Checkfree Corp (MM) (NASDAQ:CKFR)
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CheckFree Announces Fourth Quarter and Annual Results for Fiscal
2004
ATLANTA, Aug. 3 /PRNewswire-FirstCall/ -- CheckFree Corporation (NASDAQ:CKFR)
today announced fourth quarter consolidated revenue of $160.0 million,
representing 11 percent growth over the same period last year. The Company's
GAAP (Generally Accepted Accounting Principles) net income for the quarter was
$11.4 million or $0.12 per share, and underlying net income was $27.3 million,
or $0.30 per share. CheckFree reported consolidated revenue of $606.5 million
for fiscal 2004, representing 10 percent growth over fiscal 2003. For the year,
the Company's GAAP net income was $10.5 million, or $0.11 per share, and
underlying net income was $96.5 million, or $1.05 per share. Free cash flow was
$47.5 million for the fourth quarter, and $147.8 million for the year as
outlined in Attachment A.
GAAP Results: For the fourth quarter, the Company's GAAP net income of $11.4
million compared to a net loss of $17.0 million for the same quarter last year.
Earnings per share were $0.12, compared to a loss per share of $0.19 for the
same quarter last year. For fiscal 2004, net income was $10.5 million, or $0.11
per share, compared to a net loss of $52.2 million, or $0.59 per share for
fiscal 2003. Net cash provided by operating activities was $53.9 million for
the fourth quarter of 2004, compared to $41.9 million for the same period last
year. Net cash provided by operating activities was $171.1 million for fiscal
2004, compared to $157.8 million for fiscal 2003.
Underlying Results: For the fourth quarter, the Company reported underlying net
income of $27.3 million, compared to $20.0 million for the same quarter of last
year. Underlying earnings per share were $0.30 for the fourth quarter of fiscal
2004, compared to underlying earnings per share of $0.22 for the fourth quarter
of last year. For fiscal 2004, underlying net income was $96.5 million, or
$1.05 per share, compared to underlying net income of $72.2 million, or $0.81
per share, for fiscal 2003. Underlying net income and earnings per share for
the fourth quarter of fiscal 2004 exclude the amortization of
acquisition-related intangible assets and related tax benefits. Underlying net
income and earnings per share for the fourth quarter of fiscal 2003 exclude the
amortization of acquisition-related intangible assets, an intangible asset
impairment charge, a true-up of a previous reorganization charge and related
income tax benefits. A reconciliation of CheckFree's quarterly and annual
underlying results to its GAAP results is included in Attachment A.
"Our results reflect continued solid execution for the quarter and our fiscal
year overall," said CheckFree Chairman and Chief Executive Officer, Pete Kight.
"During the year, we significantly increased the number of Consumer Service
Providers offering electronic billing and payment services to consumers and
extended the services we offer to billers. We also continued to enhance our
infrastructure with sizable investments in advanced customer care capability
and development of the next generation platform serving our money manager and
broker/dealer clients."
"Delivering process excellence, driving innovation, and defining the quality
experience for our customers and their customers will continue to be our focus
in fiscal 2005," he added. "We will continue to consider opportunities for
growth by acquisition, optimization of our infrastructure and strategic
partnerships."
Fourth Quarter Highlights
On June 22, 2004, CheckFree completed its acquisition of American Payment
Systems, Inc. (APS), a Connecticut-based company offering walk-in bill payment
services to 7 million households at more than 10,000 retail and agent locations
throughout the United States. The acquisition combines the APS footprint with
CheckFree's current electronic billing and payment infrastructure to offer
billing organizations a wider number of payment processing services from a
single company.
The Company reported that its Electronic Commerce division processed more than
162.8 million transactions in the quarter, exclusive of APS transactions, a 7
percent sequential increase over the third quarter of fiscal 2004; and
delivered 25.9 million electronic bills, a 15 percent sequential increase over
the third quarter of fiscal 2004. Refer to Attachment B for details on the
financial performance of CheckFree's divisions in the fourth quarter of fiscal
2004 and the year ending June 30, 2004; and Attachment C for core electronic
billing and payment metrics.
Financial Outlook
"For fiscal 2005, we expect earnings per share in the range of $0.39 to $0.45
on a GAAP basis," said CheckFree Chief Financial Officer, David Mangum. "On an
underlying basis, the Company expects earnings per share in the range of $1.26
to $1.30. These expectations include a full year of operations for APS within
our Electronic Commerce division. We expect APS to be about neutral to GAAP
earnings per share, and approximately $0.03 to $0.04 accretive to underlying
earnings per share in fiscal 2005. We expect free cash flow to exceed $145
million, which reflects our becoming a cash taxpayer early in the fiscal year."
