From the company....
CheckFree Exceeds Expectations for Second Quarter Revenue
and Pro Forma Earnings
-- Company-wide efficiency gains continue to improve bottomline
performance --
-- 244 electronic bills are now available for viewing and payment through
Consumer Service Providers using CheckFree's distribution network --
-- Company improves expectations for full-year guidance to pro forma
earnings per share in the high single digits --
ATLANTA (January 22, 2002) - CheckFree Corporation (NASDAQ: CKFR) today
announced revenues of $121.3 million for the second quarter ended December
31, 2001, compared to $107.7 million for the same quarter of fiscal 2001.
Total revenues for the quarter increased 13 percent over the comparative
quarter of last year.
CheckFree reported a pro forma profit for the quarter of $0.3 million,
essentially break-even. This compares to a pro forma loss of $4.9 million,
or six cents per share, for the same period in fiscal 2001. On a GAAP
basis, for the quarter the company reported a net loss of $215.1 million,
or a loss per share of $2.47, compared to a net loss of $116.0 million, or
a loss per share of $1.34 for the same period last year. Pro forma results
this quarter exclude $104.8 million of acquisition-related amortization and
an asset impairment charge of $155.1 million, offset by $44.5 million of
related income tax benefits. This compares to pro forma results for the
same period in fiscal 2001 that exclude $115.7 million of
acquisition-related amortization and a one-time marketing related charge of
$25.0 million, offset by $29.6 million of related income tax benefits. The
current quarter impairment charge of $155.1 million is for the write-down
of certain intangible assets associated with the acquisitions of BlueGill
Technologies and TransPoint.
CheckFree Chairman and CEO Pete Kight said, "I am pleased with the
Company's performance in the second quarter, particularly the sales gained
by our more mature software businesses in this challenging market. Our
performance this quarter sets the stage for continued improvements to our
bottom line, and we now expect to close the fiscal year with positive pro
forma earnings per share in the high single digit range," he said.
"Moving forward, you will see continued economic benefits derived from
investments we have made to ensure CheckFree's position as the value leader
in the financial electronic commerce industry," Kight continued. "Our gains
in quality and scale efficiencies continue to present new opportunities for
us to consolidate operations and derive further economic benefits. These
gains are enabling us to continue to invest in strategic innovations that
drive economic benefit. For example, this Spring, Consumer Service
Providers on Genesis will have access to new interoperability features that
share transaction information among Web, telephone and wireless devices to
give consumers broader choices in how to receive and pay their bills
electronically, and access to technology that makes activating e-bills
easier. These innovations are designed to attract and retain subscribers,
and to increase their usage of electronic billing and payment once they
enroll," he concluded.
Core Electronic Billing and Payment Metrics
Sequential quarterly subscriber growth rate for the second quarter was
six percent. A total of 5.9 million subscribers now use these services,
compared with 4.4 million at the end of the second quarter of fiscal
2001.
About 430 sites are now live with full electronic billing and payment,
up from about 400 at the end of the first quarter of fiscal 2002,
compared to about 275 at the close of the second quarter of fiscal 2001.
During the quarter, the Company took action to clarify the intent of
billers that have signed agreements for electronic billing and payment,
but have not yet begun some stage of implementation. Based on that
analysis, 48 billers were removed from the count, leaving a total of 231
billers committed to electronic billing and payment through CheckFree.
At the start of the quarter, 175 of these were actively distributing
bills for viewing and payment.
Thirteen billers signed contracts for electronic billing and payment
distribution during the quarter, bringing CheckFree's roster of signed
billers to 244.
The Company also added 10 bills to distribution through aggregation, or
"scraping," technology, including bills from credit card, mortgage,
insurance and wireless providers. CheckFree now makes 25 bills available
for viewing and payment through this technology.
Billers with electronic bills live on the Internet increased by 16 in
the quarter, bringing the total to 191 primary bills available now to
consumers for viewing and payment through traditional distribution on
CheckFree's network. The additional 25 primary bills that are available
through scraping technology take the total of live primary bills to 216.
In addition, 28 non-primary bills - which are those that can potentially
be distributed to 100,000 or fewer consumers - are available, taking the
total of all bills that consumers can view and pay electronically today
through CheckFree's network to 244.
In addition, the Company signed software license contracts with three
billers in the quarter, and contracts for solutions to be hosted by
CheckFree with three other billers.
"We are pleased with the progress we made this quarter in adding to the
roster of electronic bills available through our Consumer Service
Providers," said Pete Sinisgalli, CheckFree's president and chief operating
officer. "We continue to expect economic pressures to affect software
sales to billers, but are confident that the hosting and distribution
solutions we have in place accurately and affordably address the needs of
the market," he said.
