CANI Carreker Corp (MM)

DALLAS, Dec. 7 /PRNewswire-FirstCall/ -- Carreker Corporation (NASDAQ:CANI), a leading provider of payments technology and consulting solutions for the financial services industry, today reported financial results for its third quarter ended October 31, 2006. The Company reported revenue of $28.3 million and a net loss of $89,000, or $0.00 per share, for the third quarter of 2006 compared to revenue of $28.8 million and net income of $961,000, or $0.04 per share, for the second quarter of 2006. During the three-month periods ended October 31, 2006 and July 31, 2006 the Company recorded amortization associated with certain acquisition-related intangible assets of approximately $1.3 million and $1.4 million, respectively. Additionally, the Company recorded equity-based compensation expense of approximately $654,000 and $627,000 during the three-month periods ended October 31, 2006 and July 31, 2006, respectively. Excluding the aforementioned non-cash expense items, non-GAAP net income for the three months ended October 31, 2006 was $1.9 million, or $0.08 per diluted share, compared with non-GAAP net income of $3.0 million, or $0.12 per diluted share, for the three months ended July 31, 2006. "While our third quarter results were lower than anticipated, we are encouraged by both the current sales activity in our primary business units and market acceptance of our products and services, which continue to reassure us of their design and direction," said J.D. (Denny) Carreker, Chairman and Chief Executive Officer of Carreker Corporation. "We continue to invest in new products and product enhancements and also continue to establish alliances and cultivate relationships with technology market leaders to enhance our market position. Additionally, we continue to progress with our evaluation of strategic alternatives and are focused on delivering an outcome from this process that delivers value to all of our stakeholders." Business Outlook Carreker expects that revenue and net income for the fourth quarter of fiscal 2006 will be the highest of any quarter of the 2006 fiscal year though the increase is not expected to be significant enough for the Company to achieve the 9 to 16% Income from Operations goal that it had previously set for the fourth quarter of 2006. Full year revenue for fiscal 2006 is expected to be relatively flat compared to fiscal 2005 but with improved profitability. The Company anticipates achieving the target of 9 to 16% Income from Operations in fiscal 2007 with year over year sales backlog growth and current sales activity positioning the Company for both revenue growth and improved profitability in fiscal 2007. Conference Call Carreker's management will host a conference call and live Web cast today, Thursday, December 7, 2006, at 11:00 a.m. Eastern Time to discuss the Company's financial results for the third quarter of fiscal year 2006. At that time, the Company will provide an overview of business conditions, industry trends and other points of interest. To join the conference call, Domestic participants dial 866-348-8664; International participants dial 706-679-0430. All participants enter code 2836462. Additionally, a live Web cast of the conference call will be available through the investor relations section of the Company's Web site at http://ir.carreker.com/ . A replay of the call will be available from Thursday, December 7, 2006 at 2:00 p.m. Eastern Time to Thursday, December 14, 2006 at 11:59 p.m. Eastern Time. To access the replay, Domestic participants dial 800-642-1687; International participants dial 706-645-9291. All replay participants enter code 2836462. An archived version of the Web cast will be available through the investor relations section of the Company's Web site at http://ir.carreker.com/ . Non-GAAP Financial Measures Carreker has included supplemental non-GAAP financial measures as part of this earnings release. The non-GAAP financial measures exclude from GAAP net income both the amortization of acquisition-related intangibles and equity- based compensation expense. These adjustments to Carreker's GAAP results are made with the intent of providing useful information to management and investors regarding Carreker's underlying operational results and performance in the marketplace. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with generally accepted accounting principles ("GAAP") in the United States. A reconciliation of GAAP to non-GAAP results for the three- month periods ended October 31, 2006 and July 31, 2006, respectively, is as follows: Three Months Three Months ended ended October 31, July 31, 2006 2006 ($ in 000s, other than per share figures) GAAP Net Income (Loss) $(89) $961 Stock Option Expense $351 $340 Restricted Stock Expense $303 $287 Amortization of Acquisition-related Intangible Assets $1,333 $1,419 Non-GAAP Net Income $1,898 $3,007 Diluted net income (loss) per share on a GAAP basis $0.00 $0.04 Stock Option Expense $0.01 $0.01 Restricted Stock Expense $0.01 $0.01 Amortization of Acquisition-related Intangible Assets $0.05 $0.06 Diluted net income per share on a Non-GAAP basis $0.08(A) $0.12 Notes: (A) Figures do not add due to rounding. 