CheckFree's Q2 profit rises

The Company's Generally Accepted Accounting Principles (GAAP) net income for the quarter was $35.3 million, or $0.39 per share, and underlying net income was $41.8 million, or $0.46 per share. Free cash flow was $48.0 million for the second quarter as outlined in Attachment A.

GAAP Results: Net income for the second quarter of fiscal 2007 was $35.3 million, compared to net income of $33.8 million for the same quarter last year. Earnings per share were $0.39 for the second quarter of fiscal 2007, compared to earnings per share of $0.36 for the second quarter of last year. Net cash provided by operating activities was $58.9 million for the second quarter of fiscal 2007, compared to $56.8 million for the same period last year.

Underlying Results: Underlying net income for the second quarter was $41.8 million, compared to $41.0 million for the same quarter of last year. Underlying earnings per share were $0.46 for the second quarter of fiscal 2007, compared to $0.44 per share for the second quarter of last year. Underlying net income and earnings per share for the second quarter of fiscal 2007 exclude the amortization of acquisition-related intangible assets and the SFAS 123( R ) impact of stock options issued prior to July 1, 2004, all net of related income tax benefits. Underlying net income and earnings per share for the second quarter of fiscal 2006 include the historical results of discontinued operations, which resulted from a business that was divested in the third quarter of fiscal 2006; and exclude the amortization of acquisition- related intangible assets and the SFAS 123 impact of stock options issued prior to July 1, 2004; net of related income tax effects from each of the foregoing. A reconciliation of CheckFree's quarterly and annual underlying results to its GAAP results is included in Attachment A.

"CheckFree's Electronic Commerce business reported solid growth in core, bank-based transactions during the quarter, while the smaller base of non-bank transactions were behind our expectations," said Pete Kight, CheckFree Chairman and Chief Executive Officer. "Our Software business showed better- than-expected results and our Investment Services business performed as expected during the quarter, with accounts under management increasing nicely. The second half of our fiscal year will be all about balancing execution with investment in longer term growth initiatives."

Second Quarter Highlights

During the second quarter of fiscal 2007, the Company reported that the Electronic Commerce Division processed 322.0 million transactions. Consumer Service Provider (CSP) transactions at banks, credit unions and other financial institutions increased 7 percent sequentially and non-CSP transactions declined 7 percent, reflecting an overall sequential transaction growth rate of 3 percent. During the second quarter, the Company delivered 54.9 million electronic bills, a 6 percent sequential quarterly increase.

The CheckFree Software Division reported results that exceeded expectations, with strong license sales in its global treasury products. The CheckFree Investment Services Division reported more than 2.6 million portfolios under management, compared to 2.1 million in the second quarter of fiscal 2006, representing a 24 percent year-over-year increase.

The Company also announced that it repurchased nearly 1.3 million shares of its common stock for approximately $50 million during the second quarter of fiscal 2007.

Financial Outlook for the Third Quarter

"For the third quarter of the fiscal year, we expect revenue between $241 million and $246 million, with GAAP earnings per share in the range of $0.39 to $0.41, which equates to underlying earnings per share in the range of $0.47 to $0.49," said David Mangum, CheckFree Chief Financial Officer.

"In Electronic Commerce, we expect sequential transaction growth of 5 to 7 percent in our CSP channel, and non-CSP transaction volumes to be flat or decline by as much as 2 percent," Mangum continued. "We expect revenue performance in our Software Division to experience a modest sequential decline from the second quarter, and portfolio growth in Investment Services to be consistent with historical rates in the third quarter."

"Our full-year expectations for earnings per share remain $1.58 to $1.62 on a GAAP basis and $1.90 to $1.94 on an underlying basis," he said. "And we continue to expect free cash flow in the range of $190 million to $195 million for fiscal 2007."

"Our full-year expectations do not include any impact from the acquisition of Carreker, which we announced on January 2, 2007," said Mangum. "We provided high-level financial expectations when we announced the acquisition, and expect to provide more specific information after the deal closes, which is expected to occur on or about March 31, 2007."

The difference between GAAP and underlying earnings expectations for the third quarter of fiscal 2007 is due to expected acquisition-related intangible amortization expenses, the SFAS 123( R ) impact of stock options issued prior to July 1, 2004, and the related income tax benefits from each of the foregoing.

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