CheckFree Reports Record Earnings and Revenues for the Third Quarter of Fiscal 1999
-- Company delivers a 20% increase in revenues over the third quarter of fiscal 1998, and Earnings Per Share of four cents --
-- Consumers can now receive 21 bills electronically at more than 20 distribution points --
ATLANTA, April 27 /PRNewswire/ -- CheckFree Holdings Corporation (Nasdaq: CKFR - news) today announced revenues of $62.9 million for the third quarter of fiscal 1999 ended March 31, 1999. Total revenues for the quarter increased 20 percent over the comparative quarter of last year, adjusted for the effects of software divestitures completed last year.
Excluding the effects of a $2.2 million charge for in-process research and development at Mobius Group, acquired in March, and a one-time real estate transaction in the Investment Services division, the Company reported a profit for the quarter of just over $2 million, or four cents per diluted share, compared to an effective break-even result for the same period last year.
The number of subscribers to the Company's electronic billing and payment (EBP) services grew by six percent over the prior quarter, equating to more than 2.8 million subscribers and driving an average of more than 11 million transactions processed per month. The Company noted that financial institutions are experiencing, on average, Internet-based sequential quarterly subscriber growth above 20 percent. By contrast, they are experiencing Personal Financial Management software-based sequential quarterly subscriber growth below four percent.
''Our subscriber growth numbers this quarter clearly indicate that consumers want to use Internet-based electronic billing and payment services, and will sign up for them at impressive rates when they are offered and promoted,'' said Pete Kight, Chairman and CEO of CheckFree. Kight also noted that, with the launch of Internet-based EBP services through Bank One on April 14, consumers can now receive and pay electronic bills at more than 20 sponsor sites, including First Union, Bank One, Quicken, Charles Schwab, Prudential, Morgan Stanley Dean Witter and Navy Federal Credit Union. Consumers can also pay bills at more than 350 financial institution sites using CheckFree services.
Company Extends Lead in Electronic Billing and Payment
The Company said that during the quarter it signed contracts for electronic billing and payment solutions with eight additional billers, bringing to 49 the total number of billers that have signed EBP contracts with CheckFree.
''Significant third quarter contract signings with telecommunications companies added to our historical success in that industry, giving CheckFree the potential to manage the electronic distribution and payment of 70 percent of all telecommunications bills in the United States,'' said Kight. In addition to these new signings, AT&T has contracted to use CheckFree's EBP services, and on February 24, MCI WorldCom made its more than 20 million consumer bills available for electronic billing and payment through CheckFree.
Among the contracts signed during the third quarter were: Cox Communications, one of the largest cable companies in the United States, mailing nearly four million bills per month; CountryWide Home Loans, the nation's largest independent mortgage lender; Illinois Power, an electric and gas utility serving approximately 650,000 customers; Nevada Power, an electric energy and services company reaching 550,000 customers; and billserve.com, an EBP service bureau and consolidator that provides small- to medium-sized billers with a turn-key bill presentment and payment solution.
Update on Distribution Through Internet Portals, Intuit Disagreement
Kight noted that the Company's plans to distribute its EBP services through a ''high-traffic Internet aggregation site'' on the Internet continue on track, and have not been affected by the Company's disagreement with Intuit, which led Intuit to file a lawsuit against CheckFree in March. ''The project is on track, with no impact on design, development, testing or market introduction plans coming from our disagreement with Intuit,'' Kight said.
Regarding the Company's disagreement with Intuit, Kight said, ''The matter has moved to arbitration, and we expect a fairly quick resolution. This is a new and rapidly evolving business, and it shouldn't be surprising that parties sometimes have to struggle to adapt relationships to new conditions. Nonetheless, Intuit and CheckFree have successfully worked together, blending our complementary strengths, for many years, and we expect to work this out.''
EC Solutions Professional Services Group Launched
CheckFree Chief Operating Officer Pete Sinisgalli said that the Company is focusing on moving the billers through the contract-to-live-service cycle as quickly as possible.
''To date, we have signed EBP contracts with 49 billers, 21 of which are offering electronic billing and payment to their customers today. An additional 19 are actively engaged in the implementation process, and the remaining 9 are in queue to begin implementation. Additionally, our pipeline for new biller signings has never been stronger, and interest from organizations wanting to provide consumer access to EBP services is high.
''A core part of our market strategy is to get these parties into market with EBP solutions as quickly as possible,'' Sinisgalli continued. ''Our experience has shown that once people use the service, and discover the convenience of not only being able to receive bills electronically, but to make any payment to anyone electronically, they love the service and stick with it. Our EC Solutions unit will focus on providing consulting and other strategic services that help billers and sponsors introduce EBP quickly to achieve these first-to-market advantages,'' Sinisgalli concluded.