"For the first quarter of fiscal 2005, the Company expects revenue in the range
of $170 to $175 million, with GAAP earnings per share in the range of $0.03 to
$0.06, and underlying earnings per share in the range of $0.24 to $0.26," he
added. "Included in the first quarter outlook, we expect APS to contribute more
than $14 million of revenue and about 27 million bill payment transactions,
which will be reported in the Payment Services category of our Electronic
Commerce division," Mangum continued.
The differences between GAAP and underlying earnings per share expected for
fiscal 2005 and the first quarter of fiscal 2005 are due to acquisition-
related intangible amortization expense and related tax benefits.
"We expect continued steady performance from our Investment Services division
during the first quarter, while our Software division is expected to experience
a typical seasonally light first quarter for license sales," Mangum continued.
"In Electronic Commerce, we expect first quarter sequential quarterly
transaction growth to be in the range of 6 to 8 percent, excluding APS," he
concluded.
Use of Non-GAAP Financial Information
Management evaluates the Company's operations using measures of underlying
income, underlying earnings per share, and free cash flow. These financial
measures are not prepared in accordance with GAAP and they exclude or include
items that represent either non-cash charges that do not impact the Company's
free cash flow or other items that are evaluated separately as they arise. The
Company believes these measures are useful to investors because they reflect
the performance of the Company's core operations and are consistent with the
Company's internal performance measures. Further, the Company considers free
cash flow to be a measure of liquidity that provides useful information to
management and investors about the amount of cash generated by the Company that
can be used for strategic and other purposes. CheckFree's underlying results
and free cash flow should be considered in addition to, and not as a substitute
for, our GAAP results.
Conference Call on the Internet
CheckFree will broadcast its fourth quarter conference call at 5:00 p.m. (EDT)
today to review its financial results for the fourth quarter and year ended
June 30, 2004, and its expectations for the first quarter of fiscal 2005 and
fiscal year 2005. To phone into the conference call, dial 1-877-232-1067
anytime after 4:45 p.m. (EDT) 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. (EDT).
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 $900 billion 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 thousands 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, earnings and free cash flow for the first quarter of
fiscal 2005 and fiscal 2005 as a whole, and the performance of each of our
divisions and sequential transaction growth in the first quarter of fiscal 2005
(paragraphs 5, 8, 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, 2003 (filed September 15, 2003); and Quarterly Reports on Form
10-Q for the quarters ended September 30, 2003 (filed November 13, 2003),
December 31, 2003 (filed February 12, 2004), and March 31, 2004 (filed May 14,
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 Year Ended
June 30, June 30,
2004 2003 2004 2003
Revenue:
Processing and servicing $139,487 $124,018 $530,205 $476,416
License fees 6,625 7,516 23,931 24,163
Maintenance fees 7,114 6,667 28,271 25,733
Other 6,800 6,404 24,057 25,334
Total revenue 160,026 144,605 606,464 551,646
Expenses:
Cost of processing,
servicing and support 63,993 59,984 244,811 237,978
Research and development 18,084 13,613 66,288 52,717
Sales and marketing 13,253 16,588 51,910 57,170
General and administrative 10,151 10,373 45,759 39,030
Depreciation and
amortization 42,204 55,651 177,582 226,638
In-process research and
development - - 324 -
Impairment of intangible
assets - 10,228 - 10,228
Reorganization charge - 1,405 - 1,405
Total expenses 147,685 167,842 586,674 625,166
Income (loss) from operations 12,341 (23,237) 19,790 (73,520)
Equity in net loss of joint
venture (593) - (593) -
Interest, net 1,023 (1,593) (7,467) (5,648)
Loss on investments - - - (3,228)
Income (loss) before income taxes
and cumulative effect of
accounting change 12,771 (24,830) 11,730 (82,396)
Income tax expense (benefit) 1,367 (7,859) 1,195 (33,106)
