Checkfree Corp (MM) (NASDAQ:CKFR)
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CheckFree Announces Fiscal 2005 First Quarter Results
ATLANTA, Oct. 18 /PRNewswire-FirstCall/ -- CheckFree Corporation (NASDAQ:CKFR)
today announced first quarter revenue of $177.8 million, representing 26
percent growth over the same period last year. The Company's GAAP (Generally
Accepted Accounting Principles) net income was $6.2 million, or $0.07 per
share, and underlying net income was $26.9 million, or $0.29 per share. Free
cash flow was $28.3 million for the quarter, as outlined in Attachment A.
GAAP Results: Net income for the first quarter was $6.2 million, compared to a
net loss of $6.7 million for the same quarter last year. Earnings per share
were $0.07 for the first quarter of fiscal 2005, compared to a loss per share
of $0.07 for the first quarter of last year. Net cash provided by operating
activities was $31.7 million for the first quarter of fiscal 2005, compared to
$27.0 million for the same period last year.
Underlying Results: Underlying net income for the first quarter was $26.9
million, compared to $19.4 million for the same quarter of last year.
Underlying earnings per share were $0.29 for the first quarter of fiscal 2005,
compared to $0.21 for the first quarter of last year. Underlying net income and
earnings per share exclude the amortization of acquisition-related intangible
assets and related tax benefits. A reconciliation of CheckFree's underlying
results to its GAAP results is included in Attachment A.
"CheckFree had a good first quarter, with consistent results across each of our
divisions," said Pete Kight, CheckFree's Chairman and Chief Executive Officer.
"We showed steady performance from Investment Services, and Software delivered
better-than-expected sales during a traditionally slow quarter. In Electronic
Commerce, e-Bill and transaction growth were directly in line with our
expectations, with our walk-in bill payment business contributing better-
than-expected transaction results. Distribution points for our fully integrated
electronic billing and payment solution continue to increase steadily."
"These fiscal first quarter results represent a good start for CheckFree,
providing a solid foundation on which to build for the rest of fiscal 2005,"
Kight concluded.
First Quarter Highlights
The Company reported that its Electronic Commerce division processed 205.8
million transactions for the quarter, a 25 percent increase over the previous
quarter; delivered 29.6 million e-Bills, an increase of 14 percent over the
previous quarter; and increased the number of fully enabled electronic billing
and payment distribution points to more than 1,400.
First quarter results for the Electronic Commerce division also included
better-than-expected transaction volume and associated revenue from the
Company's walk-in bill payment operations. Integration of this business into
the Company's Electronic Commerce division continues as planned, following the
acquisition of American Payment Systems, Inc., late in the fourth quarter of
fiscal 2004.
The Company also reported stronger-than-expected license sales in its Software
division in the first quarter. Refer to Attachment B for details on the
financial performance of CheckFree's divisions in the first quarter of fiscal
2005, and Attachment C for electronic billing and payment metrics.
Financial Outlook
"For the second quarter of fiscal 2005, we expect revenue in the range of $178
million to $183 million, and GAAP earnings per share in the range of $0.07 to
$0.10," said CheckFree Chief Financial Officer David Mangum. "This expectation
equates to underlying earnings per share in the range of $0.30 to $0.32 for the
quarter."
"Our expectations for the second quarter of fiscal 2005 are based on an outlook
for continued solid performance from both our Investment Services and Software
divisions," he continued. "Sequential quarterly transaction growth is expected
to be in the range of 4 to 7 percent, reflecting our expectations for solid
growth across all of our electronic billing and payment distribution points,
and more modest growth from our walk-in bill payment business," he continued.
"Our first quarter results set us on a favorable course for achieving our
fiscal year expectations. We continue to expect full-year earnings per share in
the range of $0.39 to $0.45 on a GAAP basis, and in the range of $1.26 to $1.30
on an underlying basis, and free cash flow of more than $145 million for the
year," Mangum concluded.
The difference between GAAP and underlying earnings expectations for fiscal
2005 and the second quarter of fiscal 2005 is due to expected
acquisition-related intangible amortization expense and related tax benefits.
Conference Call on the Internet
CheckFree will broadcast its first quarter conference call at 5:00 p.m. (ET)
today to review its financial results for the first quarter ended September 30,
2004, and its expectations for the second quarter of fiscal 2005 and for fiscal
2005. To phone into the conference call, dial 1-877-232-1067 anytime after 4:45
p.m. (ET) and ask for the CheckFree Conference Call. CheckFree will also
broadcast the call on the Internet. The live conference call will be accessible
through the Investor Center section of the CheckFree corporate Web site at
http://www.checkfreecorp.com/ . A digital replay of the call will be available
on the same Web site after 7:00 p.m. (ET).
