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01/15 02:12
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
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.
Total Revenue $15.7 million, a 17% increase year-over-year, driven by higher license revenue, professional services revenue, and processing and maintenance revenue.
License Revenue $1.4 million, contributing to the overall revenue growth.
Professional Services Revenue $7 million, which exceeded previously guided range.
Processing and Maintenance Revenue $6.1 million, a 4% increase year-over-year, primarily due to higher revenues from existing customers and new customers, partially offset by a decline from the Legacy Cabbage business.
Income from Operations $2.8 million, compared to $0.4 million for the same time last year.
Operating Margin 18%, compared to 3% for the same time last year, driven by higher license and professional services revenue.
Earnings per Diluted Share $0.27, compared to a loss per share of $0.03 for Q3 2023.
Adjusted Diluted EPS $0.30, compared to $0.09 for Q3 2023, which excluded an impairment loss on a cost method investment.
Adjusted EBITDA $3.9 million, compared to $1.9 million for the third quarter of 2023.
Cash and Marketable Securities Over $28 million as of September 30, 2024.
Share Repurchases 134,650 shares for $1.6 million in Q1, 147,040 shares for $2.1 million in Q2, and 123,370 shares for $1.7 million in Q3.
New Platform Development: CoreCard is developing a new cloud-native platform called Corefinity, expected to be ready for production by the end of 2025.
Revenue Growth Guidance: For 2025, CoreCard expects total revenue between $60 million and $64 million, with revenue growth excluding Goldman Sachs projected at 30% to 40%.
Goldman Sachs Agreement: CoreCard renewed its agreement with Goldman Sachs, extending it through December 31, 2030, which provides increased managed services fees starting January 2025.
Operational Efficiency: CoreCard's operating margin improved to 18% in Q3 2024, up from 3% in Q3 2023, driven by higher license and professional services revenue.
Share Repurchase Program: CoreCard repurchased 123,370 shares in Q3 2024 for $1.7 million as part of its ongoing share buyback strategy.
Succession Planning: CoreCard's board has been discussing succession planning, with expectations to move from discussion to action early next year.
Acquisition Strategy: CoreCard is open to acquisitions but is cautious, focusing on profitable companies rather than those with cash burn.
Auditor Reappointment Risk: The company faces a risk due to the decision by their auditor not to stand for reappointment after the fiscal 2024 audit, which may lead to challenges in finding a new auditor.
Concentration Risk: CoreCard has a highly concentrated revenue position with Goldman Sachs, which poses a risk if the relationship changes or if Goldman decides to move their processing to another bank.
Regulatory Risk: Recent fines imposed by the CFPB on Goldman Sachs and Apple could indirectly affect CoreCard, despite not being directly involved in the issues.
Market Volatility Risk: The company is exposed to market volatility, as indicated by the significant drop in the Russell and S&P indices during the earnings call.
Succession Planning Risk: There is a potential risk associated with succession planning as the current CEO, at age 83, is considering transitioning leadership, which could impact company stability.
Acquisition Risk: CoreCard is approached for acquisitions but is cautious due to the potential negative implications for shareholders and the company's current valuation.
Platform Development Risk: The ongoing development of the new Corefinity platform may face delays or challenges, impacting future operational capabilities and competitiveness.
Customer Transition Risk: The potential loss of the Apple program to another bank could lead to reduced future revenues and impact the company's financial stability.
New Platform Development: CoreCard is developing a new cloud-native platform called Corefinity, expected to be ready for production by the end of 2025, which aims to be the most flexible and feature-rich credit platform.
Customer Growth: CoreCard continues to onboard new customers and expects non-Goldman revenue growth at a 30% compound annual growth rate over the next three years.
Share Buyback Program: CoreCard plans to continue its share buyback program, having repurchased shares in the first three quarters of 2024.
Goldman Sachs Agreement: CoreCard renewed its agreement with Goldman Sachs, extending it through December 31, 2030, which provides increased managed services fees and revenue visibility.
Q4 2024 Revenue Guidance: CoreCard expects total revenues for Q4 2024 to be between $13.3 million and $13.7 million.
2025 Revenue Guidance: For 2025, CoreCard projects total revenue between $60 million and $64 million, with revenue growth excluding Goldman expected at 30% to 40%.
2024 Full Year Revenue Growth: CoreCard anticipates revenue growth excluding its largest customer to be between 25% and 30% for the full year 2024.
Earnings Per Share Guidance: CoreCard expects earnings per share for Q4 2024 to be between $0.07 and $0.09.
Share Repurchase Program: CoreCard Corporation has a share repurchase program in place. In Q1 2024, they repurchased 134,650 shares for $1.6 million, in Q2 2024, 147,040 shares for $2.1 million, and in Q3 2024, 123,370 shares for $1.7 million. The company intends to continue buying back shares using excess cash and cash generated from operations.
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.
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%.
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.
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