Divisions Perform As Expected
CheckFree's Electronic Commerce division reported revenue of $43.5 million for the quarter, 21 percent growth over the same quarter of fiscal 1998. The division posted an operating profit of $1.5 million, compared to a profit of $800,000 for the same period last year. The number of people subscribing to electronic billing and payment services offered by the division exceeded 2.8 million, a 6 percent increase over the prior quarter.
CheckFree Investment Services reported revenue of $9.7 million for the third quarter of fiscal 1999, a 23 percent increase over the same quarter last year, after adjusting for the acquisition of Mobius Group. Operating income, adjusted for the effects of charges associated with in-process research and development related to the Mobius acquisition, and a one-time real estate transaction, was $2.7 million for the quarter, a 61% increase over Q3 1998. The division grew the number of portfolios under its management to 630,000, up 10 percent over the previous quarter and more than 41 percent over the same quarter of fiscal 1998.
The Company's Software division reported revenue in the quarter of $9.8 million, an increase of 8 percent over the roughly $9.0 million generated by these same businesses in the third quarter of fiscal 1998. Operating income was $3.8 million for the quarter, an increase of 63% over last year's adjusted third quarter result. The division extended its ACH Alliances Services business -- through which CheckFree provides ACH process management resources to customers on their sites -- to another top 10 bank, and its reconciliation products group closed important sales in the banking sector, including M&I and Washington Mutual.
Fourth Quarter Expectations
Commenting on the Company's expectations for the fourth quarter, Sinisgalli said, ''We expect to finalize agreements soon that will expand Internet distribution of CheckFree's EBP technology, as well as the availability of our partner banks' on-line banking services. We intend to be fully prepared to invest in our service delivery infrastructure to support this expanded distribution.
''The success we have had signing billers to EBP contracts has led us to an enviable challenge: Many billers are eager to offer electronic billing and payment to their consumers as quickly as possible, and are asking for a greater amount of help from us in this process. Meeting these requests probably will require us to increase our investment in resources we acquire from third parties, including software and development tools.
''We will be quite profitable in fiscal Q4, but are now most comfortable with analyst EPS projections in the low end of the range, namely five cents per diluted share. This reflects our full commitment to invest to maximize the opportunities of our EC division, one cent of accounting dilution from the Mobius acquisition, and risk in our software business stemming from the Y2K impact on new sales.
''We certainly could reduce costs in Q4 to achieve higher EPS -- keep in mind that 1 cent of EPS equals only about a half million dollars. However, cutting costs in our EC division would be a mistake,'' Sinisgalli concluded.
Commenting on CheckFree's commitment to investing in market growth and leadership, Kight said, ''Three things are critical to leading this market: the widest consumer distribution possible, through both bank and Internet distribution channels; high-percentage penetration of the largest billing categories, such as telecommunications; and an integrated electronic billing and payment platform that enables distribution, tracking, audit, payment, and customer care in highly efficient form. CheckFree is focused on continuing to lead in all three categories.''
Highlights
* April 14, 1999 -- Bank One becomes the first bank to offer fully
integrated electronic bill delivery through the Integrion Financial
Network, using CheckFree's growing network of billers.
* April 13, 1999 -- CheckFree announces that in May, it will launch EC
Solutions, a new division that will provide consulting and professional
services to prospective and existing clients, industry partners and
other organizations.
* March 22, 1999 -- PNC Bank, Integrion Financial Network and CheckFree
announce plans to pilot a fully integrated, Web-based electronic
banking, bill delivery and payment service for PNC Bank customers. PNC
Bank already uses CheckFree for its bill payment service via personal
financial management software and telephone bill payment.
* March 19, 1999 -- CheckFree rolls out the first large-scale system
support for the Open Financial Exchange (OFX) specification for
electronic banking and bill payment. CheckFree's electronic payments
engine now supports OFX for transactions processed on behalf of 400,000
users, making it the largest in-production OFX-compliant system in the
industry.
* March 17, 1999 -- CheckFree and Equifax E-Banking Solutions, one of the
largest providers of electronic banking software in the United States,
announce that they have signed a three-year reseller agreement. Under
the agreement, Equifax E-Banking Solutions will resell CheckFree
E-Bill(SM) services to their customers, which include banks, credit
unions and savings institutions worldwide.
