CoreCard Corporation (CCRD) Q1 2024 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals several negative aspects: declining total revenue and EPS, reduced operating margin, and significant revenue loss from a major customer. Although there is a share repurchase program, the economic uncertainty and unclear responses regarding future opportunities, coupled with lower immediate growth expectations, contribute to a negative sentiment. The positive aspect of potential strategic customers is offset by the delay in revenue realization until 2025. Overall, the negative elements outweigh the positives, leading to a likely negative stock price reaction over the next two weeks.
Key Financial Performance
Total Revenue $13.1 million, a decrease of 11% year-over-year driven by lower professional services revenue, primarily from Goldman Sachs.
Professional Services Revenue $5.8 million, a decrease attributed to lower contributions from Goldman Sachs.
Processing and Maintenance Revenue $6.2 million, an increase of 13% year-over-year, primarily driven by the acceleration of $0.5 million of revenue from a customer acquired in 2023.
Third Party Revenue $1.1 million, no specific year-over-year change mentioned.
Income from Operations $0.5 million, a decrease from $1.8 million year-over-year, primarily due to lower professional services revenue and continued investments in the new platform.
Operating Margin 4%, down from 12% year-over-year, driven by investments in the new platform and lower professional services revenue.
Earnings per Diluted Share $0.05, down from $0.15 year-over-year.
Adjusted Diluted EPS $0.07, compared to $0.15 for Q1 2023.
Adjusted EBITDA $1.7 million, down from $3.5 million year-over-year.
Cash on Balance Sheet Over $24 million as of March 31, 2024.
Share Repurchase Repurchased 134,650 shares for $1.6 billion.
Tax Rate 25.7%, compared to 24.7% in Q1 2023.
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Operating Highlights
New Product Launch: CoreCard is collaborating with the Bank of California to introduce a new commercial card, expected to be launched in the next month or two.
Market Expansion: CoreCard is onboarding new customers through partnerships with program managers such as Deserve, Vervent, and Cardless.
Operational Efficiency: CoreCard is implementing cost-saving measures, including headcount reductions in India, to maintain profitability amid lower revenues.
Strategic Shift: CoreCard is focusing on non-Goldman business and managing expenses towards new strategic partnerships, with a goal of having two or three strategic partners.
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Risk or Challenges
Revenue Dependency Risk: CoreCard's revenue is heavily dependent on Goldman Sachs, which represented 59% of total revenues in Q1 2024. The uncertainty surrounding Goldman Sachs' future in the business poses a significant risk to CoreCard's revenue stability.
Regulatory Challenges: Recent regulatory changes have led to banks being held accountable for compliance issues, particularly in anti-money laundering (AML) and know-your-customer (KYC) activities. This has caused banks to pause new partnerships with Fintechs, potentially limiting CoreCard's growth opportunities.
Operational Margin Decline: CoreCard's operating margin has decreased from 12% to 4% year-over-year, primarily due to lower professional services revenue and ongoing investments in a new platform, indicating potential operational inefficiencies.
Customer Acquisition Risk: While CoreCard is onboarding new customers, the loss of revenue from its largest customer and the impact of legacy businesses like Kabbage and ParkMobile could hinder overall growth.
Market Competition: The competitive landscape is challenging, especially with the potential loss of significant contracts and the need to secure new strategic partnerships to maintain revenue growth.
Economic Factors: General economic conditions may impact CoreCard's ability to attract new customers and retain existing ones, particularly in a tightening financial environment.
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Guidance & Outlook
Strategic Partnerships: CoreCard is focusing on onboarding new customers and partnerships, specifically mentioning the Bank of California as a strategic partner. They are working on a commercial card with this partner, expected to be introduced in the next month or two.
Cost Management: CoreCard is actively looking for cost savings due to lower revenues from their largest customer, Goldman Sachs, and has made headcount reductions in India to manage expenses.
Future Customer Engagement: CoreCard is in discussions with potential strategic customers that could help expand their market presence and brand.
Revenue Expectations: For the full year 2024, CoreCard expects services revenue to be approximately flat compared to 2023, with growth from customers outside of Goldman Sachs projected at 10% to 15%.
