The Hillsboro, Ore., technology vendor Corillian Corp. reported a decline in its second-quarter results (which still beat its guidance) and said it is pilot testing a security product it hopes to cross-sell to online banking customers.
Net income fell 9% from the same quarter last year, to $2.1 million, or 5 cents per diluted share, Corillian said Thursday. Revenue dipped 1%, to $12.3 million.
In previous guidance, it had said it expected to post revenue of between $11 million and $12 million, as well as earnings of 2 to 4 cents a share.
The results were a stark improvement from the first quarter, when delays in a large online banking project with Wachovia Corp. drove Corillian's net income down 64% from a year earlier, to $654,000.
Alex Hart, Corillian's president and chief executive, said during a conference call with analysts Thursday that its role in the Wachovia implementation is over.
"Our toughest days are behind us," he said.
In an interview Friday, Mr. Hart said that Corillian already has a customer for its new Intelligent Authentication software. A large credit union, which he would not name, is installing it now.
Intelligent Authentication is designed to prevent unauthorized people from using a company's systems. Like Corillian's other online security product, Fraud Detection, Intelligent Authentication can be sold to companies that are not using Corillian's online banking platform, including nonbanks.
"There are a number of people that aren't even in the bank business who are very interested in this," Mr. Hart said.
Corillian plans to sell its anti-fraud products directly to banks and through partners to nonbanks, he said.
The authentication software does not require customers to use additional hardware or software, he said. It evaluates a customer's behavior, including the computer's characteristics and the types of transactions initiated online. If something seems unusual, the bank can call the customer and ask one or more of 20 pre-registered challenge questions to verify the customer's identity.
"It's not unlike someone who uses a credit card in a foreign country - they're going to get a phone call," he said.
During the conference call, Corillian also announced that it had signed up five more financial institution customers (which it would not name) for its Fraud Detection software, which Citigroup Inc. agreed to use in the first quarter. The software evaluates Web surfing habits to determine if criminals are visiting a bank's Web site to create an imposter site that could be used as part of an online scam.
Mr. Hart said that his company's deal to acquire the Reston, Va., online bill payment software vendor InteliData Technologies Corp. remains on track, despite InteliData's recent admission to the Securities and Exchange Commission that its accounting is not adequate and that its financial reports may contain errors.
John Kraft, an analyst with the investment firm D.A. Davidson & Co. in Great Falls, Mont., who owns shares of Corillian, said it seems to be recovering from the damage caused by the first-quarter delay in the Wachovia project. "Clearly, they didn't blow up."
Avivah Litan, a vice president and research director at the Stamford, Conn., market research company Gartner Inc., said Corillian may have trouble marketing its anti-fraud products.
"There's just a bias against online banking vendors having the best solutions, because it's not what they do for a living," she said. "They certainly have very smart engineers, but they still have to prove to the market that they can make security products as well as the security companies. The jury's just still out."
Still, Corillian will probably find takers for its new authentication product, Ms. Litan said.
"They'll definitely get interest in it," she said. "It sounds like a terrific idea."
