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spk02: 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, Vervant, and Cardless. As in previous quarters, we currently have multiple implementations in progress with new customers that we expect to go live in the coming months, including our recently announced commercial card partnership with the Bank of California. Turning to some additional highlights on our income statement for the first quarter of this year, 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 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're currently receiving from our largest customers. 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 for diluted share for the quarter was 5 cents compared to 15 cents for Q1 2023. Adjusted diluted EPS for the quarter, excluding stock compensation expense, was 7 cents compared to 15 cents for Q1 2023. Adjusted EBITDA was $1.7 million compared to $3.5 million from 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 to continue investing in our new platform and to continue buying back shares, especially at current price levels. We repurchased 134,650 shares in the first quarter of 2024 for $1.6 million. 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 compared to 2023. We expect license revenue to be approximately $1.4 million, likely in the fourth quarter of 2024. As mentioned earlier, we expect growth from customers, including our largest customer, the impact of ParkMobile, the legacy cabin business, and the $0.5 million of accelerated revenue in Q1 2024 to be 10% to 15% for the full year. Within services, we continue to expect growth in processing and maintenance as our customers continue to grow and as we need to onboard new customers. We anticipate professional services revenue in the second quarter of 2024 to be likely in the range of $5.7 to $6 million. With that, I'll turn it over to Leland.
spk05: All right. Thanks, Matt.
spk01: I think, as you said, the quarter was pretty much as we expected. I view the results simply as a little better than breakeven, and I think I expect similar results the next couple of quarters. Say similar rather than the right answer, because one might be a little better, one might be a little worse, but generally I would say similar to the next two quarters, hopefully significantly better than the fourth, but the next two will be similar. The elephant in the room is and has been our largest customer, Goldman Sachs, and variations in revenue for them, along with the question about what's going to happen in the future, becomes the unknown. Let me address that first before discussing costly things coming from our continued increasing in revenue from the segment that's outside of the largest customer. Everyone wants to know what's going to happen with the Goldman situation since they have 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 is speculative and from my view is not backed up anything that's definitive that comes from the customer or any conversations. First, I do expect the General Motors card that's being processed on the car card platform at Goldman that it will go to another party either the fourth quarter this year or the first quarter next year. The Wall Street Journal speculated yesterday or a couple days ago that Barclays is funding for that card. Again, I want to emphasize that even that article was speculation, and they didn't quote anybody or anyone that said that was definitive. It really doesn't matter where the receivables go from a core card perspective. It's highly unlikely that we'll continue processing that portfolio since it's a very plain card with no special requirements. Any processor could probably pick that up. It's fairly easy as a card, so I just don't see any 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 simple to move somewhere else. There is, again, speculation that it will go to a new bank either the end of this year or early 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 something 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 kind of 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. I constantly get questioned, well, what's going to happen? What's going to happen is 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 them or both of them already have significant revenues, but we're talking to a set of handful, some that have significant revenues, 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 manage 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, 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 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 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 do, 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 kind of reorient our compliance procedures to take care of what the regulators are saying at this point. So that does develop a new fintech type capability. On the other hand, the folks that are already out there that are not new fintechs are notified, no regulatory issues there, and those are the ones that we're tending to approach at this point. With that, let's just open up to questions. That's my view of where we are now and what's happening.
spk00: Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the start keys. Our first question is from Hal Ghosh with B. Riley Securities. Please proceed.
spk03: Good morning, guys. I wanted to ask you about what you mentioned toward the end of this call, and that is the potential for one to three strategics. And you mentioned one or both might have significant revenue. Does that mean they would bring cards that they already have onto your platform and that would be the new processing platform for an existing portfolio? Could you help us understand that a little better? Thanks.
spk01: Yeah, that would require conversion. We're very good at conversions. We've got a good history of that. That's obviously one of the issues with folks, but we have a really good history. We have no hesitation in taking on the project of converting a portfolio. So, yeah, again, that makes us sloppy. If we get one of those now, something I didn't say, and I should mention here, two of them do not have contracts that end with their current processor until, I think, one in June of next year and one in October of next year. But they'll make their decision by June to October of this year, but the And we would start working probably 12 months before that contract ends, but the revenue wouldn't come in until next year. So it's 2025 revenue.
spk03: Okay. Okay. And then on the fintech issues on the compliance side, do the fintechs you're working with, you mentioned Deserve, Vervant, and Cardless, are they in that camp of taking the pause, or do they have their –
spk01: None of our current customers are having that problem. There are customers that currently exist that are having that problem, but none of our customers have any problems. But as I think about it, they are dealing with some of the banks that have gotten consent orders. But all that means for the bank is they can't take on new customers. They have to do something until they get their side. So it's not impacting... to my knowledge, any of our current customers.
spk05: Okay. And I just want to make sure I understand kind of the revenue guide again. Basically, you said X woman, X cab expects this one-time cancellation fee.
spk03: Right. In Park Mobile, you expect your processing revenues to be up 10% to 15%? Is that right?
spk01: Everything. All revenues. Everything. I should have gone back and mentioned something that Matt mentioned. That $500,000 that we put in this year, it was a previous customer who was only paying us minimums. They had only gone live with friends and family, and they got purchased by another processor. So the other processor obviously wanted to get them on their platform, not ours, so they took it off. Now, we looked at should you just continue to spread that over the term of the contract, but really the auditors and Matt determined that we have no more services to provide, so therefore we're going to have to take it all in in the first quarter. That's going to make it difficult on some forward comparisons for the next couple of quarters, meaning that's a $500,000 that was a one-time increase we're not going to get. Now, we expect to increase some other places. We expect to have some cost savings. So that's why I said early on, I expect our next two quarters to be similar to this quarter. But that's a big make-up.
