Company Press Release
SOURCE: CheckFree Corporation
CheckFree Reports Second Quarter Results
- Revenue and EPS Results Better Than Expectations -
- 89 Billers Under Contract, 62 Live, With CheckFree's Electronic Billing and Payment Service -
- Sites Where Consumers can Get and Pay Bills More Than Double, Exceed 100 -
ATLANTA, Jan. 25 /PRNewswire/ -- CheckFree Holdings Corporation (Nasdaq: CKFR - news) today announced revenues of $73.0 million for the second quarter of fiscal 2000, ended December 31, 1999, compared to $59.6 million for the same quarter of fiscal 1999, a 22 percent increase.
The Company reported a net loss for the quarter of $4.0 million, or 8 cents per share, diluted, compared to a break-even result for the same period in fiscal 1999, adjusted for non-recurring items.
CheckFree Chairman and CEO Pete Kight said, ``We continue to deliver very solid results this year, with both revenue and earnings per share coming in slightly better than expected for the second quarter. Revenue beat the high end of the expected range by $1 million, and EPS was a penny better than the positive side of the range expected for loss-per-share. These results reflect strong sales in each of our divisions, and less-than-expected downward pressure from Y2K concerns.''
Distribution More Than Doubles, 22 More Billers Get to The 'Net for Total of 62
CheckFree reported strong progress in both billers and distribution points committed to electronic billing and payment services, and in getting electronic bills to the Internet. The Company signed 12 new contracts with billers in the second quarter, for a total of 89 billers set to offer electronic billing and payment through CheckFree. Of these, 62 now make electronic bills available for payment, compared with 40 at the end of last quarter.
``Last quarter we realigned our sales, implementation and account management teams to focus on condensing the time between signing an E-bill contract to getting bills on the 'Net,'' said Pete Sinisgalli, CheckFree's president and chief operating officer. ``This quarter, we reaped the benefits: 11 billers moved from planning to implementation, and 22 moved from implementation to live. With 62 billers live, we have met two-thirds of our June 30 goal of having 90 billers live.
``When the transaction closes, we expect our acquisition of BlueGill to help us sign more billers and further speed the process of making bills available on the Internet,'' Sinisgalli added.
The Company also disclosed that more than 100 Internet sites now offer electronic billing and payment through CheckFree, up from 53 at the end of the first quarter. ``Much of this impressive growth came from community banks and credit unions,'' said Kight. ``These typically are supported through our relationships with Equifax, Fiserv and other reseller partners who make it easy for community banks and credit unions to offer Internet billing and payment services quickly and cost-effectively,'' he added.
The Company nearly doubled the number of bills it distributed over the Internet, sending more than 38,000 in December, up from 20,000 in the prior September. The Company processed more than one million more transactions per month at the end of the second quarter compared to at the end of the first quarter, tallying 14 million transactions processed in December.
Meeting expectations the Company shared last quarter, the number of subscribers using CheckFree services remained flat at about three million. Subscriber growth of 7 percent during the quarter was offset by the removal of subscribers using non-Y2K-compliant personal financial management software for system access who failed to upgrade by December.
``Sequential quarterly growth in the number of Internet-based subscribers continued on its strong trend of greater than 20 percent growth this quarter,'' said Sinisgalli. ``So, despite our overall subscriber count remaining at three million, the quality of the subscribers is increasing. More of them are high- frequency users over the Internet. They are conducting more transactions, more often, evidenced by our transaction count increasing by more than one million. Moving forward, transactions processed will deserve deeper analysis as a barometer of how consumers are changing their behavior as they move their financial lives to the 'Net.''
Sinisgalli expressed comfort with the Company's ability to achieve its revenue and earnings-per-share targets for the year, and said the Company is reconsidering its target of approaching five million subscribers by June 30. ``Given that we are halfway through our fiscal 2000, achieving a subscriber count approaching five million by June 30 will be more difficult than we had expected six months ago. However, given the difficulty of accurately predicting the exact timing of partner marketing campaigns, we are not yet ready to concede our ability to reach this target by June 30,'' Sinisgalli said.
Sinisgalli said the Company's targets had been based, in part, on expectations for when certain Internet service providers would launch electronic billing and payment services. ``Those Internet services did not launch in the timeframe built into our planning assumptions, but they will launch,'' Sinisgalli said. ``And, while we can't share specifics, we now expect to launch through this calendar year at more Internet sites -- both bank-based and portal-based -- than we had originally planned six months ago,'' he added.
