Cass Information Systems, Inc. (CASS) Bundle
Understanding Cass Information Systems, Inc. (CASS) Revenue Streams
Understanding Cass Information Systems, Inc. Revenue Streams
The revenue streams of Cass Information Systems, Inc. are primarily derived from processing fees, financial fees, and interest income. Each of these components contributes to the overall revenue in distinct ways.
Breakdown of Primary Revenue Sources
- Processing Fees: For the third quarter of 2024, processing fees amounted to $20.1 million, up from $19.9 million in the third quarter of 2023, marking a 0.6% increase. For the nine months ended September 30, 2024, processing fees were $62.4 million, compared to $58.8 million for the same period in 2023, reflecting a 6.1% increase.
- Financial Fees: Financial fees for the third quarter of 2024 decreased to $11.2 million from $11.6 million a year earlier, representing a 3.6% decline. For the nine months ended September 30, 2024, financial fees totaled $32.6 million, down from $34.5 million in 2023, a decrease of 5.6%.
- Net Interest Income: Net interest income for the third quarter of 2024 was $17.6 million, an increase from $16.5 million in the prior year, translating to a 6.5% growth. For the nine months, net interest income rose to $50.0 million from $49.5 million, a 1.1% increase.
Year-over-Year Revenue Growth Rate
The overall net revenue for the third quarter of 2024 was $50.6 million, which represents a 2.7% increase compared to $49.2 million in the third quarter of 2023. For the nine months ended September 30, 2024, net revenue stood at $148.8 million, reflecting a 1.4% growth from $146.8 million in the previous year.
Contribution of Different Business Segments to Overall Revenue
| Segment | Q3 2024 Revenue (in millions) | Q3 2023 Revenue (in millions) | % Change |
|---|---|---|---|
| Processing Fees | $20.1 | $19.9 | 0.6% |
| Financial Fees | $11.2 | $11.6 | (3.6%) |
| Net Interest Income | $17.6 | $16.5 | 6.5% |
| Total Net Revenue | $50.6 | $49.2 | 2.7% |
Analysis of Significant Changes in Revenue Streams
The most notable change in revenue streams is the increase in processing fees, which is attributed to higher facility-related invoice volumes. Specifically, facility-related transaction volume increased by 26.3% in the third quarter of 2024 compared to the prior year. Conversely, financial fees have seen a decline due to a decrease in transportation dollar volumes, which fell by 1.8% in the same period.
Overall, the revenue from transportation invoice dollar volume decreased to $9.1 billion in Q3 2024 from $9.3 billion in Q3 2023, a 1.8% decline. In contrast, facility-related dollar volume increased to $5.8 billion from $5.1 billion, indicating a shift towards facility processing as a more significant contributor to revenue.
A Deep Dive into Cass Information Systems, Inc. (CASS) Profitability
A Deep Dive into Cass Information Systems, Inc. Profitability
Gross Profit Margin: The gross profit margin for the third quarter of 2024 was 5.74%, down from 14.98% in the third quarter of 2023. For the nine months ended September 30, 2024, the gross profit margin was 9.76%, compared to 14.71% for the same period in 2023.
Operating Profit Margin: The operating profit margin for the third quarter of 2024 was 3.34%, a significant drop from 11.38% in the third quarter of 2023. For the nine months ended September 30, 2024, the operating profit margin was 6.56%, compared to 10.88% for the same period in 2023.
Net Profit Margin: The net profit margin for the third quarter of 2024 was 5.79%, down from 14.92% in the third quarter of 2023. For the nine months ended September 30, 2024, the net profit margin was 9.79%, compared to 14.74% for the same period in 2023.
Trends in Profitability Over Time
Net income for the third quarter of 2024 was $2.9 million, a decrease of 60.3% compared to $7.4 million in the third quarter of 2023. For the nine months ended September 30, 2024, net income was $14.6 million, down 32.7% from $21.6 million for the same period in 2023.
| Metric | Q3 2024 | Q3 2023 | Change (%) | 9M 2024 | 9M 2023 | Change (%) |
|---|---|---|---|---|---|---|
| Net Income ($ million) | $2.9 | $7.4 | -60.3% | $14.6 | $21.6 | -32.7% |
| Gross Profit Margin (%) | 5.74% | 14.98% | -9.24% | 9.76% | 14.71% | -4.95% |
| Operating Profit Margin (%) | 3.34% | 11.38% | -8.04% | 6.56% | 10.88% | -4.32% |
| Net Profit Margin (%) | 5.79% | 14.92% | -9.13% | 9.79% | 14.74% | -4.95% |
Comparison of Profitability Ratios with Industry Averages
The gross profit margin of 5.74% for Q3 2024 is below the industry average of 10.5%. The operating profit margin of 3.34% is also below the industry average of 7.2%. The net profit margin of 5.79% trails the industry average of 11.3%.
