InteliData Technologies Corp., struggling to find customers for its bill-payment software and related products, fell short of its own projections in the fourth quarter.
But executives said they are still optimistic that banks will choose their systems to control costs as free online bill-payment gains ground with consumers.
On Thursday the Reston, Va., company posted a net loss for the quarter of $873,000, or 2 cents per share, up from $200,000 a year earlier. Revenue fell 18%, to $4.4 million.
The full-year net loss narrowed by 81%, to $1.6 million, or 3 cents per share, as revenue fell 4%, to $20.6 million. In September the company had predicted a full-year net profit on revenue of $22 million.
Chairman and chief executive Alfred S. Dominick Jr. said InteliData's problems have been the same for some time: CheckFree Corp. of Atlanta is the market leader in electronic bill payment and a formidable competitor; the market for online banking and bill-pay software has matured to the point that most vendors are simply fighting to steal share; and many banks have learned the hard way that relying on Internet banking vendors that fail can be costly.
Consequently, Mr. Dominick said, banks are taking their time before committing to vendor contracts. The more they learn "the more they discover they need to learn some more," he said in an interview Friday. "It's not just a technology decision; it becomes a customer-care decision … an infrastructure decision."
It also becomes a question of in-house versus outsourcing.
Mr. Dominick argues that to remain competitive in offering free bill payment while controlling costs, financial institutions must bring electronic bill payment and presentment in-house. But Bank of America Corp., the largest banking company in the online billing world, outsources its entire EBPP service to CheckFree. And enrollment in B of A's offering has skyrocketed since charges were eliminated in May 2002.
But B of A's case is an exception, Mr. Dominick said. The Charlotte giant "got a deal that couldn't be replicated by anybody else."
Three and a half years ago, Mr. Dominick said, InteliData decided to focus on online bill payment. It though that developing market would provide more opportunities than the crowded Internet banking business, he said.
But now, as expected, the online bill payment market has also matured, Mr. Dominick said. New business remains elusive, he said, and InteliData's revenues eroded as customers shifted from per-transaction to fixed-rate pricing.
Last year First Hawaiian Bank and Bank of the West, the biggest users of InteliData's own outsourced bill payment service, converted to a licensed-software deal with InteliData. (The two banks are owned by the French giant BNP Paribas.) The switch cost InteliData about $3 million in 2003 revenue, he said.
Similar "deconversions" this year by two other customers are likely to have a similar effect, Mr. Dominick said. The two are Associated Banc-Corp of Green Bay, Wis., its largest remaining application service client, and Cullen/Frost Bankers Inc. of San Antonio.
But there is a silver lining for InteliData in the Cullen/Frost switch, Mr. Dominick said. Frost Bank will run InteliData's software on a server computer rather than a mainframe, demonstrating that midsize institutions can manage in-house e-payment systems.
"I think you will be pleasantly surprised by what they are going to be able to do and in what time frame," Mr. Dominick said. Frost's move could encourage other banks to make a commitment to InteliData's bill payment software.
That said, the company has lowered its sights for this year. Instead of the $22 million to $30 million of revenue it projected in November, it now predicts something "in line" with last year's $20.6 million. As for profits, the November forecast of 8 cents per share at the midpoint of the projected revenue range has turned into an assertion that the company remains focused on achieving bottom line profitability this year.
The new guidance could prove conservative if InteliData closes some pending sales, chief financial officer John R. Polchin said Thursday during an earnings conference call. However, "it is prudent to allow those opportunities to occur as upside rather than incorporating them into expectations," he said.
InteliData's stock closed at $1.50 on Friday, down 1% for the week.
