Corillian Corp. of Portland, Ore., reported solid fourth-quarter and full-year earnings on Wednesday but said that it had missed its internal sales targets for the year.
Alex Hart, its president and chief executive, said he wants to land at least one big new customer and three midsize ones every year. And Thursday it announced a sale to a midsize client.
The online banking software company said Security Service Federal Credit Union of San Antonio, which has more than $3.5 billion of assets and 550,000 members, will use its consumer banking software.
Corillian said Wednesday that a shortage of recent contracts with midsize banking companies would curb earnings in the first half of this year. The statement led to a downgrade of its stock Thursday.
The company signed a banking giant, Wachovia Corp., in July, but “we did not have any midsize deals last year to speak of,” Mr. Hart said in an interview after its fourth-quarter earnings conference call.
During the call he spoke of two missed opportunities last year. One was a deal with Bank of China, which instead chose software from Digital China Software Ltd. and Financial Fusion Inc.
Mr. Hart said Sybase Inc.’s Financial Fusion in Concord, Mass., and S1 Corp. of Atlanta are Corillian’s biggest competition for midsize banks, as is software developed in-house for large-bank contracts.
Corillian’s fourth-quarter net income rose 57% from a year earlier, to $3.3 million, while revenue rose 8%, to $13.2 million. Full year net income rose 106%, to $10.5 million, while revenue grew 10%, to $50.8 million.
John Kraft, a D.A. Davidson & Co. analyst who owns Corillian stock, said the company met his expectations for the fourth quarter. For large banks, Corillian is “the best and almost the only game in town,” he said.
But he downgraded the stock to “neutral,” from “buy,” because of revenue expectations. “We’ve been kind of hopeful that the sales pipeline and the number of deals would pick up, and it doesn’t look like we had hoped,” he said.
“What the market has expected them to do is to hit home runs — to make the big deals,” Mr. Kraft said. In the coming year “what I think they want to do is hit a bunch of singles.”
Mr. Hart said he wants to motivate Corillian’s sales force by becoming more involved in marketing this year. During the conference call he praised his new-accounts salespeople, whom he called “hunters.” (He called the salesperson who signed Wachovia “an elephant hunter.”) However, he also said they could benefit from more of his personal attention, particularly in selling to midtier banks.
He also said that he has been involved in every big sale for the past five years and in all of Corillian’s sales since becoming the CEO in October 2002. Making himself more visible in marketing should cause sales to pick up in the second half, he said.
Mr. Kraft said Mr. Hart’s increased involvement could help sales. “Investors have been frustrated that there haven’t been more deals signed,” and Mr. Hart had to do something, he said. “He needs to get directly involved.”
Mr. Hart said that Corillian’s Fraud Detection System, which was introduced in July to combat the growing threat of phishing, could appeal to nonbanks as well, though all of the customers to date have been banking companies.
Many companies offer software that detects the fake e-mails used in phishing scams and helps track down the fake Web sites that the e-mails ask people to visit. Corillian’s product, though, tries to spot criminals during their research phase — while they are examining a legitimate banking site to learn how to duplicate it.
The software has also stopped other types of crime, Mr. Hart said. One bank found someone looking for branch floor plans and employment postings because he wanted to land a job at the bank and then rob it. “He was electronically casing the joint.”
Nonbanks are intrigued by the idea that criminals tend to have different Web-surfing habits than legitimate customers, according to Mr. Hart.
He said he is trying to sell Corillian software to online dating and Internet service companies and online merchants.
“Almost anything you can buy with a credit card or PayPal online is a category where people are intrigued by what we do,” he said.
