Executive Summary / Key Takeaways

• CoreCard (NYSE:CCRD) is a specialized FinTech provider with a deep history, focusing on complex card issuing and processing solutions, particularly for revolving credit, where its proven platform and expertise offer a competitive edge over newer entrants.
• The company's Q1 2025 results demonstrated strong growth, with total revenue increasing 28% year-over-year to $16.7 million, driven primarily by higher professional services revenue from its largest customer, Goldman Sachs (GS), due to increased rates and activity.
• Growth outside of the largest customer is a key focus, with revenue excluding Goldman, legacy businesses, and one-time items growing 23% year-over-year in Q1 2025 and projected to accelerate to 30-35% for the full year 2025, fueled by new customer onboarding and existing program expansion.
• CoreCard is investing in its future with the CoreFinity platform, a cloud-native successor designed to enhance flexibility, reduce operating costs, and strengthen its competitive position against both legacy and modern processors, expected to be production-ready by late 2025.
• While concentration risk with Goldman Sachs remains significant (65% of Q1 2025 revenue), a recent contract amendment provides revenue visibility through 2026 and termination payments if canceled before 2030, offering a buffer as the company diversifies its customer base and explores strategic alternatives.

The Foundation: Deep Roots in Complex Payments

CoreCard Corporation, with roots stretching back to 1973, has quietly built a formidable position within a critical, yet often overlooked, niche of the financial technology landscape: complex card issuing and processing, particularly for revolving credit. While the broader FinTech market buzzes with payment apps and digital wallets, CoreCard specializes in the intricate backend systems required for credit cards, private-label cards, and other complex lending products. This isn't just about moving money; it's about managing the lifecycle of an account, handling nuanced calculations, and ensuring rigorous regulatory compliance – a task far more challenging than it appears, especially at scale.

The company's journey has seen it evolve from its early days to become a provider capable of serving large financial institutions, notably securing Goldman Sachs as a major customer in 2018. This relationship, while creating revenue concentration, also validated CoreCard's platform's capability to handle high-volume, complex programs. CoreCard operates globally, leveraging development and support centers in Romania, India, the UAE, and Colombia, a strategic footprint that supports its operational efficiency and service delivery.

CoreCard's strategic focus has shifted towards expanding its processing services business, recognizing the recurring revenue streams and scalability it offers. This involves actively onboarding new customers, both directly and through partnerships with program managers, a strategy designed to build a more diversified and resilient revenue base.

The Technological Moat: Mastering Revolving Credit Complexity

At the heart of CoreCard's value proposition lies its specialized technology platform. The company asserts that its core system is uniquely equipped among "modern processors" to handle the inherent complexities of revolving credit card reconciliation and management at scale. This isn't merely a software feature; it's a deep integration of business knowledge into technology.

Reconciling revolving credit involves navigating delayed data feeds from networks, managing late or partial payments with complex interest calculations, handling returns that occur months after initial transactions, and maintaining meticulous records for years to satisfy regulatory audits. CoreCard's management highlights that this is less a pure technology challenge and more a "business knowledge challenge that has to be transformed into technology outcomes." This expertise, built over decades, is a significant barrier to entry. While newer processors might handle basic transactions, CoreCard claims they struggle with the detailed reconciliation required for large-scale revolving credit portfolios. CoreCard points to its proven scale, processing around 15 million revolving credit cards on its platform, while stating it knows of no other modern processor handling even 0.5 million. This scale isn't just a number; it represents real-world stress testing and refinement of systems to handle edge cases and volume that newer platforms haven't experienced. The company also possesses "thousands of test cases for revolving credit," a critical asset for ensuring accuracy and compliance that is difficult and time-consuming for competitors to replicate.

Looking ahead, CoreCard is investing significantly in its next-generation platform, CoreFinity (or CoreFI). This project, nearing completion after approximately four years of development, is designed to be cloud-native, flexible, and feature-rich, incorporating the complexities of the current system but built with the latest technologies. A key innovation mentioned is "time travel testing," intended to accelerate the process of adding unique programs for innovative issuers. While specific quantifiable performance metrics for CoreFinity's benefits (like percentage improvement in processing speed or cost reduction) were not detailed, the stated goals are clear: to be the most flexible, cloud-native, real-time credit platform globally with the lowest maintenance and operating costs. Expected to be ready for production by the end of 2025 and fully utilized in 2026, CoreFinity aims to strengthen CoreCard's competitive stance against both established legacy processors and newer FinTech players.

For investors, this technological differentiation translates into a potential competitive moat. The difficulty for rivals to replicate CoreCard's deep domain expertise and proven scale in complex processing means CoreCard can target lucrative niches and potentially command better margins in those areas. The investment in CoreFinity signals a commitment to maintaining this technological edge and expanding capabilities for future growth.

