CoreCard(CCRD) - 2022 Q1 - Quarterly Report

Part I Financial Information Item 1. Financial Statements CoreCard Corporation's Q1 2022 unaudited consolidated financial statements reveal significant increases in assets, revenue, and net income Consolidated Balance Sheets CoreCard's March 31, 2022, balance sheet shows total assets of $69.7 million, up from $58.1 million, driven by accounts receivable Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | March 31, 2022 (unaudited) | December 31, 2021 (audited) | | :--- | :--- | :--- | | Cash | $24,544 | $29,244 | | Accounts receivable, net | $18,264 | $5,547 | | Total current assets | $46,078 | $36,837 | | Total assets | $69,687 | $58,148 | | Total current liabilities | $15,583 | $10,853 | | Total liabilities | $19,464 | $14,274 | | Total stockholders' equity | $50,223 | $43,874 | Consolidated Statements of Operations Q1 2022 total net revenue surged to $24.3 million, driven by product revenue, significantly boosting net income and diluted EPS Q1 2022 vs Q1 2021 Statement of Operations (in thousands, except per share data) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Services Revenue | $11,795 | $8,912 | | Products Revenue | $12,489 | $0 | | Total net revenue | $24,284 | $8,912 | | Income from operations | $11,753 | $1,465 | | Net income | $8,670 | $1,040 | | Diluted EPS | $1.00 | $0.12 | Consolidated Statements of Cash Flows Q1 2022 operating cash flow was $0.3 million, with cash used for investing and financing, resulting in a $4.7 million cash decrease Cash Flow Summary for Three Months Ended March 31 (in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by (used for) operating activities | $313 | $(2,326) | | Net cash used for investing activities | $(2,682) | $(2,028) | | Net cash used for financing activities | $(2,332) | $(2,605) | | Net decrease in cash | $(4,700) | $(6,955) | | Cash at end of period | $24,544 | $31,001 | Notes to Consolidated Financial Statements Notes detail accounting policies and financial results, highlighting revenue disaggregation, customer concentration, related-party transactions, and lease commitments - Revenue is highly concentrated, with a single customer ('Customer A') representing 84% of consolidated revenue in Q1 2022, up from 71% in Q1 2021[29][30][64] Revenue Disaggregation for Three Months Ended March 31 (in thousands) | Revenue Type | 2022 | 2021 | | :--- | :--- | :--- | | License | $12,489 | $0 | | Professional services | $6,562 | $5,747 | | Processing and maintenance | $4,060 | $2,607 | | Third party | $1,173 | $558 | | Total | $24,284 | $8,912 | - The company entered into a new five-year lease for its corporate headquarters on March 1, 2022, with an entity controlled by the company's Chairman and CEO[35] - Total operating lease liabilities as of March 31, 2022, amount to $4.6 million, with payments extending through 2027[51][53] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes Q1 2022's 172% revenue growth to one-time license fees from its largest customer, highlighting strong cash, share repurchases, and key operational risks Results of Operations Q1 2022 total revenue grew 172% to $24.3 million, driven by product revenue, which also reduced cost of revenue as a percentage of total revenue - Total revenue for Q1 2022 was $24.28 million, a 172% increase over Q1 2021[71] - The significant revenue increase was primarily due to $12.5 million in software license fees from the company's largest customer adding a new institution to the platform[73] - Cost of revenue as a percentage of total revenue decreased to 31% in Q1 2022 from 50% in Q1 2021, mainly due to the increase in high-margin license revenue[74] Liquidity and Capital Resources Cash balance decreased to $24.5 million by March 31, 2022, due to equipment purchases and share repurchases, despite positive operating cash flow; a new $20 million repurchase program was authorized - Cash balance stood at $24.5 million as of March 31, 2022[79] - The company repurchased $2.3 million of its common stock in Q1 2022[81] - In May 2022, the Board of Directors authorized an additional $20 million for the company's share repurchase program[81] Factors That May Affect Future Operations Future operations face significant risk from high customer concentration, with the largest customer accounting for 84% of Q1 2022 revenue, alongside other market and operational risks - A key risk is the high customer concentration, with the largest customer representing 84% of consolidated revenues for the three months ended March 31, 2022; loss of this customer would materially impact future revenues[85] Item 4. Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of March 31, 2022, with no significant changes to internal controls - Based on an evaluation as of March 31, 2022, the CEO and CFO concluded that the company's disclosure controls and procedures are effective[88] Part II Other Information Item 2. Unregistered Sales of Equity Securities and Use of Proceeds CoreCard repurchased 70,864 shares for $2.3 million in Q1 2022, with a new $20 million repurchase program authorized in May 2022 Share Repurchases in Q1 2022 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 2022 | - | - | | Feb 2022 | 31,993 | $33.83 | | Mar 2022 | 38,871 | $32.14 | | Total Q1 2022 | 70,864 | $32.91 | - As of March 31, 2022, approximately $1,341,000 was available for future share repurchases under the existing program[91] - In May 2022, the Board authorized an additional $20 million for the share repurchase program[89] Item 6. Exhibits Exhibits filed with Form 10-Q include corporate governance documents, CEO/CFO certifications, and Inline XBRL data files - Exhibits filed with the report include corporate governance documents and CEO/CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[93]