the most successful new credit card ever to the market. I know any of the legacy processors could eventually code to the current card specs. I also believe it would take two to three years to transition as Apple expects perfection and then go through months of testing.

I should say that also believing that keeping CoreCard would be the best outcome for whatever bank ends up in the program. I can be less risk and no more costly. Other than that, I have nothing more to add. So at that point, I’ll take questions that you might have a better eye.

Conference Operator: Eye. Our first question comes from the line of Powell Gausch with B. Riley Securities. Please proceed with your question.

Powell Gausch, Analyst, B. Riley Securities: Hey, thanks for the chance to ask the question here. Just want to make sure I heard you correctly. There’s in your forecast, there’s no planned license fees expected in 2025. Is that right?

Matt White, Chief Financial Officer, CoreCard Corporation: That’s right.

Powell Gausch, Analyst, B. Riley Securities: Yes. Is that to be conservative, you would think maybe you had some new issuers in the pipeline that might make an initial first license or an initial first license for a new program win. So I hope this doesn’t mean you don’t have a pretty good funnel that you’ve been working on. Could you give us your thoughts

Matt White, Chief Financial Officer, CoreCard Corporation: on why No.

Leland Strange, Chairman and CEO, CoreCard Corporation: No. That that that that that’s the Goldman situation. That’s where we get the license here. We’re not primarily in the licensing business, but yes, we’re in the processing business now. Yes,

Matt White, Chief Financial Officer, CoreCard Corporation: we expect new customers to be on the processing side rather than the license side. Something big did come in, we would still bring on a licensed customer, but that’s not our focus at the moment.

Powell Gausch, Analyst, B. Riley Securities: So 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 cards and then you get the processing afterwards. That doesn’t sound like it’s yes, okay.

Matt White, Chief Financial Officer, CoreCard Corporation: That’s right. Okay. Yes, mostly in the processing maintenance line.

Powell Gausch, Analyst, B. Riley Securities: Okay. Okay, good. Okay. And then, you know, help us think about, you know, total dollars of cost to run the business this year. It’s your marketing G and A and R and D have kind of been quite variable in terms of moving like it was $3,000,000 in Q1, but it almost hit $4,500,000 in Q4.

Any points there on just kind of dollars of spending to run the businesses as you kind of execute in 2025. Yes.

Matt White, Chief Financial Officer, CoreCard Corporation: Well, we do expect some increases in costs in 2025. But we don’t need to add a lot of personnel and we don’t need to add a lot of equipment to support the growth that we’re expecting in 2025. And we think we have the people that we need. So primarily the increase in overall costs will be just normal cost of living adjustments for salaries and just other costs that come along to run the business. But we’re not expecting a significant increase year over year in operating expenses from ’24 to $25,000,000.

Conference Operator: Okay.

Powell Gausch, Analyst, B. Riley Securities: Okay. And then you have about $15,000,000 cards right now on the platform. Is that what Leon said? Is that right?

Leland Strange, Chairman and CEO, CoreCard Corporation: No. I said there’s nobody that we know of in terms of the modern processors that have even a half a million revolving credit cards, and we have around 15,000,000 revolving credit cards in one instance actually.

Powell Gausch, Analyst, B. Riley Securities: Yes. Right. That’s right. Make sure I heard that number right. Yeah.

I heard that the others don’t have a half million. That’s right. I want to make sure I heard that right. Okay. That’s

Leland Strange, Chairman and CEO, CoreCard Corporation: right. Nobody else. Yes. Yes. So we’re far so ahead of any other modern processors in terms of numbers and scale is important building scale.

Powell Gausch, Analyst, B. Riley Securities: Okay. Those are my questions. I’ll follow-up with the after with you guys. If I have some extra questions, I’ll get back in the queue. Thanks.

Matt White, Chief Financial Officer, CoreCard Corporation: Thanks, Al.

Conference Operator: Thank you. And we have reached the end of our question and answer session. And this also concludes today’s conference. And you may disconnect your lines at this time. We do thank you for your participation.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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