Competitive Landscape: A Niche Player Among Giants

CoreCard operates in a competitive FinTech market dominated by large, diversified players like Fiserv (FISV), Global Payments (GPN), ACI Worldwide (ACIW), and Jack Henry & Associates (JKHY). These companies offer broad suites of financial software and processing services, often leveraging massive scale and deep relationships with traditional financial institutions.

Compared to these giants, CoreCard is a niche player. Its estimated market share in global card processing is small, likely in the low single digits. However, its competitive positioning is not based on broad market dominance but on specialized capability. While Fiserv and Global Payments boast significantly higher revenues (billions annually) and generally stronger profitability metrics (higher gross, operating, and net margins, better ROIC/ROE) due to their scale and diversified offerings, CoreCard's strength lies in its specific expertise in complex revolving credit.

CoreCard's API-centric platform is highlighted as offering flexibility and potentially faster implementation times for card programs compared to some legacy systems. This agility can be particularly appealing to FinTech startups and institutions launching innovative products. For instance, one new customer is reportedly moving from another "modern processor" due to reconciliation issues, underscoring CoreCard's claimed advantage in this critical area.

However, CoreCard's smaller scale relative to the legacy processors presents challenges. Its operating costs per unit may be higher, impacting overall profitability compared to the efficiency achieved by the larger players. While CoreCard's technology excels in reconciliation, competitors like ACI Worldwide may have advantages in other areas, such as fraud detection processing speed. Furthermore, CoreCard acknowledges losing some deals simply due to its smaller size compared to the established industry leaders.

Indirect competitors, including payment facilitators like Square (SQ) and PayPal (PYPL) and emerging blockchain technologies, pose a different kind of threat by offering alternative, often simpler and cheaper, payment solutions that could erode market share in less complex transaction areas.

CoreCard's strategy to counter these dynamics involves leveraging its specialized technology and expertise to win business in complex, high-value segments where the larger players may be less flexible or newer players lack the necessary capabilities. The investment in CoreFinity is aimed at enhancing its technological competitiveness, while partnerships with program managers help extend its reach without requiring massive internal sales infrastructure. The recent contract amendment with Goldman Sachs, despite the concentration risk, provides a degree of stability and validation in a competitive environment.

Financial Performance: Growth Momentum and Margin Expansion

CoreCard's recent financial performance reflects a business gaining momentum, particularly outside of its largest customer relationship, while also benefiting from favorable terms with that key client.

In the first quarter of 2025, total revenue surged 28% year-over-year to $16.69 million. This growth was primarily fueled by a significant increase in Professional Services revenue, which rose nearly 50% to $8.70 million. Management attributed this directly to the contract amendment with Goldman Sachs, which resulted in higher managed services rates effective January 2025, alongside continued high levels of development work for the customer. Processing and Maintenance revenue saw more modest growth of 3.1% year-over-year to $6.34 million. However, excluding the impact of a one-time accelerated revenue item in Q1 2024 and revenue from a legacy business (CABG), processing and maintenance growth was a more robust 16%. Third Party revenue also saw strong growth, increasing nearly 50% to $1.64 million, which management indicated is often tied to new programs coming online and anticipates future processing revenue. As expected, there was no License revenue in Q1 2025 or Q1 2024.

The increase in higher-margin professional services revenue, particularly from the repriced Goldman contract, had a notable impact on profitability. Cost of revenue decreased as a percentage of total revenue, falling from 73% in Q1 2024 to 55% in Q1 2025. This drove a substantial improvement in operating income, which jumped from $527,000 in Q1 2024 to $2.81 million in Q1 2025, resulting in an operating margin of 16.8% compared to just 4% in the prior year period.

Operating expenses increased year-over-year, primarily due to higher bonus accruals and stock compensation expense, particularly in development and general and administrative categories. The income statement impact of the new CoreFinity platform build was $800,000 in Q1 2025, a slight increase from $700,000 in Q1 2024, reflecting ongoing investment in future capabilities. Investment losses increased due to higher losses from equity method investments, while other income decreased due to lower interest income from reduced cash balances compared to the prior year. Net income for the quarter was $1.91 million, or $0.24 per diluted share, a significant improvement from $430,000, or $0.05 per diluted share, in Q1 2024.

CoreCard maintains a solid liquidity position. Cash and cash equivalents stood at $22.07 million at March 31, 2025, an increase from $19.48 million at the end of 2024. Operating cash flow generation was strong in Q1 2025, providing $4.60 million compared to $552,000 in Q1 2024, driven by higher net income and favorable changes in working capital, particularly lower accounts receivable. The company continues to invest in property and equipment and capitalized software development, utilizing $1.93 million for these purposes in Q1 2025.

