Sometimes a small loss is a big gain.
Smaller-than-expected earnings losses at Corillian Corp., the Internet banking vendor, came as a relief to most of its investors - and probably to its customers.
Corillian chief executive officer Alex Hart was decidedly upbeat in spreading the news to analysts Wednesday. "These are the best results in our company's history," he said. They "demonstrate that we have successfully managed the company during one of the worst IT spending downturns in history."
The company cut 40 jobs in June; that, on top of 100 layoffs the previous October, left 246 on staff. Even two months ago there were serious concerns about Corillian's ability to expand its business.
But fourth-quarter revenue was up 1%, to $10.1 million, and cash flow increased $3.5 million, to $17.6 million. Corillian posted a positive EBITDA for the first time in its three years as a public company.
"They've proven they're not going away," said John Kraft, an analyst at Davidson & Co. in Great Falls, Mont. "Corillian finally got its costs in line and a positive cash flow. They found a sustainability that a lot of people did not expect them to find."
For the year, Corillian's revenues fell 27% to $39.1 million; the biggest hit was an $8.4 million decline in its international business. It maintained accounts with three of Malaysia's largest banks but floundered in Europe.
European banks "are a little behind in using third-party software," said Steve Sipowicz, Corillian's chief financial officer, in an interview Friday. "They're more focused on doing it themselves. … If we were going to attack that market this year, we would need a lot of resources to build an infrastructure there."
Instead the company will focus on operations in this country, where revenue was essentially flat last year. "The European and international markets are generally a good idea for us, but they're a couple of years away," Mr. Sipowicz said.
Alenka Grealish, the manager of the banking group at the Boston research firm Celent Corp., said, "Part of the challenge is that there isn't a 'European' market' " but rather a collection of individual country markets. "When you have to differentiate within your product, all of a sudden it's not scaleable anymore, unless you bag the biggest banks," she said.
Hatcher Associates, Corillian's consulting arm, accounted for most of the rest of its loss; the unit's full-year revenue fell $6 million, to around $2 million. Hatcher, which handles software integration, was acquired in late 2000.
Corillian does not expect to add many clients this year. Mr. Hart said current customers should provide enough business to ensure a 10% to 15% revenue increase, though the first quarter is expected to be flat.
"Customers such as Washington Mutual, Bank One, Comerica, and J.P. Morgan Chase" - who use its Voyager platform - "recognize that the online channel is strategically critical," Mr. Hart said at the conference.
He then took a swipe at competitors who lure clients with lower prices.
"We are confident that other forward-thinking financial institutions will be reluctant to select an unproven solution from a vendor that doesn't have Corillian's track record of execution," he said. "It's too risky and ultimately too costly, no matter how low the initial price tag."
