Jon Hickman : Yes, but my question is, have you put those in your guidance for the year or not? Those four, they’re not specifically those four.
Louis Hoch: Yes, they’re not. But so, we did do some increased sales in our guidance.
Jon Hickman : Yes, I get that. I just wanted to know about those specific four.
Louis Hoch: Yes, that’s why we’re saying that really moved needle for us as we close these.
Operator: The next question comes from Gary Prestopino with Barrington Research.
Gary Prestopino: A couple of questions here. Greg, you went through some metrics on processing volume, transaction growth and revenue growth. I just want to make sure, and this was for PayFac, I assume so could you just repeat that? Was that a Q4 number or was that a year number?
Greg Carter: That’s a 2023 number. And that was for PayFac only.
Gary Prestopino: What was the processing volume up?
Greg Carter: 17%.
Gary Prestopino: And transactions were up 35% and revenue was up 25%?
Greg Carter: Correct.
Gary Prestopino: And as I just go through my notes here, at this point, both portfolios are equal in size in terms of revenue generation or just in terms of what processing merchants, whatever?
Greg Carter: Revenue.
Gary Prestopino: So for this year, as PayFac grows, we should see PayFac starting to become a bigger part of the business and possibly see some acceleration in the revenue generated from card.
Greg Carter: That’s correct.
Gary Prestopino: And then I just want to understand this, Houston, with this, this card load. Well, first of all, I want to understand you had about 10 million of breakage revenue that occurred in 2023 that the bulk of which will not be repeated. Is that correct?
Greg Carter: There’s probably 2 million or less remaining that will come out very slowly through the remainder of the year. But now there’s going to be breakage and inactivity fees assessed to other programs. So we’re really only referring to New York City with those numbers. So I’ll pause there and see if I answered your question.
Gary Prestopino: No, that’s fine. What I’m trying to understand is, I mean, if there was 10 million of breakage, you basically doubled your revenues. I mean, was that like at such an extremely low diminimis margin to the business?
Greg Carter: The overall margin on that 10 million or 12 million was over 30% kind of on average. So there was a little bit of a steering system that occurred there, but so different quarters had different margins but it was approximately 35% overall. But some quarters were higher margin. And then, there was some tiering that occurred.
Gary Prestopino: So you say it had a 35% gross margin?
Louis Hoch: On average for all the breakage on that particular program during 2023.
Gary Prestopino: Then in looking forward to what you’re doing for this year, you got 371 million loaded on the cards, right? Is that correct? As I’m going through my notes,
Louis Hoch: That’s 2023 numbers.
Gary Prestopino: That’s loaded on the cards with the expectations that that should be spec. So, is that coming in at a much higher margin? Because I mean, you’re losing 10 million in revenues at 35% margins. I mean, is this new business that you’re putting on the books at much higher margins than that 35%? I’m just trying to get to how you get to where you want to be.
Louis Hoch: Well, a couple things. One is yes, specifically referring to breakage, our margins will be higher on smaller programs. But the other thing that to recognize here is that breakage is going to become a less significant component of our revenue generation. So what we’re seeing is a substantial increase in corporate expense volume, which has higher interchange for us and much larger margin on that interchange. We’re seeing some more custom programs where they’re direct client fees, and so that has a certain gross margin associated with it. And then again, to reiterate, the most important thing to realize is that card load volumes will go up from 2023 to 2024. So, you’re going to see acceleration really beginning in Q2, but then even more so Q3, Q4.
But we’re going to have a lot more dollars running through the card. While the breakage component of the revenue, it is going to go down, we’re going to be generating more revenue on interchange transactional fees as well as client fees.
Operator: This concludes our question-and-answer session. The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.
