CoreCard Corporation (NYSE: CCRD), a leading provider of card management systems and processing services, reported its second quarter financial results for 2024. The company experienced a 12% decline in total revenue year-over-year, amounting to $13.8 million, primarily due to lower license revenue and decreased professional services revenue from its largest customer, Goldman Sachs (NYSE:GS). Despite the downturn, CoreCard's professional services revenue surpassed expectations, and the company has seen a 34% growth in revenue excluding its largest customer and other specific impacts. CoreCard's adjusted EBITDA for the quarter was $2.5 million, a decrease from $4.8 million in the same quarter of the previous year.
Key Takeaways
- Total revenue for Q2 2024 was $13.8 million, a 12% decrease from the previous year.
- Professional services revenue exceeded the guided range, reaching $7 million.
- Processing and maintenance revenue remained mostly flat at $5.7 million.
- No license revenue was recorded for the quarter.
- Revenue from customers other than Goldman Sachs grew by 34% year-over-year.
- Operating margin declined to 8% from 17% the previous year.
- Earnings per diluted share were $0.11, down from $0.22 in Q2 2023.
- The company repurchased shares worth $2.1 million in Q2 2024.
- CoreCard expects flat services revenue and $1.4 million in license revenue in late 2024 or early 2025.
Company Outlook
- CoreCard is focusing on diversifying its revenue streams and reducing reliance on its largest customer.
- Revenue growth excluding the largest customer and specific impacts is projected to be 15% to 20% for the full year.
- Investments in a new platform, Corfinity, are ongoing and expected to contribute to long-term growth.
Bearish Highlights
- The decrease in total revenue was driven by lower license and professional services revenue.
- The operating margin has significantly decreased due to lower revenues and continued investments.
Bullish Highlights
- Professional services revenue has unexpectedly outperformed, indicating potential stability.
- The company has successfully onboarded new customers and expects additional growth from these partnerships.
Misses
- CoreCard did not generate any license revenue during the quarter, which impacted overall earnings.
Q&A Highlights
- Inquiries from smaller banks have increased, while fintech activity has slowed down.
- CoreCard bought back approximately 147,000 shares in the quarter.
- Large potential deals, ranging from $2 million to $8 million in annual revenue, are in the pipeline for late 2025.
In conclusion, CoreCard Corporation is navigating a challenging period marked by revenue declines, primarily from its largest customer. However, the company is making strategic moves to diversify its revenue sources and invest in future growth opportunities. CoreCard remains committed to enhancing shareholder value through share repurchases and maintaining a steady growth trajectory in its customer base beyond its primary client.
InvestingPro Insights
CoreCard Corporation (NYSE: CCRD) has navigated through a challenging quarter, as reflected in the financial metrics and market performance. Here are a few insights based on the latest data from InvestingPro that may provide additional context for investors:
- The company's market capitalization stands at $102.58 million, which may indicate its current valuation in the market relative to its peers. Despite the recent revenue declines, CoreCard's approach to managing its finances is reflected in its Price to Earnings (P/E) ratio. The adjusted P/E ratio for the last twelve months as of Q2 2024 is 38.32, suggesting investors may be expecting earnings growth in the future.
- CoreCard's revenue for the last twelve months as of Q2 2024 was $52.43 million, with a gross profit margin of 32.64%. This margin can be a useful indicator for investors to assess the company's profitability relative to its revenue.
- An InvestingPro Tip highlights that CoreCard holds more cash than debt on its balance sheet, which is a positive sign of financial stability. This is particularly relevant as the company faces a downturn in revenue from its largest customer and continues to invest in the new Corfinity platform.
For investors seeking a deeper dive into CoreCard's financial health and future prospects, there are additional InvestingPro Tips available. For instance, the company has been profitable over the last twelve months and management has been aggressively buying back shares, which could be seen as a vote of confidence in the company's future. In total, there are 9 InvestingPro Tips available for CoreCard, offering a comprehensive analysis of the company's performance and outlook.
Investors may also consider the analysts' fair value estimate of $19 and the InvestingPro Fair Value of $15.5 for CoreCard's shares, which could provide a benchmark for evaluating the company's current share price and potential investment opportunities.
For more detailed analysis and tips, investors are encouraged to visit InvestingPro at https://www.investing.com/pro/CCRD.
