Notable items during the quarter include:
-- Q3 revenue was approximately $1 million higher than Q2 04.
-- The Company experienced increases in all revenue categories, except
consulting revenue, in comparison to Q2 04.
-- SG&A expenses decreased by approximately $650,000 from Q2 04.
-- Contracted sales in Q3 decreased significantly from Q2 04.
-- KeyCorp and Wells Fargo accepted and deployed Carreker software for
image exchange and image quality.
-- Coley Clark, retired EDS Executive, and Gregory B. Tomlinson, retired
"Big Four" Audit Partner, joined Carreker Board of Directors.
"For the second half of
2004 and the first half
of 2005, we will have more
products released or scheduled
for release than at any
other comparable time in
the Company's history.
Complex buying decisions
and continued high levels
of competition are causing
some delays though we are
encouraged by the growth
in our qualified sales
opportunities," said J.
D. (Denny) Carreker, Chairman
and Chief Executive Officer
of Carreker Corporation.
Third quarter 2004 revenue
was $30.6 million as compared
to the second quarter 2004
revenue of $29.6 million
and revenue of $31.4 million
in the third quarter 2003.
In the third quarter 2004,
the Company experienced
increases over second quarter
2004 in all revenue categories,
except consulting, with
revenue from software license,
maintenance and implementation
fees each increasing by
approximately $1 million.
Software license, maintenance,
and implementation fees
all decreased in third
quarter 2004 relative to
third quarter 2003 but
were partially offset by
increased consulting revenue.
Third quarter 2004 operating
income of $366,000 decreased
in comparison to the $631,000
reported for the second
quarter 2004 and the $1.4
million operating income
in the third quarter 2003.
The decrease in third quarter
2004 relative to second
quarter 2004 was due, in
part, to increases in cost
of revenue and R&D
expenses in third quarter
2004. The increases in
these expenses more than
offset the favorable impact
of higher revenue and decreased
SG&A expenses in third
quarter 2004. Contributing
to the decrease in operating
income from third quarter
2003 to third quarter 2004
were higher third quarter
2003 revenues, increased
research and development
expense in third quarter
2004, and a $540,000 benefit
in third quarter 2003 recorded
in other operating costs
related to the reversal
of certain merger costs
where actual costs were
lower than the estimated
amounts.
Net income for the third
quarter 2004 was $513,000,
or $0.02 earnings per diluted
share, as compared to second
quarter 2004 net income
of $199,000, or $.01 per
diluted share, and third
quarter 2003 net income
of $1.3 million, or $0.05
per diluted share.
Guidance
Although the Company had
anticipated that the strong
contracted sales in the
GPT business segment in
the second quarter would
continue in the third quarter,
that trend did not materialize
as delays in decision making
by clients contributed
to softness in contracted
sales in third quarter.
The fourth quarter 2004
outlook remains very sensitive
to the volume and timing
of sales, product delivery,
client implementation schedules
and client-dependent timing
on a small number of engagements
in our Revenue Enhancement
business segment. We expect
revenues for the fourth
quarter to be flat to slightly
down and operating profit
to be approximately break-even
or slightly negative. During
the third quarter, the
Company qualified an increased
number of Check 21 and
other potential sales opportunities
and anticipates that contract
sales will improve in the
fourth quarter and beyond
as an expanded array of
new products becomes available.
Accordingly, the Company
believes this will result
in revenue growth in 2005.
Conference Call
Management has scheduled
a conference call tomorrow,
Wednesday, December 8,
2004, at 11:00 a.m. Eastern
Time. The conference call
is intended to provide
a forum for a discussion
of the Company's third
quarter fiscal 2004 financial
results, business conditions,
industry trends and other
points of interest to investors.
To join the conference
call, domestic participants
dial 800-901-5241, international
participants dial 617-786-2963.
All participants enter
the passcode 39632178.
A replay of the call will
be available on Wednesday,
December 8 from 1:00 p.m.
Eastern Time through Wednesday,
December 15 at 11:45 p.m.
Eastern Time. To access
the replay, domestic participants
dial 888-286-8010, international
participants dial 617-801-6888.
All replay participants
enter the passcode 59294914.
A live webcast of the conference
call, as well as the archive
webcast, will be available
through the investor relations
(IR) section of the Company's
website at http://ir.carreker.com
.
About Carreker Corporation
Carreker Corporation improves
earnings for financial
institutions around the
world. The Company's integrated
consulting and software
solutions are designed
to increase clients' revenues
and reduce their expenses,
while improving security
and increasing the value
of their customer relationships.
Carreker provides products
and services to more than
250 clients in the United
States, Canada, the United
Kingdom, Ireland, continental
Europe, Australia, New
Zealand, South Africa,
South America, Mexico,
and the Caribbean. Clients
include the full range
of community, regional
and large banks, among
them more than 75 of the
largest 100 banks in the
United States. Headquartered
in Dallas, Texas since
1978, Carreker Corporation
has offices in London and
Sydney. For more information,
visit http://www.carreker.com
.
