Yahoo Finance CoreCard Corporation (NYSE:CCRD) Q1 2024 Earnings Call Transcript
CoreCard Corporation (NYSE:CCRD) Q1 2024 Earnings Call Transcript May 2, 2024
CoreCard Corporation beats earnings expectations. Reported EPS is $0.05214, expectations were $0.02. CoreCard Corporation isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Greetings, and welcome to the CoreCard First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded. I’ll now the turn the conference over to Matt White, CFO. Thank you. You may begin.
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'll be making certain forward-looking statements to help you understand CoreCard Corporation and its business environment. These statements involve a number of risk factors, uncertainty and other factors that could cause actual results to differ materially from our expectations. Factor 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 first quarter results were in line with our expectations, with continued year-over-year growth in processing and maintenance revenue. Total revenue for the first quarter was 13.1 million, an increase -- a decrease of 11% year-over-year driven by lower professional services revenue, primarily from our largest customer Goldman Sachs. The components of our revenue for the first quarter consisted of professional services revenue of 5.8 million, processing and maintenance revenue of $6.2 million and third party revenue of 1.1 million. As expected, we did not have any license revenue for the quarter. Goldman represented 59% of our revenues for the first quarter of 2024 compared to 73% for the first quarter of 2023.
Processing and maintenance revenues grew 13% in the first quarter on a year-over-year basis, primarily driven by the acceleration of 0.5 million of revenue from a customer that was acquired in 2023, formally terminated their contract in the first quarter of 2024. Revenue growth excluding our largest customer was 41% for the first quarter on a year-over-year basis. Revenue growth, excluding our largest customer and the impact from ParkMobile, the legacy Kabbage business and the 0.5 million of accelerated rated revenue in Q1, 2024 previously mentioned 41% first quarter on a year-over-year basis as expected to be 10% to 15% for the full year. We continue to onboard new customers, both directly and through various partnerships we have with program managers such as Deserve, Vervent and Cardless.
As in previous quarter, we currently have multiple implementations in progress with new customers that we expect to go live in the coming months including our business with commercial our partnership with the Bank of California. Turning to some additional highlights on our income statement for the first quarter. Our income from operations was $0.5 million compared to $1.8 million for the same period last year. Our operating margin was 4% compared to an operating margin of 12% for the same period last year. The year-over-year decline in our operating margin was primarily driven by 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 first quarter of 2024 compared to $0.4 million for the prior year period.
We made some headcount reductions in India [Technical Difficulty] 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're currently receiving from our largest customer. Our Q1 2024 tax rate was 25.7% compared to 24.7% in Q1 2023. We expect an ongoing tax rate between 25% and 27%. Earnings per diluted share for the quarter, was $0.05 compared to $0.15 for Q1 2023. Adjusted diluted EPS for the quarter, excluding stock compensation expense $0.7 compared to $0.15 for Q1 2023. Adjusted EBITDA was $1.7 million compared to $3.5 million in the first quarter of 2023. We have over $24 million of cash on our balance sheet as of March 31, 2024 and we expect to continue generating operating cash flow in 2024.
We plan to use this excess cash and cash generated from operations. We continue investing in our new platform and to continue buying back share especially, at current price levels. We repurchased 134,650 shares in the first quarter of 2024 for $1.6 billion. We have approximately $13 million remaining in our current share repurchase authorization For the full year 2024, we continue to expect services revenue to be approximately flat to 2023, In fact, license revenue to be approximately $1.4 million likely in the fourth quarter of 2024. As mentioned earlier, we expect growth from customers, [Technical Difficulty] our largest customer impact of ParkMobile, the legacy Kabbage business and the 0.5 million of accelerated revenue in Q1 2024 to be in the 15% for the full year.
Within services, we continue to expect growth in processing and maintenance as our customers continued to grow, and have stayed onboard new customers. We anticipate professional services revenue in the second quarter of 2024 to be likely in the range of $5.7 million to $6 million. With that, I'll turn it over to Leland.
Leland Strange: Thanks, Matt. I think the -- as you said the quarter was pretty much as we expected. I have seen the result, simply is a little better than breakeven. And I think, I expect similar results for the next couple of quarters. Saying some more is the right answer that will maybe a little better will not be a little worse. But generally, I would say some of the next two quarters, hopefully, achieve significantly better than before. But the next year will similar. The elephant in the room is and it has been our largest customer Goldman Sachs variations of revenue for them along with the question about what's going to happen in the future, becomes the unknown. Let me address that for reported to proceed. Actually obviously things are coming from our continued increasing in the revenue from this segment.