Full transcript - Intelligent Systems (NYSE:CCRD) Q2 2024:
Operator: Ladies and gentlemen, good morning, and welcome to CoreCard Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Matt White, Chief Financial Officer. Please go ahead.
Matt White: Thank you, and good morning, everyone. With me on the call today is Leland Strange, Chairman and CEO of CoreCard 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-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. These non-GAAP measures are detailed in reconciliation tables included with our earnings release. As we noted in our press release, our second quarter results were in line with our expectations. Total revenue for the second quarter of 2024 was $13.8 million, a 12% decrease year-over-year, driven by lower license revenue and lower professional services revenue, primarily from our largest customer, Goldman Sachs. The components of our revenue for the second quarter consisted of professional services revenue of $7 million, a metric we guide to and which came in ahead of our previously guided range. Processing and maintenance revenue of $5.7 million, and third-party revenue of $1.1 million. As expected, we did not have any license revenue for the quarter. As we continue to grow revenues outside of our largest customer, Goldman represented 63% of our revenues for the second quarter of 2024 compared to 70% for the second quarter of 2023. Revenue growth, excluding our largest customer of 7% in the second quarter on a year-over-year basis. Revenue growth, excluding our largest customer, in addition to the impact from Park Mobile and the legacy CABG business, as we've detailed in prior quarters, was 34% in the second quarter on a year-over-year basis and is expected to be 15% to 20% for the full year, which is above our previously guided range of 10% to 15%. We continue to onboard new customers, both directly and through various partnerships we have with program managers. As in previous quarters, we currently have multiple implementations of progress with new customers that we expect to go live in the coming months. Processing and maintenance revenues were mostly flat in the second quarter of 2024 compared to the second quarter of 2023, primarily due to the revenue decline from the legacy CABG business that I mentioned previously. Turning to some additional highlights on our income statement for the second quarter of 2024. Income from operations was $1.1 million for the second quarter of 2024 compared to income from operations of $2.7 million for the same time last year. Our operating margin for the second quarter of 2024 was 8% compared to an operating margin of 17% for the same time last year. The decrease is primarily driven by lower license revenue, continued investments in our new platform and lower professional services revenue. The income statement impact of our new platform build was $0.7 million in the second quarter of 2024 compared to $0.4 million for the prior year period. We reduced our headcount slightly in India and expect related cost savings starting in the third quarter of 2024. We will continue to look for cost savings as needed to remain profitable given the lower revenues we are currently receiving from our largest customer. Our second quarter 2024 tax rate was 24.4%, compared to 24.8% in the second quarter of 2023. Earnings per diluted share for the quarter was $0.11 compared to $0.22 for Q2 2023. Adjusted diluted EPS for the quarter, excluding stock compensation expense, was $0.15 compared to $0.23 for Q2 '23. Adjusted EBITDA was $2.5 million compared to $4.8 million for the second quarter of 2023. We have over $22 million of cash on our balance sheet as of June 30, 2024, and we expect to continue generating operating cash flow in 2024. We plan to use this excess cash and cash generated from operations to continue our investments in our new platform and to continue buying back shares. We repurchased 134,650 shares in the first quarter of 2024 for $1.6 million and 147,040 shares in the second quarter for $2.1 million. For the full year 2024, we continue to expect services revenue to be approximately flat. We expect license revenue to be approximately $1.4 million in either the fourth quarter of 2024 or the first quarter of 2025. As mentioned earlier, we expect growth from customers, excluding our largest customer, in addition to the impact of Park Mobile, the legacy CABG business in the $0.5 million of accelerated revenue recognized in Q1 2024 to be between 15% and 20% for the full year, which is above our previously guided range of 10% to 15%. Within services, we continue to expect strong growth in processing and maintenance as our customers continue to grow and as we continue to onboard new customers. We anticipate professional services revenue in the third quarter of 2024 and be likely in the range of $6.2 million to $6.5 million. And with that, I'll turn it over to Leland.