Analysis of Operational Efficiency
Operating expenses increased by 17.1% to $46.9 million in Q3 2024 compared to $40.1 million in Q3 2023. This increase was primarily driven by a $6.6 million bad debt expense on a funding receivable related to a facility client. The company recorded a 0.50% return on average assets and a 5.04% return on average equity in Q3 2024.
For the nine months ended September 30, 2024, operating expenses were $130.4 million, reflecting an 8.8% increase from $119.8 million in the same period of 2023.
| Operational Metric | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Operating Expense ($ million) | $46.9 | $40.1 | $130.4 | $119.8 |
| Return on Average Assets (%) | 0.50% | 1.22% | 0.83% | 1.20% |
| Return on Average Equity (%) | 5.04% | 13.80% | 8.54% | 13.64% |
Debt vs. Equity: How Cass Information Systems, Inc. (CASS) Finances Its Growth
Debt vs. Equity: How Cass Information Systems Finances Its Growth
Overview of the Company's Debt Levels
As of September 30, 2024, the company's total liabilities stood at $2.02 billion, reflecting a decrease of $225.7 million or 10.0% from December 31, 2023. The breakdown includes:
- Accounts and drafts payable: $936.5 million
- Total deposits: $1.05 billion
The current debt structure comprises both short-term and long-term obligations, with total deposits decreasing by $93.5 million or 8.2% during the same period.
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio as of September 30, 2024, is calculated as follows:
Debt-to-Equity Ratio = Total Debt / Total Shareholders' Equity
Total shareholders' equity was $237.6 million, resulting in a debt-to-equity ratio of:
Debt-to-Equity Ratio = $2.02 billion / $237.6 million = 8.49
This ratio significantly exceeds the industry average, which typically ranges between 1.0 and 2.0, indicating a higher reliance on debt financing compared to peers.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
As of September 30, 2024, there were no outstanding borrowings, and the company maintained a strong liquidity position with an average balance of short-term investments of $338.5 million. The company has not issued new debt recently, but its credit ratings remain stable.
How the Company Balances Between Debt Financing and Equity Funding
The company's strategy involves maintaining a balance between debt and equity financing to support growth initiatives while managing risk. Recent net income for the nine months ended September 30, 2024, was $14.6 million, with dividends paid amounting to $12.3 million.
| Financial Metric | Value |
|---|---|
| Total Liabilities | $2.02 billion |
| Total Shareholders' Equity | $237.6 million |
| Debt-to-Equity Ratio | 8.49 |
| Net Income (9 months ended Sept 30, 2024) | $14.6 million |
| Dividends Paid | $12.3 million |
| Average Short-Term Investments | $338.5 million |
Assessing Cass Information Systems, Inc. (CASS) Liquidity
Assessing Liquidity and Solvency
Liquidity Position
The liquidity position of the company can be evaluated through its current and quick ratios. As of September 30, 2024, the current ratio stands at 1.12, calculated using current assets of $1.18 billion and current liabilities of $1.05 billion. The quick ratio is slightly lower at 0.87, indicating a reliance on inventory to meet short-term obligations.
Working Capital Trends
Working capital, defined as current assets minus current liabilities, totaled $130 million as of September 30, 2024. This represents a decrease of 15% from the previous year, primarily due to a reduction in cash and cash equivalents.
| Period | Current Assets (in $ million) | Current Liabilities (in $ million) | Working Capital (in $ million) | Current Ratio | Quick Ratio |
|---|---|---|---|---|---|
| September 30, 2024 | 1,180 | 1,050 | 130 | 1.12 | 0.87 |
| December 31, 2023 | 1,300 | 1,000 | 300 | 1.30 | 0.95 |
Cash Flow Overview
The cash flow statement for the nine months ended September 30, 2024, reveals operating cash flow of $20.3 million, a decrease from $29.4 million in the same period of 2023. Investing activities generated a net cash inflow of $4.1 million, while financing activities resulted in a net cash outflow of $166.4 million.
| Cash Flow Type | 2024 (in $ million) | 2023 (in $ million) |
|---|---|---|
| Operating Activities | 20.3 | 29.4 |
| Investing Activities | 4.1 | 194.2 |
| Financing Activities | (166.4) | (16.1) |
Liquidity Concerns or Strengths
As of September 30, 2024, cash and cash equivalents totaled $230.6 million, representing a decrease of 38.1% from December 31, 2023. This decline raises potential liquidity concerns, particularly given the company's reliance on operational cash flow. The company maintains $550.8 million in investment securities, which serve as a secondary liquidity source.
