CoreCard Corporation Price & Performance (CCRD)

Which is adjusted for certain items that affect the comparability of our underlying 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 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 various partnerships we have with program managers such as Deserve, Verbit and Cardless. We continue to work on multiple implementations with new customers to be expect 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 twelve 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 12/31/2020 and we expect to continue generating operating cash flow in 2025.

We 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. 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 processing and maintenance and growth in professional services reflecting the impact of higher managed service rates 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 of twenty twenty five. With that, I'll turn it over to Leland. Okay. Thanks, Matt. I'll start off with a live comment. We had a Matt received a text this morning after 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, 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 just But yes, no, we haven't lost our mind. We still have no salespeople. We still spend very little marketing. And I got a call also this morning after the [indiscernible] The release and from one of our long term investors. He said, I'm surprised you're still doing this. I thought you said you were looking for younger [indiscernible] the last couple of calls Well, we are [indiscernible] really good, maybe I'll hang around, but not really. And I'll say more about that as people call.

So Just as Matt said, our revenue and profits, they exceeded our expectations. Due to another license tier 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% for the year, but 11% for the quarter. And adjusted for a couple of old customers that were acquired by other parties in 2023 and had to leave the [indiscernible] we were up, I believe, over 30% That's the number that I look at. It's really 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 $64,000,000 or higher range although we had rather guide to a little bit lower we don't have that confirmed and under contract at this point. I will say we've already had three new customers this quarter typically fintechs, they'll go live in the next few quarters and they're small and it'll take time for them to grow, at least one of those that we've signed 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 tried to reconcile revolving credit card balances with really hard for 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 hold the credit has actually been sold off. And then the regulator says, prove to me the interest conforms to the published cards terms and conditions. That's hard. And then you have to keep all those details which is 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 it 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 coder can do it for a few hundred or a few thousand accounts, You just manually adjust for errors, but it doesn't work when you've got millions of accounts. I believe CoreCard is the only modern process that can legitimately compete with the legacy processor today. For a large scale revolving credit program. I know no other modern process has added half a million active revolving credit cards CoreCard has around $50,000,000 CoreCard their platform. A comment about our new 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 issuers. I guess that brings me full circle my opening comment I previously talked about companies acquiring by CoreCard as a possible acquisition candidate I've been forever open and regularly say we always try 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.

But 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 modern platform as well as our newer CoreCard The Board wants to make a decision to either do a transaction or quit talking about it and focus on finding a new prospect. Not going to be the President who gets to take advantage of future Corfiniti platform. We'll either partner with someone else rather soon or we'll go find the right person into capability.

That said, we put in place an informal but comprehensive process to discover interest in order to maximize value per shareholders.

We'll know in the next few months the future direction and it may 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 twenty twenty six 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 would get out of the issuing business as soon as it can and a new bank will take on the Apple program.

The press reports that conversation are going on with different bikes and I would certainly expect that to be true. I have no information that would provide any uncertainty that whatever new bank has chosen would keep the program on CoreCard. All banks have existed agreements with processors.

Either FIS Global Payments or Fiserv while JPMorgan Chase mostly does their own processing. CoreCard would hope to maintain the processing and will do whatever it can to keep the viable plant that introduced 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'd say that also believing that keeping CoreCard would be the best outcome for whatever bank ends up with the 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 of matter right.

Thank you. We will now be conducting a question and answer session. Our first question comes from the line of Al Gossch. Please proceed with your question. Hey, thanks for the chance to ask a question here. To make sure I heard you correctly. There's in your forecast, there's no planned license fees expected in 2025, is that right? That's right. Yes. Is that to be conservative, you think maybe you had some some new issues in the pipeline that might make an initial first license an initial first license for a new program when So I hope this doesn't mean you don't have Pretty good.

Funnel that you've been working on. Could you [indiscernible] That's the Goldman situation. That's where we get the license tier. We're not primarily in the licensing business, Rob. We're the project sig business now. Yes, we're expect new customers to be on the processing side rather than the license side. If something big did come in, we'd still we would still on a licensed customer, but that's not our focus at the moment. 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 processing afterwards. That doesn't sound Yes, okay. That's right. Okay. Yes, mostly in the processing and maintenance line. Okay, okay, good. Okay. And then help us think about total dollars of cost to run the business this year. It's Your marketing G and A and R and D kind of been quite variable in terms of movement like it was $3,000,000 in Q1, but almost hit $4,500,000 in Q4. [indiscernible] points there on just kind of dollars of spending to run the business is as you kind of execute in 2025, yes. 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 [indiscernible] 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 $24,000,000 to 25 Okay. And You have about 15,000,000 cards right now on the platform. Is that what Leland said?

No, I should there's nobody Nobody that we know of in terms of the modern processors that have even 500,000 revolving credit cards and we have around 15,000,000 In one instrument actually.

Yes, right. That's what I'm making sure I heard that number right. Yes, I heard that the others don't have a half million dollars that's what I make sure I heard that right. Okay. That's right. [indiscernible] So we're far so ahead of any other modern processors in terms of numbers. And scale is important. Building scale.

Okay. Okay. [indiscernible] Those are my questions. After with you guys. If I have some extra question, I'll get back in the queue. Thanks.

Thanks, 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.