Leland Strange: Thanks, Matt. You didn't leave me much to say. I think you're pretty comprehensive to be covering kind of the business and even where we're headed now. I guess I often say, just look at the numbers and don't pay attention to what anybody says. I think the numbers are about what we expected. We're happy with them. We're -- they're probably a little higher than what we expected from the standpoint of professional services, and I wouldn't expect that to stay up, but I've been surprised several times in the last few years on them, and they may still stay up. Generally, our growth is good as far as the other side of the business, other than our largest customer, is steady. Could it be a little faster and bigger? Would I like that? Yes. But you can't have a lot of -- you couldn't handle it if it was growing a whole lot faster. So we're pretty happy with the continued growth. The new the new -- what we call core filer, our Corfinity platform we're building is coming along fine also. I'll just remind everybody that's not expected to be finished until the end of the 4 quarters, let's say, in 2025, but we're making good progress. And we're using parts of what we've done already in our current environment. So that's an investment. It's an investment we think is really good for the company and the shareholders over the long term. Other than that, there's not a lot to say. We've added -- I could name a lot of cards or things, but we don't tend to do that. I will mention that one of our customers has got Qatar. So if you fly to Qatar or to India through Qatar and want to earn bonus points, you will end up with the Qatar Airlines card, and that's being processed by CoreCard. We're still doing well in the Middle East. So generally, business is just steady, steadily growing as far as the current business, steadily growing as far as adding some new ones. And we are working on several other good-sized potential business that would be -- that would come online in late 2025. That is just the nature of what we do. If you have to work on it -- you're [Indiscernible] typically, and we have 2 or 3 that we're -- we believe at least one of those will go live, maybe all of them in the third, fourth quarter of next year, first quarter of 2026. So generally, I would just have to say we're pleased with the numbers that we reported this quarter, and we're pleased with the way business is going, and we're just going to continue to stay on the path we're on now. Operator, you can open it for questions. Be happy to take your questions either for Matt or I.
Operator: Thank you. Ladies and gentlemen, we will now be conducting a question-and-answer session. [Operator Instructions] Our first question is from the line of Hal Goetsch with B. Riley Securities.
Leland Strange: We can't hear you.
Hal Goetsch: Hey, hi, there.
Operator: Hal, are you there?
Hal Goetsch: Yes. In the -- thank you, I'm sorry, I was on mute. The total business this time a year ago, we were in the midst of a little bit of a banking crisis for small banks, large banks as well. A year has gone by. And you mentioned the total business is steady. And it's just -- is the tone of like RFPs or inquiries, is that still steady? Or is that lifting from maybe a year ago or 6 months ago? Or what is the tone of that?
Leland Strange: Yes. I would say there's been a change in the sense that less fintech activity a little bit more from the smaller banks. It's still not big, but it has improved some from what we're getting from the smaller banks. Fintech has slowed some. Of course, we still get some, but I'm just trying to give you the sort of the sense of what I see in the landscape a little better from the smaller banks and a little less from the fintech side of the business.
Hal Goetsch: Okay. And a question for Matt. Was there any buyback activity in the quarter? I know you have been buying back stock.
Matt White: Yes, we bought back around 147,000 shares at $2.1 million. So and then again buyback activity for Q2.
Hal Goetsch: And final question is, you mentioned, like, 2 to 3 large, at least 1 or all could hit maybe in the back half of 2025. Could you give us like a kind of a range or a feel for what large is for you guys, like in terms of pure hard...
Leland Strange: Sure. Yes, that's a good question, now. I'm going to place your large in the 2 million -- I'm going to give you a pretty wide range, $2 million to $8 million a year type revenue. So over 2 million is -- it's a small large, but it's a medium and 8 million is a big large for us. And I'm talking about annual revenue. So 2 million, 3 million, 4 million, 5 million, 6 million, 8 million type annual revenue, maybe in combination -- well, no recent new combination. You either have it or you don't have it. But let me just add to that, though. What's important in this kind of business is that tends to snowball a little bit. If you add a couple of more decent-sized financial institutions, that tends to lower the risk for the next guy to make the decision. So that helps you. Now, we believe it's very little risk. We have got a lot of experience with conversions. We've never had a problem. We do not think that will be a problem, but it doesn't matter what we believe. What matters is what our Board of Directors or a risk officer believes. And of course, we do all we can to show that it's not much risk, but the risk is taken away based on historical performance. So that's what -- that's kind of the way we're growing the business. Any other questions?
Operator: No, sir, there are no questions in the queue.
Leland Strange: Yes, we thank everyone for taking the time to listen to our call. And as always, if you have any individual questions, Matt and I are always available to talk. So thank you very much. Bye.
Operator: Thank you. The conference of CoreCard has now concluded. Thank you for your participation. You may now disconnect your lines.
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