Slow third-quarter sales at the payments technology vendor Carreker Corp. kept earnings close to break-even, but the company, which is shopping itself, said it expects better results next year.
John D. "Denny" Carreker, the chairman and chief executive, said in a conference call with analysts Thursday that banks will probably step up purchases of the Dallas company's next-generation software products and services.
Analysts agreed that the outlook is stronger and said that increases the company's chances of getting a good price in a sale.
Carreker reported a loss of $89,000, or less than a penny per share, for its fiscal third quarter, which ended Oct. 31, after posting a second-quarter profit of $961,000, or 4 cents a share. Carreker reports its results sequentially rather than year over year, but compared with the like quarter of fiscal 2005, the third-quarter loss narrowed from $950,000, or 4 cents a share.
Revenue was $28.3 million, down 2% from the second quarter and down less than 1% from the third quarter of 2005.
Excluding noncash items, Carreker's adjusted profit was 8 cents, topping analysts' projection by 5 cents.
Mr. Carreker emphasized the company's brightening outlook but would say little about its efforts to sell itself. "We continue to make progress with this review," he said during the call and pledged to make a decision that "adds value for all our stakeholders."
He did not give a time frame for making a decision but acknowledged that the uncertainties about the future had affected the company, especially its global payments consulting practice. Carreker has named to its board at least two shareholders who had agitated for a sale of the company, and it disclosed in June that it had hired investment bankers last year to evaluate alternatives.
"Our strategic-alternatives process has impacted GPC's ability to focus on sales and to attract and retain consultants," Mr. Carreker said. Some of those consultants, who specialize in the complex area of payments processing, are being lured away by banks, which are seeking ways to cut costs and increase sales as checks decline and electronic payments grow.
Coincidentally, Mr. Carreker said, two large-bank clients delayed until next year consulting projects that had been scheduled to begin in the third fiscal quarter. He attributed the delays to the banks' own priorities and allocation of resources.
In September the company announced that a top-five global bank had licensed its Fraud Manager software, the first customer for that product, and that it had begun providing float management services to several U.S. financial institutions to make their payment processing more efficient and less costly. It did not name any of the customers, but Mr. Carreker said the initial sales should encourage other banks to sign on as well.
In addition, the company won a contract in November to put its check imaging software into automated teller machines from Diebold Inc., after landing a source-capture deal with International Business Machines Corp.
Mr. Carreker described the hardware makers as "thoughtful companies that put you through a lot of rigor before they front for you," which he termed a vote of confidence in his products.
He projected that two-thirds of Carreker's fourth-quarter licensing sales would be for products that did not exist in 2004, when the company began developing systems for the electronic payments business, including check imaging.
George F. Sutton, an analyst at Craig-Hallum Capital Group LLC of Minneapolis, said Carreker's improving outlook could increase its value to potential buyers. "We expect a deal, expect a premium price, and believe the stock should be particularly attractive" to investors who buy ahead of an announcement, Mr. Sutton said in a Friday note to clients.
Justin Cable, an analyst at B. Riley & Co. of Los Angeles, also sounded bullish.
"While we are modeling 5.5% growth to be conservative, we believe the potential is for double-digit revenue growth if the company's growth strategy plays out," Mr. Cable said in a note. In addition, he said, "Management appears to be fully committed to delivering an outcome from the process of evaluating strategic alternatives that delivers value to shareholders, as indicated in both the press release and conference call. Thus, we could see a sale of the company in the near-term."
