10-K: CoreCard Corporation Reports FY 2024 Results: Revenue Up Slightly, Focus Remains on Processing Services Growth

CoreCard Corporation's FY 2024 results show a slight revenue increase driven by processing services, with a continued focus on expanding its FinTech business.

Summary

• CoreCard Corporation's FY 2024 revenue increased by 2% to $57.4 million.
• Service revenue rose 1% to $54.6 million, driven by transaction processing and software maintenance.
• Product revenue, including software licenses, increased 58% to $2.8 million.
• Cost of revenue decreased as a percentage of total revenue, primarily due to higher license revenue.
• Operating expenses increased due to higher development and general & administrative expenses.
• The company reported a net income of $5.4 million, compared to $3.4 million in the previous year.
• CoreCard's largest customer, Goldman Sachs Group, Inc., accounted for 62% of consolidated revenues in 2024.
• An Omnibus Amendment with Goldman Sachs extends key agreements through December 31, 2030, and provides for increased monthly fees starting January 2025.
• The company's cash balance at the end of 2024 was $19.5 million.
• The company spent $8.9 million on software development in 2024.
• The company has approximately $7.1 million remaining under its share repurchase program as of December 31, 2024.

Sentiment

Score: 7

Explanation: The document presents a generally positive outlook with revenue growth and increased net income, but also highlights risks related to customer concentration and market conditions. The extension of the Goldman Sachs agreement is a positive sign.

Positives

• Total revenue increased by 2% year-over-year.
• Service revenue increased due to growth in transaction processing and software maintenance.
• Product revenue saw a significant increase of 58%.
• The Omnibus Amendment with Goldman Sachs provides long-term revenue visibility.
• Net income increased from $3.4 million to $5.4 million.
• The company continues to invest in software development.
• The company has a strong cash position and an ongoing share repurchase program.

Negatives

• The company's largest customer, Goldman Sachs Group, Inc., accounted for 62% of consolidated revenues in 2024, creating customer concentration risk.
• Investment Income (Loss) was a loss of $427,000 in 2024 and loss of $1,579,000 in 2023.
• Cash provided by operations decreased from $16.8 million to $5.8 million.

Risks

• The company is heavily reliant on Goldman Sachs Group, Inc. for a significant portion of its revenue.
• Weakness or instability in the global financial markets could negatively impact customer decisions.
• Increased federal and state regulations could result in losses and additional cash requirements.
• Delays in software development projects could cause customers to postpone implementations or delay payments.
• A security breach in the company's platform could expose confidential information.
• The company could fail to expand its customer base as quickly as anticipated.
• The company could fail to retain key software developers and managers.
• Volatility in the markets, including as a result of political instability, civil unrest, war or terrorism, or pandemics or other natural disasters, could adversely affect future results of operations and could negatively impact the valuation of our investments.

Future Outlook

CoreCard anticipates steadily growing its processing services business further in 2025 and future years. The amount and timing of future revenues from Goldman will be dependent on various factors not in our control such as the number of accounts on file and the level of customization needed by the customer and whether the customer continues the credit card line of business.

Management Comments

• We are adding new processing customers at a faster pace than we are adding new license customers, resulting in steady growth in the processing revenue stream.
• We continue to believe that we have a strong cash position.
• We intend to use our cash balances to support the domestic and international operations associated with our CoreCard business and to expand our operations in the FinTech industry through financing the growth of CoreCard and, if appropriate opportunities become available, through acquisitions of businesses in this industry.

Industry Context

CoreCard competes with third-party card processors and believes it can compete successfully by providing a robust technology platform, greater system flexibility, and more customer-driven marketing options. The company also highlights its unique transition path for customers to license the same software used in CoreCard's processing environment.

Comparison to Industry Standards

• The document does not provide specific comparisons to industry standards or benchmarks.
• It mentions competition with larger and more established processors but does not quantify CoreCard's market share or relative performance.
• Without specific benchmarks, it's difficult to assess CoreCard's performance against industry peers.

Related Party Transactions

• The lease on the company's headquarters is held by ISC Properties, LLC, an entity controlled by J. Leland Strange, the Chairman and CEO. Rent paid to ISC Properties, LLC was $380,000 in 2024.

Stakeholder Impact

• Shareholders may be impacted by the share repurchase program and the company's financial performance.
• Employees are impacted by the company's investment in software development and the ongoing operations of its subsidiaries.
• Customers benefit from the company's technology solutions and processing services.
• Suppliers and creditors are impacted by the company's financial stability and ability to meet its obligations.

Next Steps

• The company expects to continue to enhance and upgrade its existing software solutions and to develop additional modules to meet changing customer and market requirements.
• The company is working on the next generation of the CoreCard platform and solutions, which seeks to leverage progress in commercial state-of-the-art distributed technologies alongside now widely adopted agile work methodologies and practices to transform our entire suite of offerings.

Key Dates