CoreCard Corporation

cabbage business as we've detailed in prior quarters was 34% in the second quarter on a year-over-year basis is expected to be 15 to 20 percent for the full year which is above our previously guided range of 10 to 15 percent 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 cabbage 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 for diluted share for the quarter was 11 cents compared to 22 cents for Q2 2023. Adjusted diluted EPS for the quarter excluding stock compensation expense was $0.15 compared to $0.23 for Q2 2023. 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 ParkMobile, the legacy cabbage business, and 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 to be likely in the range of $6.2 to $6.5 million. And with that, I'll turn it over to Leland.

Thanks, Matt. You didn't leave me much to say. I think you're pretty comprehensive in covering the business and even where we're headed now. I guess I often say just look at the numbers. Don't pay attention to what anybody says. I think the numbers are about what we expected. We're happy with them. 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 past few years on them, and they may still stay up. Generally, our growth is good as far as uh the other side of the business other than our largest customer it's steady uh could it be a little little faster and bigger would i like that yeah but uh 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 um the new the new uh what we call core file or core affinity 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 fourth quarter, let's say, of 2025. But we're making good progress. 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 and things, but we don't tend to do that. I will mention that one of our customers has got a cutter. So if you fly to Cutter or to India through Cutter and when I earn bonus points, you'll end up with the Cutter Airlines card and that's being processed by core card. 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 size potential business that would come online in late 2025. That is the nature of what we do. You have to work on it a year in advance, typically, and we have two or three that 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 just have to say we're pleased with the numbers that we reported this quarter. We're pleased with the way business is going, and we're just going to continue to to stay on the path we're on now. Operator, you can open it for questions. Be happy to take a few questions either from Matt or I. Thank you.

Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star and one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Ladies and gentlemen, we will wait for a moment while we poll for questions. Our first question is from the line of Hal Goch with B Riley Securities. Please go ahead.

Hey, Hal, we can't hear you. Hal? Hey there.

Yeah, in the – thank you. I'm sorry I was on mute. The tone of business this time a year ago, we were in the midst of a little bit of a banking crisis for small banks and large banks as well. A year has gone by, and you mentioned the tone of business is steady, and is the tone of RFPs or inquiries, is that still steady, or is that lifting from maybe a year ago or six months ago or something?

what's the tone of like yeah 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 not it's still not big but it has improved some uh from the from what we're getting for the smaller banks uh fintech is 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 A little better from the smaller banks and a little less from the fintech side of the business.

Okay. And a question for Matt. Was there any buyback activity in the quarter? You had been buying back stock.

Yeah, we bought back around 147,000 shares at $2.1 million. And then again, buyback activity for Q2.

Okay. Okay. And final question is, you know, you mentioned like two to three large, at least one 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 number of cards?

Sure. Yeah, that's a good question. I'm going to place your large in the two. I'm going to give you a pretty wide range. $2 to $8 million a year type revenue. So over two is, you know, it's a small to large, but it's a medium, and eight is a big large for us. And I'm talking about annual revenue. So two, three, four, five, six, seven, eight type annual revenue, maybe in combination, well, no reason to do 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 it tends to snowball a little bit. If you add a couple 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 low risk. We have got a lot of experience with conversions. We've never had a problem. We do not think there'll be a problem. But it doesn't matter what we believe. What matters is what a board of directors or a risk officer believes. And, of course, we can do all we can to show them that it's not much risk. But risk is taken away based on historical performance. So that's kind of the way we're growing the business.

All right. Thank you. Appreciate that perspective. Thank you.

Any other questions?

Thank you. There are no questions in the queue.

Ladies and gentlemen. Yeah, 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.

Thank you. The conference of CoreCard has now concluded. Thank you for your participation. You may now disconnect your lines.