Carreker Corp., which has struggled to cash in on the growth in check imaging, plans to build consulting and other parts of its business and to market to industries outside banking, its chairman said.
J.D. "Denny" Carreker, who is also the Dallas company's chief executive, said Monday, "Our financial results underperformed our expectations" in 2005, but "we have true momentum" now.
Carreker announced results for the three months and fiscal year that ended Jan. 31 on Monday; it was supposed to report in mid-March but postponed because of an accounting error related to deferred revenue. It had said last week that its financial problems were more far-reaching than it had previously reported.
The accounting mishap - a customer's software maintenance revenue was recognized twice during the fiscal year that ended Jan. 31, 2004 - arose during an October 2002 accounting system conversion. To correct the error Carreker had to remove $2 million of revenue from its 2004 reports. Its current accounting practices would not have produced that error, it said.
Carreker, which had a loss of $1.1 million in year-earlier quarter, reported that its net income for the three months that ended Jan. 31 of this year was $1.5 million, or 6 cents a share. Revenue rose 4%, to $30.1 million. For the full fiscal year its net income was $2.1 million, compared with a net loss of $1.2 million in fiscal 2004. Revenue for the 12 months dropped 2%, to $116.6 million.
During a Monday conference call with analysts, Mr. Carreker said that executives recognized as long ago as late 2004 that the company's check imaging products were not selling as well as they had expected. The Check Clearing for the 21st Century Act went into effect Oct. 28, 2004, and allowed banks to exchange printouts of check images in place of the original checks.
There were enough early adopters to keep image exchange progressing, but they were not all buying their technology from his company, Mr. Carreker said. "While the market for many of our Check 21 solutions grew in 2005, it did so at a much more cautious pace than we anticipated, and the competition was strong," he said.
To adapt, Carreker is building its other lines, such as consulting. It hopes its offerings will appeal to nonbanks in the financial industry. "Our problem is we don't know the people in the other verticals, so what we need is an alliance or a partnership," Mr. Carreker said.
He said he does not intend to completely shift focus away from banks. His company plans soon to announce a back-office deal with a top-10 bank and another deal with a major bank processor.
"We are gaining market momentum," Mr. Carreker said. "We'll be among the market-share leaders in many of the core Check 21 spaces coming out of this year."