Management expects sufficient liquidity to fund operations and investments and intends to use excess cash for FinTech expansion and share repurchases. The company has approximately $7.10 million remaining under its share repurchase authorization as of March 31, 2025, although no repurchases were made in Q1 2025.

Outlook and Strategic Trajectory

CoreCard's outlook for 2025 signals continued growth, particularly in its core processing business outside of the dominant Goldman Sachs relationship. Management provided full-year 2025 revenue guidance between $65 million and $69 million and earnings per share guidance between $1.10 and $1.18.

A key driver for this outlook is the expected acceleration of growth from customers excluding Goldman Sachs, legacy businesses, and the Q1 2024 accelerated revenue. This segment is projected to grow between 30% and 35% for the full year 2025. This growth is underpinned by the ongoing onboarding of new customers, both directly and through partnerships, and the expansion of existing customer programs as they add more accounts. Management noted that new customers typically start with minimum fees and contribute more significantly as their businesses mature.

For the second quarter of 2025, the company expects total revenues between $16.2 million and $16.9 million and earnings per share between $0.23 and $0.28. Professional services revenue is anticipated to be between $8.4 million and $8.8 million in Q2 2025, reflecting the continued impact of the higher managed services rates from Goldman Sachs.

Management explicitly stated that they do not expect any license revenue in 2025. This reflects the nature of their current customer pipeline, which is focused on processing agreements, and the anticipated transition of the GM program (a licensed customer) to another processor in Q3 2025. While the GM transition will not impact maintenance revenue (which is based on the achieved license tier), it will affect the number of accounts needed to reach the next license tier under the Goldman agreement. The potential sale of customer Deserve to Intuit (INTU) is also factored into the guidance as a potential headwind, although its revenue contribution is relatively small.

Operating expenses are expected to increase only modestly in 2025, primarily due to normal cost of living adjustments, as the company believes its current headcount and infrastructure can support the projected revenue growth. This cost control, combined with revenue growth, is expected to contribute to improved operating margins throughout the year.

Beyond the financial guidance, CoreCard's strategic trajectory involves leveraging its specialized technology, expanding its customer base outside of Goldman Sachs, and exploring strategic alternatives. Management and the Board are actively discussing succession planning and the possibility of an acquisition, with an informal process underway to gauge interest and maximize shareholder value. A decision on the future direction – either pursuing a transaction or focusing on finding a new President to lead the company independently – is expected in the coming months. The development of the CoreFinity platform is central to the long-term strategy, positioning the company for future growth and competitiveness.

Risks and Considerations

While CoreCard's specialized technology and growth trajectory outside its largest customer present a compelling investment case, several risks warrant careful consideration.

The most significant risk remains the high concentration of revenue from Goldman Sachs, which accounted for 65% of consolidated revenues in Q1 2025. Although the amended contract provides revenue visibility and termination payments through 2030, Goldman has early termination rights starting in 2027. The announced transition of the GM program and public speculation about the future of the Apple (AAPL) card program processed under the Goldman agreement highlight the potential for this relationship to change. A significant reduction or loss of this customer, while partially mitigated by termination fees, would have a material adverse effect on CoreCard's financial results and could impact its growth trajectory and market perception.

Other risks include the inherent volatility in revenue due to the lumpy nature of license fees (though not expected in 2025), the timing and success of new customer implementations which can be dependent on third-party processes, and competitive pressures from larger, more diversified players. Regulatory changes in the FinTech industry could require costly platform modifications. Cybersecurity threats are also a significant concern, given the sensitive nature of financial data.

The company's ability to attract and retain skilled personnel, particularly software developers with deep domain knowledge, is critical to its ability to onboard new customers and continue platform development. The recently approved retention program aims to address this, but talent competition is fierce. Finally, the decision by the company's auditor not to stand for reappointment after the 2024 audit, while attributed to the auditor's business decision, requires the company to find a new auditor, which can be a complex process.

Conclusion

CoreCard Corporation presents a fascinating investment narrative centered on its deep expertise and specialized technology in the complex world of revolving credit processing. While the significant revenue concentration with Goldman Sachs introduces a notable risk, the recent contract amendment provides a degree of near-term stability and visibility. The core investment thesis is increasingly underpinned by the company's accelerating growth trajectory outside of this relationship, driven by new customer wins and expanding programs, validating the demand for its specialized platform.

The ongoing investment in the CoreFinity platform underscores CoreCard's commitment to maintaining its technological edge and positioning itself for future competition against both legacy giants and newer FinTech entrants. As the company navigates potential changes in its largest customer relationship and explores strategic alternatives, its proven ability to handle complex processing at scale and its focus on profitable growth outside of Goldman Sachs are key factors for investors to monitor. The coming months, with expected decisions on strategic direction, will be critical in shaping CoreCard's future path.