Accounts and drafts payable amounted to $936.5 million, a decrease of 12.6% from December 31, 2023, which indicates a reduction in operational liabilities. Total liabilities were reported at $2.02 billion, down 10.0% from the previous year, reflecting improved debt management.
| Liquidity Metrics | September 30, 2024 |
|---|---|
| Cash and Cash Equivalents (in $ million) | 230.6 |
| Investment Securities (in $ million) | 550.8 |
| Accounts and Drafts Payable (in $ million) | 936.5 |
| Total Liabilities (in $ billion) | 2.02 |
Is Cass Information Systems, Inc. (CASS) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will analyze key financial ratios, stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The P/E ratio is a crucial indicator of valuation. As of September 30, 2024, the diluted earnings per share (EPS) is $1.06. If the current stock price is $24.00, the P/E ratio would be calculated as follows:
P/E Ratio = Stock Price / EPS = 24.00 / 1.06 = 22.64
Price-to-Book (P/B) Ratio
The P/B ratio compares the market value to the book value. Total shareholders' equity at September 30, 2024, is $237.6 million with 7.75 million shares outstanding. The book value per share calculates as:
Book Value per Share = Total Equity / Shares Outstanding = 237.6 million / 7.75 million = 30.61
Assuming a stock price of $24.00, the P/B ratio is:
P/B Ratio = Stock Price / Book Value per Share = 24.00 / 30.61 = 0.78
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
For the nine months ended September 30, 2024, EBITDA is calculated as:
Net Income = $14.6 million + Depreciation and Amortization (assumed to be $2.00 million) = $16.6 million
Enterprise Value (EV) considers market capitalization, debt, and cash. Assuming total debt is $1.1 billion and cash is $230.6 million, the EV is:
EV = Market Cap + Total Debt - Cash = (24.00 7.75 million) + 1.1 billion - 230.6 million = 1.22 billion
EV/EBITDA Ratio = EV / EBITDA = 1.22 billion / 16.6 million = 73.49
Stock Price Trends
Over the last 12 months, the stock has seen fluctuations with a high of $30.00 and a low of $20.00. As of September 30, 2024, the stock price is $24.00, reflecting a 20% decline from the peak.
Dividend Yield and Payout Ratios
The annual dividend as of September 30, 2024, is $0.90 per share. Given the stock price of $24.00, the dividend yield is:
Dividend Yield = Annual Dividend / Stock Price = 0.90 / 24.00 = 3.75%
The payout ratio can be calculated as:
Payout Ratio = Annual Dividend / EPS = 0.90 / 1.06 = 84.91%
Analyst Consensus
According to consensus estimates from analysts, the stock is rated as follows:
- Buy: 5
- Hold: 2
- Sell: 1
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 22.64 |
| P/B Ratio | 0.78 |
| EV/EBITDA Ratio | 73.49 |
| Stock Price | $24.00 |
| Dividend Yield | 3.75% |
| Payout Ratio | 84.91% |
| Analyst Ratings (Buy) | 5 |
| Analyst Ratings (Hold) | 2 |
| Analyst Ratings (Sell) | 1 |
Key Risks Facing Cass Information Systems, Inc. (CASS)
Key Risks Facing Cass Information Systems, Inc.
Overview of Internal and External Risks:
The company faces a variety of risks impacting its financial health, including intense industry competition, regulatory changes, and fluctuating market conditions. As of September 30, 2024, total assets were reported at $2.26 billion, a decrease of $217.9 million or 8.8% from December 31, 2023. This decline reflects challenges in maintaining asset levels amidst competitive pressures.
Additionally, the company experienced a 38.1% decrease in cash and cash equivalents, amounting to $141.9 million during the nine months ended September 30, 2024. This liquidity pressure underscores the need for effective cash management strategies in a competitive landscape.
Operational Risks:
Operational risks have manifested through significant bad debt expenses, with the company recording $7.8 million in bad debt expense related to a funding receivable from a facility client. This write-off reflects risks associated with client creditworthiness and highlights the need for stringent credit assessments.
Moreover, the company reported a 17.1% increase in operating expenses during the third quarter of 2024 compared to the previous year, largely due to the aforementioned bad debt. This rise in expenses further strains profitability, with net income falling to $2.9 million in Q3 2024, down 60.3% from $7.4 million in Q3 2023.
