GAAP Results: Net income for the first quarter was $26.4 million, compared to net income of $6.2 million for the same quarter last year. Earnings per share were $0.28 for the first quarter of fiscal 2006, compared to earnings per share of $0.07 for the first quarter of last year. Net cash provided by operating activities was $43.5 million for the first quarter of fiscal 2006, compared to $31.7 million for the same period last year.
Underlying Results: Underlying net income for the first quarter was $43.1 million, compared to $26.9 million for the same quarter of last year. Underlying earnings per share were $0.46 for the first quarter of fiscal 2006, compared to $0.29 for the first quarter of last year. Underlying net income and earnings per share for the first quarter exclude the amortization of acquisition-related intangible assets, the SFAS 123(R) impact of options issued prior to July 1, 2004 and the related tax benefits of both.
"CheckFreeâs first quarter results reflect very good execution across all of our businesses, measured by better-than-expected transaction growth in our Electronic Commerce division, and good performance in both managed account growth in Investment Services and sales in the Software division," said Pete Kight, Chairman and Chief Executive Officer of CheckFree. "These results delivered earnings per share performance ahead of plan, providing the Company with a strong start for the full year."
"We will continue to focus on executing CheckFreeâs strategic business plan toward long-term growth while looking for investment opportunities to extend our core franchises. At the same time, we expect to deliver free cash flow on target for the year," Kight concluded.
First Quarter Highlights
For the first quarter, the Company reported that its Electronic Commerce division processed 266 million transactions for the quarter, a 9 percent sequential increase over the fourth quarter of fiscal 2005, and delivered 42.7 million e-Bills, a sequential increase of 4 percent over the fourth quarter of fiscal 2005.
During the quarter, CheckFree Investment Services reached the milestone of 2.0 million portfolios under management, which compares to almost 1.7 million portfolios under management in the first quarter of fiscal 2005, representing 18 percent annual growth. The Software division delivered a strong performance in the first quarter, with revenue growth of 54 percent over the first quarter of fiscal 2005.
Financial Outlook for the Second Quarter and the Fiscal Year
"Our strong first quarter results put the Company on track to achieve its previously announced fiscal year expectations," said CheckFree Chief Financial Officer David Mangum.
"First quarter performance was fueled by strong electronic billing and payment transaction growth, better-than-expected software sales and delays in investment spending now slated to start later in the year. We continue to expect full-year earnings per share in the range of $1.08 to $1.13 on a GAAP basis and $1.50 to $1.54 on an underlying basis, and free cash flow of about $170 million for the year."
"For the second quarter of the current fiscal year, we expect revenue in the range of $210 million to $215 million, and GAAP earnings per share in the range of $0.33 to $0.36, an improvement from the first quarter which reflects the expiration of TransPoint-related amortization expense," Mangum continued. "This expectation equates to underlying earnings per share in the range of $0.40 to $0.42 for the quarter."
"Expectations for the second quarter of fiscal 2006 are based on an outlook for increased investment levels across all three divisions, and the effect of the expiration of guaranteed minimum revenue from one of the TransPoint partners in August. Sequential quarterly transaction growth is estimated to be in the range of 1 to 4 percent due primarily to two anticipated customer departures, while we expect portfolio growth in Investment Services and performance in Software to be consistent with the first quarter," Mangum concluded.
The difference between GAAP and underlying earnings expectations for fiscal 2006 and the second quarter of fiscal 2006 is due to expected acquisition-related intangible amortization expense, the SFAS 123(R) impact of options issued prior to July 1, 2004 and the related tax benefits of both.