About CheckFree ( http://www.checkfreecorp.com/ )
Founded in 1981, CheckFree Corporation (NASDAQ:CKFR) provides financial
electronic commerce services and products to organizations around the world.
CheckFree Electronic Commerce solutions enable thousands of financial services
providers and billers to offer their customers the convenience of receiving and
paying their household bills online or in person through retail outlets.
CheckFree Investment Services provides a broad range of investment management
solutions and outsourced services to thousands of financial services
organizations, which manage more than $1 trillion in assets. CheckFree Software
develops, markets and supports software applications that are used by financial
institutions to process more than two-thirds of the 10 billion Automated
Clearing House transactions in the United States. The division also provides
global trade processing, reconciliation, financial messaging, compliance and
electronic billing and statement software to hundreds of organizations across
the globe.
Certain of the Company's statements in this press release are not purely
historical, and as such are "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. These include statements
regarding management's intentions, plans, beliefs, expectations or projections
of the future, and include statements in this document regarding forecasts and
expectations of revenue and earnings for the second quarter of fiscal 2005,
earnings and free cash flow for fiscal 2005 as a whole, and the performance of
each of our divisions and sequential transaction growth in the second quarter
of fiscal 2005 (paragraphs 5, 9, 10, 11 and 12). Forward-looking statements
involve risks and uncertainties, including without limitation, the various
risks inherent in the Company's business, and other risks and uncertainties
detailed from time to time in the Company's periodic reports filed with the
Securities and Exchange Commission, including the Company's Annual Report on
Form 10-K for the year ended June 30, 2004 (filed September 3, 2004). One or
more of these factors have affected, and could in the future affect, the
Company's business and financial results in future periods, and could cause
actual results to differ materially from plans and projections. There can be no
assurance that the forward-looking statements made in this document will prove
to be accurate, and issuance of such forward-looking statements should not be
regarded as a representation by the Company, or any other person, that the
objectives and plans of the Company will be achieved. All forward-looking
statements made in this press release are based on information presently
available to management, and the Company assumes no obligation to update any
forward-looking statements.
CHECKFREE CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Operations
(Unaudited)
(In thousands, except per share data)
Three Months Ended
September 30,
2004 2003
Revenues:
Processing and servicing $158,842 $124,245
License fees 5,874 4,962
Maintenance fees 7,355 6,701
Other 5,762 5,356
Total revenues 177,833 141,264
Expenses:
Cost of processing, servicing and support 75,362 59,288
Research and development 20,223 14,903
Sales and marketing 14,226 12,325
General and administrative 15,035 11,523
Depreciation and amortization 44,017 50,613
Total expenses 168,863 148,652
Income (loss) from operations 8,970 (7,388)
Equity in net loss of joint venture (647) -
Interest, net 1,696 (1,624)
Income (loss) before income taxes 10,019 (9,012)
Income tax expense (benefit) 3,812 (2,343)
Net income (loss) $6,207 $(6,669)
Basic income (loss) per share:
Net income (loss) $0.07 $(0.07)
Weighted average number of shares 90,315 89,463
Diluted income (loss) per share:
Net income (loss) $0.07 $(0.07)
Weighted average number of shares 92,212 89,463
CHECKFREE CORPORATION AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(Unaudited)
(In thousands)
September 30, June 30,
2004 2004
Current assets:
Cash, cash equivalents and investments $217,744 $208,029
Settlement assets 86,829 82,520
Accounts receivable, net 102,567 85,217
Accounts receivable, related parties 4,774 26,632
Prepaid expenses and other assets 19,733 14,727
Deferred income taxes 34,444 49,129
Total current assets 466,091 466,254
Property and equipment, net 87,445 91,912
Capitalized software and
intangible assets, net 886,497 917,543
Investments 82,529 68,344
Other noncurrent assets 4,089 4,396
Investment in joint venture 808 483
Total assets $1,527,459 $1,548,932
Current liabilities:
Accounts payable, accrued
liabilities and other $64,799 $83,637
Settlement obligations 85,429 82,611
Deferred revenues 37,388 36,193
Total current liabilities 187,616 202,441
Accrued rent and other 3,392 4,313
Deferred income taxes 1,429 17,492
Capital leases and long-term
obligations, less current portion 25,599 25,504
Net stockholders' equity 1,309,423 1,299,182
Total liabilities and
stockholders' equity $1,527,459 $1,548,932
Attachment A
Calculation of Free Cash Flow
(Unaudited)
(In millions)
Three Months Ended
September 30,
2004 2003
Net cash provided by operating activities $31.7 $27.0
Excluding: Net change settlement accounts 1.5 -
Less: Capital expenditures (4.9) (5.4)
Free cash flow $28.3 $21.6
Additional Information:
Net cash used in investing activities (31.3) $(49.2)
Net cash provided by financing activities $0.8 $0.4
Use of Non-GAAP Financial Information
The Company supplements its reporting of cash flow information
determined in accordance with GAAP by using "free cash flow" in this
earnings release as a measure to evaluate its liquidity. The Company
defines free cash flow as GAAP net cash provided by operating
activities, exclusive of the net change in settlement accounts and
less capital expenditures. The Company believes free cash flow
provides useful information to management and investors in
understanding its financial results and assessing its prospects for
future performance. CheckFree also uses free cash flow as a factor in
determining long-term incentive compensation for senior management.