Income (loss) before cumulative
effect of accounting change 11,404 (16,971) 10,535 (49,290)
Cumulative effect of accounting
change - - - (2,894)
Net income (loss) $11,404 $(16,971) $10,535 $(52,184)
Basic income (loss) per share:
Income (loss) before cumulative
effect of accounting change $0.13 $(0.19) $0.12 $(0.56)
Cumulative effect of accounting
change - - - (0.03)
Net income (loss) $0.13 $(0.19) $0.12 $(0.59)
Weighted average number of
shares 90,166 89,215 89,870 88,807
Diluted income (loss) per share:
Income (loss) before cumulative
effect of accounting change $0.12 $(0.19) $0.11 $(0.56)
Cumulative effect of accounting
change - - - (0.03)
Net income (loss) $0.12 $(0.19) $0.11 $(0.59)
Weighted average number of
shares 92,279 89,215 91,864 88,807
CHECKFREE CORPORATION AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(Unaudited)
(In thousands)
June 30, June 30,
2004 2003
Current assets:
Cash, cash equivalents and
investments $208,029 $282,032
Accounts receivable, net 111,849 81,626
Deferred income taxes 36,543 41,202
Settlement assets 82,520 -
Other current assets 14,727 9,708
Total current assets 453,668 414,568
Property and equipment, net 91,912 94,853
Capitalized software and intangible
assets, net 917,543 946,976
Investments 67,494 121,615
Other 4,879 9,258
Total assets $1,535,496 $1,587,270
Current liabilities:
Accounts payable, accrued
liabilities and other $83,637 $73,739
Settlement liabilities 82,611 -
Deferred revenues 36,193 36,543
Total current liabilities 202,441 110,282
Long-term liabilities, net 28,967 7,611
Deferred income taxes 5,783 28,728
Convertible subordinated notes - 172,500
Net stockholders' equity 1,298,305 1,268,149
Total liabilities and
stockholders' equity $1,535,496 $1,587,270
Attachment A
Calculation of Free Cash Flow
(Unaudited)
(In millions)
Three Months Ended Year Ended
June 30, June 30,
2004 2003 2004 2003
Cash provided by operating activities $53.9 $41.9 $171.1 $157.8
Adjustment for settlement accounts(1) 0.2 - 0.2 -
Adjusted cash provided by operating
activities 54.1 41.9 171.3 157.8
Less: capital expenditures 6.6 3.5 23.5 24.3
Free cash flow $47.5 $38.4 $147.8 $133.5
(1) Related to APS walk-in bill payment transactions.
The Company defines free cash flow as GAAP net cash from operating
activities, adjusted for the net change in settlement accounts, less
capital expenditures.
Additional Information:
Cash used in investing activities $(107.0) $(9.8) $(103.4) $(61.2)
Cash provided by (used in) financing
activities $25.0 $(0.8) $(142.5) $(2.3)
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 Year Ended
June 30, June 30,
2004 2003 2004 2003
Total revenue per GAAP $160,026 $144,605 $606,464 $551,646
Warrants issued to third party - - - (644)
Total underlying revenue $160,026 $144,605 $606,464 $551,002
Net income (loss) per GAAP $11,404 $(16,971) $10,535 $(52,184)
Warrants issued to third party - - - (644)
Amortization of acquisition-
related intangible assets 31,896 45,038 136,558 183,342
Write-off of in-process research
and development - - 324 -
Call premium and write-off of
unamortized issuance costs for
convertible notes - - 7,219 -
Loss on investments - - - 3,228
Impairment of intangible assets - 10,228 - 10,228
Reorganization charge - 1,405 - 1,405
Tax benefit of underlying
adjustments (15,996) (19,739) (58,099) (76,040)
Cumulative effect of accounting
change(1) - - - 2,894
Underlying net income $27,304 $19,961 $96,537 $72,229
GAAP basic weighted average shares
outstanding 90,166 89,215 89,870 88,807
GAAP impact of dilutive options
and warrants 2,113 - 1,994 -
GAAP diluted weighted average
shares outstanding 92,279 89,215 91,864 88,807
Underlying basic weighted average
shares outstanding 90,166 89,215 89,870 88,807
Underlying impact of dilutive
options and warrants 2,113 2,256 1,994 747
Underlying diluted weighted
average shares outstanding 92,279 91,471 91,864 89,554
GAAP basic earnings (loss) per share $0.13 $(0.19) $0.12 $(0.59)
GAAP diluted earnings (loss) per
share $0.12 $(0.19) $0.11 $(0.59)
Underlying basic earnings per share $0.30 $0.22 $1.07 $0.81
Underlying diluted earnings per
share $0.30 $0.22 $1.05 $0.81
(1) Effective July 1, 2002, the Company adopted SFAS No. 142 - Accounting
for Goodwill and Other Intangible Assets. Upon adoption of
SFAS No. 142, the Company no longer amortizes goodwill.