spk05: Okay. Thank you.
spk00: Our next question is from Avi Fisher with Long Cast Advisors. Please proceed.
spk04: Hi. Thanks for taking my question. I hopped on a little late. Did you mention anything about expectations of license revenues this year?
spk02: $1.4 million likely in the fourth quarter.
spk01: I'm going to say it's possible. Matt and I may differ a little bit in terms of predicting it, but it's possible.
spk04: Okay. And then two other quick questions. So do you generate any one-time or quote-unquote excess revenues as the General Motors card leaves?
spk05: No.
spk04: Is there any special work you have to put in? No.
spk02: I mean, there might be a little bit of work, you know, in terms of the conversion off of the platform. We haven't assumed anything at this point. You know, the timing is still pretty uncertain as to when that might happen.
spk01: I wouldn't expect any big increase on that because it would just offset some of the other professional services that we're doing for the client.
spk04: Got it. And then within that, you know, General Motors, does it change your contract with Goldman, or are they still going to pay you based on that contracted rate?
spk01: It doesn't change our contract with Goldman.
spk04: Got it. Okay. And then can you talk about the revenue generation on these strategic opportunities? So, for example, you know, you have a processing customer. They're going to pay you overtime on monthly accounts. So, you know, essentially on day one, you're not getting paid a lot. But if the card is successful or a year or two out, you start making a lot of money at a high incremental margin. But what is the revenue generation and margin profile of a strategic before it starts before it goes live and before those monthly accounts start accumulating?
spk01: The strategies are so different. I can't answer the question. I'll give you an example. Back in California, it's strategic. Revenue is basically nil at this point. It will grow over time, but it's nil. So they're all different. All five or six we're talking to are different. The two or three, I can only take two strategic really. The two that we get, I can't predict which one we'll get. In some cases, it would be some revenue immediately, but that's not until their contract expires and they go live next year. There may be another one we're talking to. We may get a significant chunk this year if we get that one. Now, each of these parties, in my opinion, we're not going to lose them to somebody else, but they may stay with their current provider. So I'm not going to, I don't want to get out there predicting revenue from them.
spk04: Sure. That's fine. But just so I understand, I mean, to bring on board, say bank of California, you have to spend professional, you have to spend money to, to set up, to set up the platform for them and you don't generate.
spk01: Yeah. It's already historical. Yeah, we're spending money every month on that, and it's just an expense. We're not building it up in terms of advertising. I mean, it might be a tiny bit of that, but generally we're trying to be very conservative on it. So, yeah, I think there is a little bit there, but we're working on that every day.
spk02: Yeah, everything we've done is primarily historical, and we expect a public launch in the coming months on that. Most of those costs have been incurred already. The balance sheet hasn't changed significantly over the last 12 months in terms of what we've put on related to those costs we've incurred.
spk04: Right. So just so I understand, though, ahead of a launch of a strategic, your margins will be lower because you're spending money and not generating any revenue off of it. And then the launch, and if it's successful, the margins go up because you're generating revenue without a lot of incremental costs. Is that kind of the right way to think about it?
spk02: You know, a lot of those costs incurred, you know, so similar to like if we charge an implementation fee that's going to go into the deferred revenue line, the costs associated with getting ready for a new launch also go onto the balance sheet into a deferred cost bucket, which has never been significant, never been a separate line item. So there really isn't a huge margin impact as you're describing. Okay.
spk04: Well, can you then talk about the opportunity to grow your EBITDA margins?
spk01: Again, the way we're investing strategic, we're just not looking at margin there. We're looking at future potential and not concerning ourselves about percentage margin.
spk05: I hear what you're saying. Thank you very much. Thanks, Avi.
spk00: There are no further questions at the time, so this will conclude today's conference. You may disconnect your line. Let me just. Go ahead, Lita.
spk01: Yeah, let me just kind of give a quick summary just to say I'm very optimistic with the potential we have for 2025 to be a good growth year outside of our largest concentrated customer. As I said earlier, I don't think we'll be in a position to be very definitive on that until late third quarter. And another note I missed earlier, but Matt did mention, we continued to invest in a new core entity or core five platform that's slated to be available in the fourth quarter of 2025. If I were to take a look back at our strategy, we had planned on Goldman Sachs being a partner that was going to bring additional clients home, and we'd been building a bench to take care of that growth. We were counting on growth to come from that partnership with that being the number one partnership or the number one strategic customer. When they decided to exit the business, we really were not prepared to immediately ramp up business development. And I'm going to have to acknowledge that it was my mistake to believe that the partnership would be sufficient for our future growth. Actually, I should say it would have been sufficient for growth if they had not changed course, but they did. So now we're dealing with that we're managing expenses, we have new products coming, and we have a good number of prospects that we're talking to. So I realize there's a period of uncertainty, but I'm pretty confident that we have the only modern revolving card platform that's not in the hands of the multi-billion dollar companies that's going to survive over the long term. So we're pleased that those of you that are current shareholders or major shareholders, we're happy to continue the dialogue with anybody that would like to talk to us. Thanks for being on the call today, everyone.
spk00: Thank you. We will now conclude today's conference. You may disconnect your lines at this time and thank you for your participation.
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