Professional Services Revenue Guidance: Professional services revenue for Q2 2024 is expected to be in the range of $5.7 million to $6 million.
License Revenue Projection: CoreCard anticipates license revenue to be approximately $1.4 million, likely in Q4 2024.
Operating Cash Flow: CoreCard expects to continue generating operating cash flow in 2024, with over $24 million in cash on hand as of March 31, 2024.
Tax Rate Guidance: The ongoing tax rate is expected to be between 25% and 27%.
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Shareholder Return Plan
Share Repurchase Program: CoreCard Corporation repurchased 134,650 shares in the first quarter of 2024 for $1.6 billion. There is approximately $13 million remaining in the current share repurchase authorization.
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Key Q&A
Q:Does that mean they would bring cards that they already have on your platform and that would be the new processing platform for our existing portfolio?
A:Yes, that will require conversion. We're very good at conversions. We've got a good history of that.
Q:How are the fintechs you're working with?
A:None of our customers have a problem. They are dealing with some banks that have gotten consent orders, but it's not impacting any of our current customers.
Q:You expect your processing revenues to be up 10% to 15%. Is that right?
A:Everything. All revenue.
Q:Did you mention anything about expectations of license revenues this year?
A:$1.4 million likely in the fourth quarter.
Q:Do you generate any one-timer 'excess revenues' as the General Motors card leads?
A:No.
Q:Does it change your contract with Goldman?
A:It doesn't change our contract with Goldman.
Q:Can you talk about the revenue generation on these strategic opportunities?
A:The strategies are so different. I can't answer the question.
Q:Can you then talk about the opportunity to grow your EBITDA margins?
A:We're just not looking at margin there. We're looking at future potential.
Q:Review of Unclear Management Responses
A:Management appeared to avoid giving a direct answer regarding the revenue generation and margin profile of strategic opportunities, stating that the strategies are too different to provide a clear answer.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Apple Card
Banc California
Bank California
CoreCard platform
Deserve Vervent
General Motors
Goldman Sachs
Kabbage
ParkMobile legacy
Technical Difficulty
Vervent Cardless
account
card platform
care
client
compliance
consent order
contract Goldman
cost saving
couple quarter
customer Goldman
day
example
folk
handful
issue
launch
money
partner
portfolio
potential
processor
regulator
speculation
view
CCRD Transcript
CoreCard Corporation (CCRD) Q3 2024 Earnings Call Transcript
Unknown10-31
The earnings call presents mixed signals. Strong financial performance with increased revenue and EPS is positive, but risks like auditor reappointment, concentration with Goldman Sachs, and platform development challenges are concerning. Unclear management responses in the Q&A add uncertainty. Share repurchases are a positive, but overall, the sentiment is neutral given the balance of positive financials against significant risks.
CoreCard Corporation (CCRD) Q2 2024 Earnings Call Transcript
Unknown8-2
The earnings call presents several concerns: a significant revenue decline, high dependency on Goldman Sachs, and reduced operating margins. Despite share repurchases and some growth in non-Goldman revenues, the overall financial health appears strained. The Q&A section reveals vague responses, adding to uncertainties. The strategic partnership with Bank of California and new platform development may not offset short-term risks. Given these factors, the stock is likely to react negatively in the short term, potentially falling between -2% and -8%.
CoreCard Corporation (CCRD) Q1 2024 Earnings Call Transcript
Unknown5-2
The earnings call reveals several negative aspects: declining total revenue and EPS, reduced operating margin, and significant revenue loss from a major customer. Although there is a share repurchase program, the economic uncertainty and unclear responses regarding future opportunities, coupled with lower immediate growth expectations, contribute to a negative sentiment. The positive aspect of potential strategic customers is offset by the delay in revenue realization until 2025. Overall, the negative elements outweigh the positives, leading to a likely negative stock price reaction over the next two weeks.
CoreCard Corporation (CCRD) Q1 2024 Earnings Call Transcript
Neutral5-2
CCRD Report
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