The Company excludes the net change in settlement accounts from free
cash flow because it believes this facilitates management's and
investors' ability to analyze operating cash flow trends. In
connection with its walk-in bill payment business, the Company's
balance sheet reflects settlement assets and settlement obligations.
The settlement assets represent payment receipts in transit to the
Company from agents, and the settlement obligations represent
scheduled but unpaid payments due to billers. Balances in settlement
accounts fluctuate daily based on deposit timing and payment
transaction volume. These timing differences are not reflective of the
Company's liquidity, and thus, CheckFree excludes the net change in
settlement accounts from free cash flow.
As a technology company, CheckFree makes significant capital
expenditures in order to update its technology and to remain
competitive. The Company's free cash flow reflects the amount of cash
it generated that remains, after it has met those operational needs,
for the evaluation and execution of strategic initiatives such as
acquisitions, stock and/or debt repurchases and other investing and
financing activities, including servicing additional debt obligations.
Free cash flow does not solely represent residual cash flow available
for discretionary expenditures, as certain of CheckFree's non-
discretionary obligations are also funded out of free cash flow. These
consist primarily of payments on capital leases and other long-term
commitments, if any, as reflected in the table entitled "Contractual
Obligations" in the "Liquidity and Capital Resources" section of
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" contained in CheckFree's Annual Report on Form
10-K for the fiscal year ended June 30, 2004, which was filed with the
Securities and Exchange Commission on September 3, 2004.
The Company's free cash flow should be considered in addition to, and
not as a substitute for, net cash provided by operating activities or
any other amount determined in accordance with GAAP. Further,
CheckFree's measure of free cash flow may not be comparable to
similarly titled measures reported by other companies.
Attachment A (continued)
Reconciliation of GAAP to Underlying Net Income (Loss) and Earnings
(Loss) Per Share
(Unaudited)
(In thousands, except per share data)
Three Months Ended
September 30,
2004 2003
Total revenue - GAAP and underlying $177,833 $141,264
Net income (loss) per GAAP $6,207 $(6,669)
Amortization of acquisition-related
intangible assets 33,215 40,494
Tax benefit of underlying adjustments (12,568) (14,467)
Underlying net income $26,854 $19,358
GAAP basic weighted average shares outstanding 90,315 89,463
GAAP impact of dilutive options and warrants 1,897 -
GAAP diluted weighted average shares outstanding 92,212 89,463
Underlying basic weighted average
shares outstanding 90,315 89,463
Underlying impact of dilutive options
and warrants 1,897 1,895
Underlying diluted weighted average
shares outstanding 92,212 91,358
GAAP basic earnings (loss) per share $0.07 $(0.07)
GAAP diluted earnings (loss) per share $0.07 $(0.07)
Underlying basic earnings per share $0.30 $0.22
Underlying diluted earnings per share $0.29 $0.21
Use of Non-GAAP Financial Information
CheckFree supplements its reporting of net income (loss) and earnings
(loss) per share information determined in accordance with GAAP by
using "underlying net income (loss)" and "underlying earnings (loss)
per share" in this earnings release. Management evaluates various
items as they arise and determines whether to include or exclude these
items from GAAP net income (loss) and earnings (loss) per share in
calculating underlying net income (loss) and underlying earnings
(loss) per share, depending on whether or not, in the opinion of
management, they reflect the underlying performance of the Company's
core operations.
Examples of such items may include, but not be limited to,
amortization of acquisition-related intangible assets, cumulative
effects of accounting changes, revenue associated with warrants issued
to third parties, and related tax benefits. CheckFree believes that
underlying net income (loss) and underlying earnings (loss) per share
are useful to investors because they reflect one of the primary ways
by which management measures the Company's growth and performance.