Forward Looking Statements
- Except for historical
information, the statements
in this release, including
statements regarding future
financial performance,
constitute forward-looking
statements within the meaning
of the federal securities
laws. These statements
are subject to numerous
risks and uncertainties
that could cause actual
results to differ materially,
including but not limited
to the volatility in the
Company's common stock
price, as well as the risks
and uncertainties arising
out of economic, competitive,
governmental and technological
factors affecting the Company's
operations, markets, services,
products, sales, potential
sales and prices. For further
information concerning
certain of these risks
and uncertainties, see
under the caption "Business-Forward
Looking Statements and
Risk Factors" in the Company's
most recent Form 10-K for
the year ended January
31, 2004 and "Management's
Discussion and Analysis" in
subsequent quarterly reports
on Form 10-Q. We assume
no obligation to update
or revise any forward-looking
statements, whether as
a result of new information,
future events or otherwise,
except as may be required
by law.
CARREKER CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except per share amounts)
ASSETS
October 31, January 31,
2004 2004
Current assets
Cash and cash equivalents $26,787 $28,605
Accounts receivable, net of allowance of
$667 and $1,512 at October 31, 2004 and
January 31, 2004, respectively 11,950 21,751
Prepaid expenses and other current assets 2,913 3,331
Total current assets 41,650 53,687
Property and equipment, net of accumulated
depreciation of $19,480 and $17,140 at
October 31, 2004 and January 31, 2004,
respectively 6,918 6,690
Capitalized software costs, net of
accumulated amortization of $12,197 and
$11,050 at October 31, 2004 and
January 31, 2004, respectively 3,083 2,028
Acquired developed technology, net of
accumulated amortization of $14,618 and
$11,153 at October 31, 2004 and
January 31, 2004, respectively 11,082 14,547
Goodwill, net of accumulated amortization of
$3,405 at October 31, 2004 and
January 31, 2004 20,765 21,193
Customer relationships, net of accumulated
amortization of $4,783 and $3,733 at
October 31, 2004 and January 31, 2004,
respectively 3,617 4,667
Deferred loan costs, net of accumulated
amortization of $1,232 and $1,028 at
October 31, 2004 and January 31, 2004,
respectively 476 680
Other assets 1,036 1,087
Total assets $88,627 $104,579
Current liabilities
Accounts payable $1,151 $913
Accrued compensation and benefits 7,159 9,219
Other accrued expenses 3,274 4,520
Income tax payable 222 181
Deferred revenue 17,566 25,231
Accrued merger and restructuring costs 594 1,898
Total current liabilities 29,966 41,962
Long-term debt --- 6,250
Other long-term liabilities 481 49
Total liabilities 30,447 48,261
Commitments and Contingencies
Stockholders' equity
Preferred stock, $.01 par value:
2,000 shares authorized; no shares
issued or outstanding --- ---
Common stock, $.01 par value:
100,000 shares authorized; 24,848 and
24,357 shares issued at October 31, 2004 and
January 31, 2004, respectively 249 244
Additional paid-in capital 110,714 108,757
Accumulated deficit (52,780) (52,680)
Less treasury stock, at cost: 1 common share
at October 31, 2004 and January 31, 2004 (3) (3)
Total stockholders' equity 58,180 56,318
Total liabilities and stockholders' equity $88,627 $104,579
CARREKER CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
October 31, October 31,
2004 2003 2004 2003
Revenues:
Consulting fees $7,930 $6,396 $27,501 $21,349
Software license fees 5,701 7,026 16,134 21,955
Software maintenance fees 11,491 11,770 32,807 34,764
Software implementation fees 4,622 4,983 11,143 14,385
Outsourcing service fees 50 --- 60 ---
Out-of-pocket expense
reimbursements 813 1,228 2,365 3,367
Total revenues 30,607 31,403 90,010 95,820
Cost of revenues:
Consulting fees 4,555 4,936 14,166 15,193
Software license fees 2,503 2,037 5,771 5,662
Software maintenance fees 3,765 3,600 10,949 9,910
Software implementation fees 4,002 4,485 11,181 14,398
Outsourcing service fees 222 --- 236 ---
Out-of-pocket expenses 738 1,122 2,333 3,413
Total cost of revenues 15,785 16,180 44,636 48,576
Gross profit 14,822 15,223 45,374 47,244
Operating costs and expenses:
Selling, general and
administrative 11,320 11,797 35,483 36,267
Research and development 2,520 1,876 6,102 5,522
Amortization of customer
relationships 350 350 1,050 1,050
Restructuring and other
charges 266 (229) 2,978 1,233
Total operating costs
and expenses 14,456 13,794 45,613 44,072
Income (loss) from operations 366 1,429 (239) 3,172
Other income (expense):
Interest income 92 69 207 223
Interest expense (106) (234) (336) (991)
Other income 275 219 732 269
Total other income (expense) 261 54 603 (499)
Income before provision for
income taxes 627 1,483 364 2,673
Provision for income taxes 114 146 464 372
Net income (loss) $513 $1,337 $(100) $2,301
Basic earnings (loss)
per share $0.02 $0.06 $0.00 $0.10
Diluted earnings (loss)
per share $0.02 $0.05 $0.00 $0.10
Shares used in computing
basic earnings (loss)
per share 24,821 23,812 24,623 23,635
Shares used in computing
diluted earnings (loss)
per share 25,589 24,645 24,623 23,820
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