CheckFree distributed more than 800,000 bills over the Internet in
December 2001, up from about 600,000 bills distributed in September
2001, and up from about 210,000 bills distributed in December 2000. This
equates to a run rate of nearly 10 million bills per year.
For the full quarter, the company processed about 75 million
transactions, an increase of about eight percent from the more than 69
million transactions processed in the first quarter of fiscal 2002.
Process efficiencies continued to improve CheckFree's electronic payment
rate, which gained two percentage points in the quarter, reaching
greater than 68 percent. Gains in the percentage of payments processed
electronically reduce expenses and contribute to improved customer
quality by lowering exception and claims rates.
Divisions Continue to Perform Steadily
CheckFree's Electronic Commerce division reported revenue of $85.6
million for the quarter, representing 15 percent growth over the second
quarter of fiscal 2001. The division posted pro forma operating income of
$4.2 million, compared with a pro forma operating loss of $6.3 million for
the second quarter of fiscal 2001.
"Our Electronic Commerce division continues to improve efficiency as it
scales in both subscribers and transactions," said Sinisgalli. "This
quarter the division achieved a significant milestone by completing the
migration of subscribers formerly supported by Bank of America's California
platform to Genesis. Now, for the first time, the full functionality of
CheckFree's electronic billing and payment solutions is available to Bank
of America's customers nationwide," he said.
"This success keeps us on track to realize the cost savings associated
with no longer needing to support Bank of America's California platform,"
Sinisgalli continued. "As planned, we will continue to operate this
platform in the third quarter to ensure all transactions have been
processed, and that all customer care questions related to them have been
answered. We plan to eliminate the platform, and close the San Francisco
customer care office required to support it, in the June quarter. That
savings will combine with savings from the planned retirement of our Austin
platform to deliver meaningful cost savings in the June quarter," he added.
CheckFree Investment Services reported revenue of $19.7 million for the
quarter, a 16 percent increase over the same quarter last year. Pro forma
operating income for the quarter was $5.5 million, a 36 percent increase
from the second quarter of fiscal 2001.
The Company's Software businesses reported revenue in the quarter of $16
million, a decline of two percent compared to revenue generated in the
second quarter of fiscal 2001. This division had a pro forma operating
income of $2.0 million dollars, compared to $1.2 million in the second
quarter of fiscal 2001.
"Although revenue generated in our Software division represents a slight
decline over revenue generated in the same quarter of last year, it
represents solid performance, coming off of a severe decline in the
economic conditions, particularly in the financial services sector,"
Sinisgalli said. "This division's results drove the better-than-expected
performance of the Company overall for the quarter," he added.
Second Quarter Results and Financial Expectations
"During the second quarter, we recorded a charge of $107.4 million for
the impairment of goodwill associated with our acquisition of BlueGill
Technologies, now called CheckFree i-Solutions, in April of 2000,
reflecting the challenging market conditions for that business. We also
recorded a charge of $47.7 million for the retirement of certain technology
assets we acquired from TransPoint in September of 2000, which now have no
alternative use," said David Mangum, CheckFree's chief financial officer.
"For the third quarter, we expect continued steady improvements across
each division, with performance in the Software division more in line with
previous quarters than with this one. We are forecasting revenues to be in
the range of $119 million to $124 million, and to deliver pro forma
earnings per share of one cent to three cents. We expect sequential
quarterly subscriber growth for the third quarter to be in the range of
four to six percent, continuing to reflect economic conditions, but also
the continued commitment by our leading Consumer Service Provider and
biller partners to educate consumers on electronic billing and payment and
to incent them to enroll and use the service," Mangum added.
"Our full year earnings expectations are based on realizing the effects
of continued efficiency, rationalization, and consolidation of our
business," Mangum continued. "We have taken actions to right-size our
Raleigh, North Carolina office, which will result in a modest net benefit
to our Investment Services division's quarterly pro forma operating income.
In the June quarter, we will remove approximately $750,000 from the
Electronic Commerce division expense line by closing the customer care
operation in San Francisco, which will no longer be required now that
customers have been migrated to Genesis. We expect these actions to
deliver nearly a one cent improvement to pro forma earnings per share for
the full year, most of which will be realized in the fourth quarter. These
results exclude expected one-time charges of $5 to $7 million in the third
quarter to cover severance agreements, lease costs, and intangible assets
associated with these actions," Mangum explained.
"For fiscal 2002, we now expect to post positive earnings per share on a
pro forma basis, in the high single digit range, which reflects the
improvements outlined. In addition, we continue to anticipate being
significantly EBITDA positive and moderately cash flow positive on a pro
forma basis for fiscal 2002. As we confirmed last quarter, we continue to
expect to achieve these results while investing in programs critical to
CheckFree's long-term competitive position," Mangum added. |
