Half a year after I first began writing about the half-dozen or so companies engaged in facilitating online banking and bill-paying, the market is sending a clear signal on which of these companies it considers "winners" and which . well, not so much.
Last month, we saw yet another pair of wonderful results -- and resulting stock-price boosts -- accorded to the twin powerhouses of small-bank software services: Digital Insight (NASDAQ:DGIN) and Online Resources (NASDAQ:ORCC). Contrast those results with the news out of the two companies that reported earnings last week: Corillian (NASDAQ:CORI) and S1 (NASDAQ:SONE), and the market's verdicts are clear: Serving smaller banks is more profitable than serving larger ones, smooth revenues are better than lumpy ones, and profits are better than losses.
Corillian reported its first quarterly loss in two and a half years, if only just barely. The company lost $60,000 net, or $0.00 per share for the quarter, down from $0.08 in earnings per share one year ago. Year-to-date, that leaves Corillian stuck right about where it was three months ago, at $0.07 per share in profits, down from $0.18 by this time last year. Bad as that news was, things look even worse from a cash flow perspective. Corillian has experienced $4.3 million in negative free cash flow so far this year, quite a reversal from last year's $6.7 million in positive free cash flow.
For its part, S1 did worse under generally accepted accounting principles and a bit better on cash flow. On its income statement, the company reported losing $0.11 per share in Q3 2005, versus a $0.04 per share in profit during Q3 2004. Like Corillian, S1 has been burning cash this year, albeit not quite at last year's frenetic pace. The first nine months of 2005 had S1 generating $3.9 million in cash from operations, but after spending $5.7 million on capital expenditures, it was left with negative free cash flow of $1.8 million -- a considerable improvement over last year's $19.4 million in burnt cash.
The two companies are taking different approaches in dealing with the PR ramifications of their Q3 losses. After this, its first earnings miss in three years, Corillian got right back in the saddle and forecast earnings of no more than $0.04 next quarter -- and thus, at best, a 50% year-over-year decline. In contrast, after issuing a series of earnings warnings that somehow proved optimistic (S1 actually lost a penny more than it had predicted), S1 finally admitted that its crystal ball was cracked and resolved to no longer issue forward guidance at all.
For related Foolishness, read:
- S1's Earnings Snafu
- Fools Want to Know, With Digital Insight
- Sybase's Switcheroo
- Corillian Still on Track
Fool contributor Rich Smith owns shares of Corillian. The Motley Fool has a disclosure policy.