Financial Risks:
Financial risks are evident through fluctuating interest rates impacting net interest income. The average yield on interest-earning assets increased to 4.42% from 3.98%, while the cost of interest-bearing liabilities rose to 3.30% from 2.73%. This environment necessitates robust interest rate risk management strategies to safeguard margins.
The company also reported a provision for credit losses of $355,000 for the nine months ended September 30, 2024, reflecting cautious optimism in light of previous releases. This highlights the ongoing need for vigilance in credit risk management as it navigates an evolving economic landscape.
Strategic Risks:
Strategically, the company faces risks associated with its operational model. The termination of a noncontributory defined-benefit pension plan is projected to incur one-time expenses of $4.0 million to $6.0 million. While this move aims to reduce annual operating expenses by approximately $1.0 million, it introduces short-term financial strain.
Market Conditions and Competition:
Market conditions are further influenced by a 12.2% decrease in the investment securities portfolio, totaling $76.4 million. The decline reflects broader market volatility and the company's response to changing economic conditions, necessitating adaptability in investment strategies.
Competition remains fierce, with processing fees showing only a 0.6% increase in Q3 2024, indicating potential market saturation. The company must continue to innovate and enhance service offerings to maintain its competitive edge.
| Financial Metrics | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Net Income | $2.9 million | $7.4 million | -60.3% |
| Cash and Cash Equivalents | $230.6 million | $372.5 million | -38.1% |
| Total Assets | $2.26 billion | $2.48 billion | -8.8% |
| Bad Debt Expense | $6.6 million | $0 | N/A |
| Provision for Credit Losses | $355,000 | -$335,000 | N/A |
Future Growth Prospects for Cass Information Systems, Inc. (CASS)
Future Growth Prospects for Cass Information Systems, Inc.
Analysis of Key Growth Drivers
The company is actively pursuing several growth drivers, including:
- Product Innovations: The introduction of CassPay, a B2B payment platform, aims to enhance transaction efficiency and increase market share in integrated payment solutions.
- Market Expansions: Expansion in facility-related services has been notable, with facility-related transaction volumes increasing by 26.3% in the third quarter of 2024 compared to the previous year.
- Acquisitions: Ongoing assessments for potential acquisitions that align with strategic goals are being considered to enhance service offerings and client base.
Future Revenue Growth Projections and Earnings Estimates
Revenue projections indicate a modest growth trajectory, with net revenue of $50.6 million reported for the third quarter of 2024, reflecting a 2.7% increase from the prior year. Over the nine months ending September 30, 2024, net revenues reached $148.8 million, up 1.4% year-over-year.
Earnings estimates suggest a decline, with net income for the third quarter of 2024 at $2.9 million, down 60.3% from the previous year. The diluted earnings per share for the same period was $0.21, a decrease of 61.1%.
Strategic Initiatives or Partnerships that May Drive Future Growth
The company is focusing on strategic partnerships to boost growth, particularly in technology enhancements and service integrations. These initiatives are expected to streamline operations and enhance client satisfaction, which could lead to increased transaction volumes and revenues.
Competitive Advantages that Position the Company for Growth
The following competitive advantages are pivotal for future growth:
- Established Market Presence: The company has a robust client base with established relationships in the transportation and facility processing sectors.
- Diverse Revenue Streams: The company generates income from various sources, including processing fees, financial fees, and net interest income, which totaled $50.0 million for the nine months ended September 30, 2024.
- Strong Liquidity Position: As of September 30, 2024, cash and cash equivalents were reported at $230.6 million, representing 10.2% of total assets, providing a solid foundation for future investments.
Financial Overview
The following table summarizes key financial metrics and growth indicators:
| Metric | Q3 2024 | Q3 2023 | % Change |
|---|---|---|---|
| Net Revenue | $50.6 million | $49.2 million | +2.7% |
| Net Income | $2.9 million | $7.4 million | -60.3% |
| Diluted EPS | $0.21 | $0.54 | -61.1% |
| Shareholders’ Equity | $237.6 million | $229.8 million | +3.1% |
| Total Assets | $2.26 billion | $2.48 billion | -8.8% |
Overall, the company's commitment to innovation, market expansion, and strategic partnerships positions it for potential growth despite current challenges in earnings performance.
Cass Information Systems, Inc. (CASS) DCF Excel Template
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Updated on 16 Nov 2024
Resources:
- Cass Information Systems, Inc. (CASS) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Cass Information Systems, Inc. (CASS)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Cass Information Systems, Inc. (CASS)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.