CoreCard Corporation (CCRD) is a leading provider of technology solutions and processing services to the financial technology and services market, commonly referred to as the FinTech industry. The company has been in operation since 1973 and has established itself as a key player in the rapidly evolving FinTech landscape.
Business Overview
CoreCard's operations are conducted through its subsidiary companies located in Romania, India, the United Arab Emirates, and Colombia, as well as its corporate office in Norcross, Georgia. The company's foreign subsidiaries perform software development, testing, and processing operations, while the corporate office provides significant administrative, human resources, and executive management support.CoreCard's primary business activities include providing software licenses, professional services, and transaction processing services to its clients. The company's software solutions are designed to enable its customers, which are primarily financial institutions and FinTech companies, to manage their credit and debit card programs, as well as other financial transactions.
Financials
In the fiscal year 2023, CoreCard reported annual revenue of $56,004,000, a net income of $3,395,000, and annual operating cash flow of $16,810,000. The company's free cash flow for the year was $11,565,000. These financial metrics demonstrate CoreCard's ability to generate consistent revenue and profitability, as well as strong cash flow, which supports its growth and investment initiatives.Quarterly Results
For the first quarter of 2024, CoreCard reported total revenue of $13,076,000, a decrease of 11% compared to the same period in 2023. This decline was primarily driven by lower professional services revenue from the company's largest customer, Goldman Sachs Group, Inc. However, the company's processing and maintenance revenue grew by 13% year-over-year, reflecting the continued expansion of its customer base and the increasing demand for its transaction processing services.Net income for the first quarter of 2024 was $430,000, compared to $1,256,000 in the same period of 2023. The decrease in net income was largely due to the lower revenue and continued investments in the company's new processing platform.
Geographical Breakdown
CoreCard's revenue is primarily generated from customers located in the United States, which accounted for 96% of total revenue in the first quarter of 2024. The company also has a presence in the Middle East and the European Union, which contributed 4% of total revenue during the same period.Revenue Breakdown
CoreCard's revenue is primarily composed of three main categories: professional services, processing and maintenance, and third-party revenue. In the first quarter of 2024, professional services revenue was $5,826,000, processing and maintenance revenue was $6,152,000, and third-party revenue was $1,098,000.The decrease in total revenue during the first quarter of 2024 was primarily driven by a decline in professional services revenue, which was down 30% compared to the same period in 2023. This was partially offset by a 13% increase in processing and maintenance revenue, reflecting the company's ongoing efforts to expand its customer base and grow its recurring revenue streams.
Liquidity
As of March 31, 2024, CoreCard had a strong cash and cash equivalents balance of $24,056,000, which provides the company with ample liquidity to support its operations and fund future growth initiatives. The company's current ratio, a measure of its ability to meet short-term obligations, stood at 4.72, indicating a healthy financial position.During the first quarter of 2024, CoreCard generated $552,000 in cash from operations and used $1,593,000 in cash for capital expenditures, primarily for the development of a new processing platform and enhancements to its existing processing environment.
The company also repurchased $1,631,000 worth of its common stock during the first quarter of 2024, demonstrating its commitment to returning capital to shareholders and enhancing long-term shareholder value.
Outlook
For the full year 2024, CoreCard expects its services revenue to be approximately flat compared to 2023. The company anticipates license revenue of approximately $1.4 million, primarily in the fourth quarter of 2024. Additionally, the company expects revenue growth, excluding its largest customer and the impact of certain acquisitions, to be in the range of 10% to 15% for the full year.CoreCard's management team remains optimistic about the company's long-term growth prospects, particularly in the areas of processing and maintenance revenue, as well as the potential for new strategic partnerships and customer acquisitions.
Risks and Challenges
While CoreCard has demonstrated its ability to navigate the evolving FinTech landscape, the company faces several risks and challenges that could impact its future performance. These include the potential loss of its largest customer, Goldman Sachs Group, Inc., which represented 59% of the company's revenue in the first quarter of 2024. Additionally, the company's reliance on a limited number of large customers, regulatory changes in the financial services industry, and the need to continuously invest in technology and talent to maintain its competitive edge are all factors that could affect the company's financial results.Conclusion
CoreCard Corporation is a well-established player in the FinTech industry, with a strong track record of providing innovative software solutions and processing services to its clients. Despite the challenges posed by its reliance on a few large customers and the evolving regulatory landscape, the company has demonstrated its ability to adapt and grow its business.With a solid financial position, a focus on expanding its customer base and diversifying its revenue streams, and a pipeline of new strategic partnerships and product offerings, CoreCard appears well-positioned to navigate the complexities of the FinTech industry and deliver long-term value to its shareholders.