Yahoo! E-Bill Live, AT&T Bill Now Available, Marketing Programs Expected
Kight said that the Company expects its partners to launch marketing promotions to heighten consumer awareness, interest and enrollment during the calendar year. He noted that Yahoo! has begun to market its mid-December launch of Yahoo!® E-Bills, following the earlier launch of Yahoo! Bill Pay. Promotions include targeted banner advertising campaigns throughout the Yahoo! network of properties, including a link from the front page of Yahoo! (www.yahoo.com ).
Yahoo plans to integrate the service into some of the other properties across its network, and plans to pursue online marketing programs with select E-billers.
``We are also pleased to note the largest biller in the United States, AT&T, which mails more than 90 million statements per month, now has its consumer bills available to users of Yahoo! E-Bills. The combination of these two powerful brands will heighten awareness of the convenience and time savings associated with electronic billing and payment,'' Kight concluded.
Strong Division Performance
CheckFree's Electronic Commerce division reported revenue of $50.7 million for the quarter, representing 23 percent growth over the same quarter of fiscal 1999. The division posted an operating loss of $5 million, compared to a loss of $1 million for the second quarter of fiscal 1999, reflecting the Company's planned investments in infrastructure and programs to support future growth.
The division increased the proportion of transactions it processes electronically from 52 to 54 percent during the quarter, which improves processing efficiency.
Sinisgalli noted that a new pricing structure the Company introduced for its largest strategic partners last quarter has been well received. The structure offers much lower per-subscriber fees, combined with transaction fees and service-level base fees, and is designed to encourage heightened promotion to consumers. Sinisgalli said that the contract CheckFree announced with Wells Fargo during the quarter reflects this structure.
``Wells Fargo is clearly a market leader in electronic banking,'' Sinisgalli said. ``Their confidence in CheckFree is a clear indication of the overall success we expect to achieve with this plan.''
CheckFree Investment Services reported revenue of $13.2 million for the quarter, a 26 percent increase over the same quarter last year, adjusted for the acquisition of Mobius Group. Operating income for the quarter was $3.1 million, compared to $1.5 million, adjusted for non-recurring items, in the second quarter of fiscal 1999. During the quarter the division grew the number of portfolios under its management to 820,000, up 7 percent over the prior quarter, and up more than 43 percent over portfolios managed at the close of the second quarter of fiscal 1999.
The Company's Software division reported revenue in the quarter of $9.1 million, a decrease of 4% from the $9.5 million generated in the second quarter of fiscal 1999. These results were as expected, reflecting the Company's planning for buying moratoriums due to Y2K concerns. Results do not reflect the Company's planned acquisition of BlueGill Technologies, since the transaction has not yet closed.
Software division operating income was $2.3 million for the quarter, as compared to $3.7 million in the second quarter of fiscal 1999. ``Operating margins in this business remain healthy,'' Sinisgalli said. ``Results reflect investments in new initiatives, such as the highly-successful launch of Missingmoney.com, a state-sponsored Internet site jointly developed with the National Association of Unclaimed Property Administrators, to enable consumers to find and claim money owed to them from non-refunded deposits, unclaimed securities, and other accounts held by states,'' Sinisgalli said.
Third Quarter Expectations
Sinisgalli noted that the Company is comfortable with published financial analyst expectations of a nine- to 11-cent loss per-share for the third quarter. The Company expects consolidated third quarter revenues to be in the range of $73 to $78 million, and management remains confident in its expectation, shared in August, of closing the year at break-even or slightly positive EBITDA, with a loss per share of 40 cents or better.
These expectations exclude the impact of consolidating BlueGill Technology's results, pending the completion of the transaction to acquire BlueGill.
``Assuming two months of consolidated reporting, BlueGill will contribute roughly $2 million in revenue, and will be dilutive by about 4 cents per share, prior to amortization of goodwill and other intangibles, in the third quarter,'' Sinisgalli said. ``For the year, BlueGill will contribute about $5 million in revenue, and be dilutive by about 10 cents per share, before amortization of goodwill and other intangibles,'' Sinisgalli said.
CheckFree, the operating subsidiary of CheckFree Holdings Corp., is the leading provider of financial electronic commerce services, software and related products. CheckFree designs, develops and markets services that enable three million consumers to receive and pay bills over the Internet or electronically through a variety of bill aggregation points, including banks, brokerage firms, portals and interactive content sites on the Internet, and personal financial management (PFM) software. CheckFree's range of services and products are focused on enabling customers to make electronic payments and collections, automate paper-based recurring financial transactions and conduct secure Internet transactions.
Second Quarter 2000 Highlights