Attachment A (continued)
CHECKFREE CORPORATION AND SUBSIDIARIES
Supplemental Underlying Consolidated Condensed Statements of Operations
(Unaudited)
(In thousands, except per share data)
Three Months Ended Year Ended
June 30, June 30,
2004 2003 2004 2003
Revenue:
Processing and servicing $139,487 $124,018 $530,205 $475,772
License fees 6,625 7,516 23,931 24,163
Maintenance fees 7,114 6,667 28,271 25,733
Other 6,800 6,404 24,057 25,334
Total revenue 160,026 144,605 606,464 551,002
Expenses:
Cost of processing, servicing
and support 63,993 59,984 244,811 237,978
Research and development 18,084 13,613 66,288 52,717
Sales and marketing 13,253 16,588 51,910 57,170
General and administrative 10,151 10,373 45,759 39,030
Depreciation and amortization 10,308 10,613 41,024 43,296
Total expenses 115,789 111,171 449,792 430,191
Income from operations 44,237 33,434 156,672 120,811
Equity in net loss of joint
venture (593) - (593) -
Interest, net 1,023 (1,593) (248) (5,648)
Income before income taxes 44,667 31,841 155,831 115,163
Income tax expense 17,363 11,880 59,294 42,934
Net income $27,304 $19,961 $96,537 $72,229
Basic income per share:
Net income $0.30 $0.22 $1.07 $0.81
Weighted average number of
shares 90,166 89,215 89,870 88,807
Diluted income per share:
Net income $0.30 $0.22 $1.05 $0.81
Weighted average number of
shares 92,279 91,471 91,864 89,554
Attachment B
Reconciliation of GAAP Results to Underlying Results by Segment
(Unaudited)
(In thousands)
Three Months Ended Year Ended
June 30, June 30,
2004 2003 2004 2003
Electronic Commerce:
Total revenue per GAAP $118,508 $106,036 $452,732 $405,373
Warrants issued to third party - - - (644)
Total underlying revenue $118,508 $106,036 $452,732 $404,729
Operating income (loss) per GAAP $10,718 $(11,944) $23,025 $(59,152)
Warrants issued to third party - - - (644)
Amortization of acquisition-
related intangible assets 31,122 43,757 132,699 175,028
Reorganization charge - 307 - 307
Underlying operating income $41,840 $32,120 $155,724 $115,539
Investment Services:
Total revenue - GAAP and
underlying $22,966 $20,655 $86,270 $81,562
Operating income per GAAP $5,749 $4,629 $19,092 $18,830
Amortization of acquisition-
related intangible assets 151 232 819 2,300
Reorganization charge - (68) - (68)
Underlying operating income $5,900 $4,793 $19,911 $21,062
Software:
Total revenue - GAAP and
underlying $18,552 $17,914 $67,462 $64,711
Operating income (loss) per GAAP $3,323 $(6,591) $10,929 $583
Amortization of acquisition-
related intangible assets 623 1,049 3,040 6,014
Write-off of in-process research
and development - - 324 -
Impairment of intangible assets - 10,228 - 10,228
Reorganization charge - 1,183 - 1,183
Underlying operating income $3,946 $5,869 $14,293 $18,008
Corporate:
Operating loss per GAAP $(7,449) $(9,331) $(33,256) $(33,781)
Reorganization charge - (17) - (17)
Underlying operating loss $(7,449) $(9,348) $(33,256) $(33,798)
Attachment C
Core Electronic Billing and Payment Metrics
(in millions, except revenue/transaction, percentages and distribution
points)
Quarter Ended
6/30 3/31 12/31 9/30 6/30
2004 2004 2003 2003 2003
Transactions
Full Service
Revenue $96.2 $94.0 $91.8 $85.5 $82.6
Active Subscribers(1) 5.9 5.5 5.0 4.6 4.2
Transactions 123.9 115.5 106.1 94.3 87.5
Revenue/Transaction $0.78 $0.81 $0.87 $0.91 $0.94
Payment Services
Revenue $14.0 $12.8 $12.0 $11.9 $12.3
Transactions 38.9 36.7 33.1 32.4 32.7
APS Transactions 2.4 - - - -
Revenue/Transaction $0.34 $0.35 $0.36 $0.37 $0.37
Total 165.2 152.2 139.2 126.7 120.2
Sequential Quarterly Growth(2) 8% 9% 10% 5% 7%
Other Revenue(3) $8.3 $8.4 $8.7 $9.2 $11.2
e-Bill Delivery
Electronic bills distributed 25.9 22.5 18.5 14.7 11.5
Quarterly sequential growth 15% 22% 26% 27% 31%
Electronic Rate
Electronic payment rate 79% 78% 78% 76% 75%
Consumer Online Access
Distribution points for EBP 1,308 1,207 1,120 1,028 949
(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) Absent the APS transactions, sequential quarterly growth is 7 percent
for the quarter ending June 30, 2004. Reporting of quarterly
transaction growth will be consolidated, beginning in the quarter
ending September 30, 2004.
(3) Other revenue includes Health and Fitness, Professional Services and
Stored Value Products
DATASOURCE: CheckFree Corporation
CONTACT: Media relations, Judy DeRango Wicks, +1-678-375-1595, or
, or Investor relations, Tina Moore, +1-678-375-1278, or
, both of CheckFree Corporation
Web site: http://www.checkfreecorp.com/