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 customer acceptance of new product introductions, the timing of revenue from contracted sales, the timing of expected sales of products, the results of our exploration of strategic alternatives and 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 "Risk Factors" in the Company's most recent Form 10-K for the year ended January 31, 2006 and 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. 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/ . CARREKER CORPORATION Condensed Consolidated Statements of Operations (Unaudited) (In thousands, except per share amounts) Three Months Ended October 31, July 31, 2006 2006 Revenues: Consulting $8,939 $6,839 Software license 2,864 5,493 Software maintenance 11,198 10,899 Software implementation and other services 3,876 4,249 Outsourcing services 511 530 Out-of-pocket expense reimbursements 887 793 Total revenues 28,275 28,803 Cost of revenues: Consulting 5,154 4,798 Software license 1,985 1,885 Software maintenance 3,154 3,189 Software implementation and other services 3,167 2,938 Outsourcing services 414 514 Out-of-pocket expenses 960 774 Total cost of revenues 14,834 14,098 Gross profit 13,441 14,705 Operating costs and expenses: Selling, general and administrative 11,087 11,423 Research and development 2,519 2,453 Amortization of customer relationships 350 350 Total operating costs and expenses 13,956 14,226 Income (loss) from operations (515) 479 Other income (expense): Interest income 392 407 Interest expense --- (106) Other income 134 315 Total other income, net 526 616 Income before provision for income taxes 11 1,095 Provision for income taxes 100 134 Net income (loss) $(89) $961 Basic earnings (loss) per share $0.00 $0.04 Diluted earnings (loss) per share $0.00 $0.04 Shares used in computing basic earnings (loss) per share 24,159 24,041 Shares used in computing diluted earnings (loss) per share 24,159 24,461 CARREKER CORPORATION Condensed Consolidated Balance Sheets (Unaudited) (In thousands, except per share amounts) ASSETS October 31, January 31, 2006 2006 Current assets Cash and cash equivalents $24,248 $29,684 Marketable securities 12,965 4,700 Accounts receivable, net of allowance of $695 and $601 at October 31, 2006 and January 31, 2006, respectively 15,111 12,225 Prepaid expenses and other current assets 2,366 2,940 Total current assets 54,690 49,549 Property and equipment, net of accumulated depreciation of $25,037 and $23,050 at October 31, 2006 and January 31, 2006, respectively 6,363 5,947 Capitalized software costs, net of accumulated amortization of $14,742 and $13,686 at October 31, 2006 and January 31, 2006, respectively 3,214 2,761 Acquired developed technology, net of accumulated amortization of $23,600 and $20,393 at October 31, 2006 and January 31, 2006, respectively 2,100 5,307 Goodwill, net of accumulated amortization of $3,405 at October 31, 2006 and January 31, 2006 20,765 20,765 Customer relationships, net of accumulated amortization of $7,583 and $6,533 at October 31, 2006 and January 31, 2006, respectively 817 1,867 Deferred loan costs, net of accumulated amortization of $1,707 and $1,571 at October 31, 2006 and January 31, 2006, respectively --- 136 Other assets 584 793 Total assets $88,533 $87,125 Current liabilities Accounts payable $1,206 $1,168 Accrued compensation and benefits 6,543 6,153 Other accrued expenses 4,157 4,608 Income tax payable 84 220 Deferred revenue 17,862 19,151 Accrued merger and restructuring costs 212 334 Total current liabilities 30,064 31,634 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; 25,611 and 25,329 shares issued at October 31, 2006 and January 31, 2006, respectively 256 254 Additional paid-in capital 114,611 112,316 Accumulated deficit (53,010) (53,848) Less treasury stock, at cost: 664 and 641 common shares at October 31, 2006 and January 31, 2006, respectively (3,388) (3,231) Total stockholders' equity 58,469 55,491 Total liabilities and stockholders' equity $88,533 $87,125 Segment Information (Unaudited): Three Months Ended ($ in thousands) October 31, July 31, 2006 2006 Revenues by Segment: Revenue Enhancement $8,889 $7,353 Global Payments Technologies 17,415 19,902 Global Payments Consulting 1,460 1,018 Business Process Outsourcing 511 530 Total Revenues $28,275 $28,803 Three Months Ended ($ in thousands) October 31, July 31, 2006 2006 Cost of Revenues: Revenue Enhancement $5,120 $4,903 Global Payments Technologies 8,370 7,913 Global Payments Consulting 930 768 Business Process Outsourcing 414 514 Total Cost of Revenues $14,834 $14,098 % of Revenue 52.5% 48.9% DATASOURCE: Carreker Corporation CONTACT: Lisa Peterson, Executive Vice President and CFO, +1-972-371-1454, or fax, +1-972-458-2567, or , or Gary Samberson, SVP, Treasury, Risk Management and Investor Relations, +1-972-371-1590, or fax, +1-972-458-2567, or , both of Carreker Corporation Web site: http://www.carreker.com/ http://ir.carreker.com/

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