CheckFree also uses underlying net income (loss) and underlying
earnings (loss) per share as a factor in determining short- and long-
term incentive compensation for management.
CheckFree's underlying net income (loss) and underlying earnings
(loss) per share should be considered in addition to, and not as a
substitute for, net income (loss) or earnings (loss) per share or any
other amount determined in accordance with GAAP. CheckFree's measures
of underlying net income (loss) and underlying earnings (loss) per
share reflect management's judgment of particular items, and may not
be comparable to similarly titled measures reported by other
companies.
Attachment A (continued)
CHECKFREE CORPORATION AND SUBSIDIARIES
Supplemental Underlying Consolidated Condensed Statements of Operations
(Unaudited)
(In thousands, except per share data)
Three Months Ended
September 30,
2004 2003
Revenue:
Processing and servicing $158,842 $124,245
License fees 5,874 4,962
Maintenance fees 7,355 6,701
Other 5,762 5,356
Total revenue 177,833 141,264
Expenses:
Cost of processing, servicing and support 75,362 59,288
Research and development 20,223 14,903
Sales and marketing 14,226 12,325
General and administrative 15,035 11,523
Depreciation and amortization 10,802 10,119
Total expenses 135,648 108,158
Income from operations 42,185 33,106
Equity in net loss of joint venture (647) -
Interest, net 1,696 (1,624)
Income before income taxes 43,234 31,482
Income tax expense 16,380 12,124
Net income $26,854 $19,358
Basic income per share:
Net income $0.30 $0.22
Weighted average number of shares 90,315 89,463
Diluted income per share:
Net income $0.29 $0.21
Weighted average number of shares 92,212 91,358
Attachment B
Division Results
Reconciliation of GAAP Results to Underlying Results
(Unaudited)
(In thousands)
Three Months Ended
September 30,
2004 2003
Electronic Commerce:
Total revenue - GAAP and underlying $138,207 $106,555
Operating income (loss) per GAAP $14,388 $(5,599)
Amortization of acquisition-related
intangible assets 32,563 39,521
Underlying operating income $46,951 $33,922
Investment Services:
Total revenue - GAAP and underlying $22,843 $20,293
Operating income per GAAP $2,409 $4,686
Amortization of acquisition-related
intangible assets 151 232
Underlying operating income $2,560 $4,918
Software:
Total revenue - GAAP and underlying $16,783 $14,416
Operating income per GAAP $132 $1,487
Amortization of acquisition-related
intangible assets 501 741
Underlying operating income $633 $2,228
Corporate:
Operating loss per GAAP and underlying $(7,959) $(7,962)
Attachment C
Electronic Billing and Payment Metrics
(In millions, except revenue/transaction and percentages)
Quarter Ended
9/30/2004 6/30/2004 3/31/2004 12/31/2003 09/30/2003
Transactions
Full Service
Revenue $99.1 $96.2 $94.0 $91.8 $85.5
Active Subscribers(1) 6.4 5.9 5.5 5.0 4.6
Transactions 133.5 123.9 115.5 106.1 94.3
Revenue/Transaction $0.74 $0.78 $0.81 $0.87 $0.91
Payment Services(2)
Revenue $30.5 $14.0 $12.8 $12.0 $11.9
Transactions 72.3 41.3 36.7 33.1 32.4
Revenue/Transaction $0.42 $0.34 $0.35 $0.36 $0.37
Total 205.8 165.2 152.2 139.2 126.7
Sequential Quarterly
Growth 25% 8% 9% 10% 5%
Other Revenue(3) $8.6 $8.3 $8.4 $8.7 $9.2
e-Bill Delivery
Electronic bills
distributed 29.6 25.9 22.5 18.5 14.7
Quarterly sequential
growth 14% 15% 22% 26% 27%
Electronic Rate(4)
Electronic payment rate 83% 79% 78% 78% 76%
(1) "Active" refers to subscribers who have viewed or paid a bill in the
last 90 days at a Consumer Service Provider that outsources essentially
all of its electronic billing and payment (EBP) functions to CheckFree.
(2) Payment Services includes a full quarter of walk-in bill payment
results for the quarter ended September 30, 2004, and eight days for the
quarter ended June 30, 2004.
(3) Other revenue includes Health and Fitness, Professional Services and
Stored Value Products.
(4) Includes walk-in bill payment transactions.
DATASOURCE: CheckFree Corporation
CONTACT: Media, Judy DeRango Wicks, +1-678-375-1595, or
, or Investors, Tina Moore, +1-678-375-1278, or
, both of CheckFree Corporation
Web site: http://www.checkfreecorp.com/