Credit Management Solutions Inc., in the wake of disappointing earnings, is seeking a buyer or equity partner to help shore up its flagging stock price.

The provider of credit decision software has hired Friedman, Billings, Ramsey & Co. to help it explore options and "do the right thing to maximize value to our shareholders," said Peter M. Leger, who became the software vendor's president and chief operating officer in October.

Since the 11-year-old company went public nearly two years ago, "we've realized we were always going to be subject to takeover talks," Mr. Leger said.

Last year the Columbia, Md., company had revenue of $17.2 million, up from $14.3 million in 1996. But it lost $3.7 million, or 49 cents a share in 1997, compared to net income of $300,000, or 5 cents a share, for 1996.

The losses have continued in 1998, hitting $5.7 million, or 75 cents a share, for the first nine months, compared with a loss of $2.4 million, or 31 cents a share, a year earlier. Revenues were $11.6 million, compared with $11.7 million in the first nine months of 1997.

The company's stock price closed Friday at TK, up/down TK from its initial offering price of TK.

So far, the search for a buyer has turned up two companies that are "very much involved in looking at us," Mr. Leger said. CMSI hopes to conclude a deal by yearend, he said.

Bill Boyan, senior vice president of Friedman, Billings, Ramsey, said CMSI has been criticized because it has not yet broken even. "It will break even in the first quarter," he predicted.

Though the company is "poised" to enter a strategic partnership with another company, he said, "if it wants to go it alone, it will have a lot of success."

It has sold CreditRevue, its flagship consumer credit origination and processing software, to seven customers in the second half of this year. Thirty lenders have bought its patented CreditConnection network service that electronically connects auto dealers with multiple financing sources.

CMSI plays middleman "very well" to lenders, dealers, and customers through CreditConnection, Mr. Boyan said. The service is continuing "to gain a lot of steam," and the company "is adding dealers to its network at a rapid rate."

Mr. Leger, a director of CMSI since December 1996, was previously president of the dealer services group at Automatic Data Processing. James R. DeFrancesco remains CMSI's chairman and chief executive officer.

The company's "fundamental strategy is to emphasize growth" in its three main businesses, Mr. Leger said. He said he expects the CreditRevue credit decision software business to grow by 20% to 25% in the next year and the CreditConnection service to sign up more car dealerships.

He also wants to expand CMSI's service bureau business. In this area it has an alliance with Dun & Bradstreet Inc. to jointly develop and promote OneScore, a small-business credit scoring product being used by 250 businesses.

The company is not being diverted "or moving away from the strategic program we have in place for the next 12 to 24 months," Mr. Leger said. "We're going to execute against our plans, and the stock price will take care of itself."

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