* March 16, 1999 -- CheckFree's Investment Services division reaches
600,000 portfolios on CheckFree APL and APL WRAP portfolio management
system. These portfolios total more than $400 billion in assets.
* March 15, 1999 -- Countrywide Securities Corporation selects CheckFree
RECON Trade(TM) to automate reconciliation deposits throughout the
company.
* March 8, 1999 -- CheckFree Holdings Corporation announces the
acquisition of Mobius Group, a leading provider of money manager
databases and financial planning software to the financial services
industry. The Mobius Group will allow CheckFree's Investment Services
division to offer the broadest suite of investment consulting services
and products in the industry today.
* March 4, 1999 -- billserv.com and CheckFree sign a service bureau
agreement whereby billserv.com will transmit billing information from
its base of biller customers to CheckFree, enabling CheckFree to
provide electronic billing and payment services to the growing number
of consumers who want to pay their bills electronically.
* March 3, 1999 -- CheckFree's Investment Services division announces
that it has successfully implemented the necessary code enhancements to
make both CheckFree APL and APL WRAP product lines "Y2K-ready."
CheckFree APL/APL WRAP is the leading portfolio accounting, performance
measurement, trading and reporting system in the industry.
* March 1, 1999 -- CheckFree and Nevada Power Company announce an
agreement for electronic billing and payment. The service, which will
launch in June 1999, will be available to Nevada Power's more than
550,000 electricity and energy services customers.
* Feb. 24, 1999 -- MCI WorldCom, one of the leading global communications
companies, launches its electronic billing and payment service for
residential customers -- backed by CheckFree's infrastructure.
* Feb. 16, 1999 -- Illinois Power, an electric and gas utility serving
approximately 650,000 customers in Illinois, signs an agreement with
CheckFree to offer electronic billing and payment using CheckFree
E-Bill.
* Feb. 8, 1999 -- CheckFree announces the installation and successful
activation of a dedicated trading interface between its Investment
Services division and Interstate/Johnson Lane, a Charlotte-based
brokerage and investment-banking firm. This new trading interface
provides Interstate/Johnson Lane with true "interactive" trading
functionality, including the ability to electronically communicate
trading information directly to the trading floor for immediate
execution.
* Feb. 1, 1999 -- CheckFree names Mike Meriton as the new president of
Corporate Commerce Solutions, a unit of CheckFree's Software division.
* Jan. 26, 1999 -- CheckFree and Countrywide Home Loans, Inc., the
nation's largest independent mortgage lender with nearly 2 million
customers, sign an agreement for electronic billing and payment.
* Jan. 25, 1999 -- CheckFree's Investment Services division announces a
new agreement with Boston-based State Street Research & Management Co
to provide portfolio trading and accounting services.
About CheckFree
Founded in 1981, CheckFree (www.checkfree.com ), the operating subsidiary of CheckFree Holdings Corporation, is the leading provider of financial electronic commerce services, software and related products for more than 2.8 million consumers, 1,000 businesses and 850 financial institutions. CheckFree designs, develops and markets services that enable its customers to make electronic payments and collections, automate paper-based recurring financial transactions and conduct secure financial transactions on the Internet.
This press release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. Those statements include, but may not be limited to, all statements regarding the intent, beliefs, expectations, projections, forecasts, and plans of the Company and its management, and include statements regarding distribution through internet portals (paragraph 8), the Intuit disagreement (paragraph 9), and fourth quarter expectations (paragraphs 16 to 18). These forward-looking statements involve numerous risks and uncertainties, including without limitation: the timely and successful development of electronic billing and payment services through internet portals; the ability of the Company to resolve the disagreement with Intuit or to prevail in the arbitration; the timely development and implementation of Internet-based electronic billing and payment services by the Company's bank customers; the increased numbers of bank customers who subscribe to such services; the timely and effective implementation of bank marketing and advertising promotions to promote increased adoption of electronic billing and payment services; timely implementation of existing bank processing agreements; the ability of the Company to sell its processing services to additional financial institutions; the acceptance of the Company's electronic banking and bill payment services by financial institutions and businesses and their customers; the impact of competitive services and products; the effect of any future acquisitions and divestitures; and the timely development and acceptance of new electronic commerce services and products, as well as 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 Report on Form 10-K for the year ended June 30, 1998, and Form 10Q for the quarter ended December 31, 1998. One or more of these factors have affected, and could in the future affect, the Company's businesses and financial results in future periods and could cause actual results to differ materially from plans and projections. Therefore, there can be no assurance that the forward-looking statements included in this press release will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information 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 the management of the Company. The Company assumes no obligation to update any forward-looking statements.
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