That's outside of the largest customer. Everyone wants to know what's going to happen with the Goldman situation since they are pretty much announced that they're getting out of the business. I want to say very clearly that I have no inside information on that or what's going to happen. If I did I couldn’t talk about it. So everything I say about it speculative from my view is now back up by anything definitive that comes from the customer or any conversations? First, I do expect the General Motors car that's being processed own the CoreCard platform at Goldman that -- go to another party either the fourth quarter this year or the first quarter next year. Wall Street Journal speculated yesterday or a couple of days ago that Barclays is funding for that card.
Again I would emphasize that even that Oracle was speculation and they didn’t call anybody or anyone that said that was definitive. It really doesn't matter where the receivables go from a CoreCard perspective. It's highly unlikely that we'll continue to processing that portfolio since it's a very plain card with no special requirement. Any process or it could probably pick that up its fairly easy in as a card. So I know that I just don't see the real problems with that. The other card, the Apple Card is different. The Apple Card is one that is much more difficult. It has a lot of specialty kinds of things to it. So therefore, I would expect that not to be as support to move somewhere else. There is again, speculation that it will go to a new bank either -- either the end of this year or the next year.
And when I say speculation, there's speculation that a new bank will be chosen. It's my opinion that that is going to be choppy between Apple and a new bank. And it's not necessarily a Goldman decision although, they are obviously part of it. Again we have no insight on that. We simply cannot do what we do every day and we have to go along with whatever happens. I would also speculate that probably from today we're still going to be processing that card for the next two or more years, could be a long time. Again, we have no definitive answer on that. Our cards will get questioned well, what's going to have -- what's going to happen to see if we should know. I'm just telling you, we don't know. We can't know. And by the way, when I do know, I'll probably have to say I can't discuss it.
So that's going to be the clue that I may know, but that I can't say anything, because we're certainly not going to give any information out about our customers. The next thing, then, is looking to the future. Well, we've got a handful of folks that we are talking to that are what I will call potential strategic customers. Now, what does strategic mean? Strategic means that either they have the potential or are very large, or they want to do or are doing a product that will extend the CoreCard brand and will help us get into new markets or help us progress. What does strategic mean for the customer? It means that everybody at CoreCard, all 1,000 employees know that when that customer calls or what that customer wants, we're going to jump at it, and that's going to be the number one priority.
That's what happened with the Goldman contract when they were strategic. Now, it's simply ongoing as opposed to something strategic. You can't have a handful of strategic partners. You can only have, in my view, two or three. We have one right now. I'm going to call the Bank of California a strategic partner. They have card leadership that wants to be innovative. They're willing to do innovation, and they help us together come out with a commercial card that we think the market is going to want. So, once that gets live, you will see us actively promoting that card. They haven't introduced it yet, but I think it will be introduced in the next month or two. So, that's a strategic partner. Of the handful of people we're talking to, I hope to get, again, two more because the maximum we can have is three, and we'll be treating them the same way.
All eyes, everyone is important. I hope one of them or two of -- or both of them already have significant revenue, but we're talking to a set of handful, some that have significant revenue, some that do not, but have the potential to be significant partners. So we're looking and really spending our time thinking about the non-Goldman business, and we are going to be managing our expenses toward that, and simply that's where the resources will go. Let me just make a comment, I think, last about what's happening in the business in general. The business in general is -- there's a little bit of cap on it because of regulators. Now, CoreCard has always taken the approach that we work for the regulators. We work for the OCC on one end, or the FDIC, whoever is controlling or regulating the bank, and we work for the cardholder on the other end.
If the cardholder is happy, then you'll have no regulator issues at the bank. So it's -- the fact is, we work for the regulator, and recently the regulators have issued consent orders to a good number of banks that have been sponsoring Fintechs. The reason for that is they've been lax in program management, and they've been lax in terms of the money laundering and know-your-customer type activities. So, the banks have a bin that they rent out or provide to a program manager, and up to this point, the bank has said, has delegated and said to the program manager, you take care of AML, and we're counting on you doing it right. The regulators have come back into the banks and said, nope, you can't delegate it. They can do whatever they're doing, but you bank, you are responsible, totally.
So that has all of a sudden caused a good number of banks to have to say, we're taking a pause until we re-orient our compliance procedures to take care of what the regulators are saying at this point. So that does, that does, you Fintech type capability. On the other hand, the folks that are already out there that are not new Fintechs are doing fine, no regulatory issues there, and those are the ones that we're tending to approach at this point. So with that, let's just open it up to questions. That's my view of where we are now and what's happening.
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