CheckFree Corp., the Atlanta electronic bill payment processor, said a continuing rise in business helped it beat analysts' expectations for the just-ended quarter.
Its transaction volume should rise even more by September, when its longtime customer Bank of America Corp. adds the customers it acquired with FleetBoston Financial Corp., the company said Tuesday.
But it also said the conversion of Wachovia Corp.'s online bill pay is taking longer than expected and would not contribute to earnings for another year.
Net income jumped 103% from a year earlier, to $15.6 million, or 17 cents a share, in the quarter that ended March 31, CheckFree said. Revenue rose 23%, to $191.2 million. The quarter was the third of its fiscal year.
"Underlying earnings" CheckFree's version of operating results, were $36 million, or 39 cents a share, it said. That topped Wall Street's expectations by 3 cents.
Nevertheless, CheckFree's shares fell Wednesday - by 9.4%, to $35.16, by 3:30 p.m.
Financial DNA LLC, a San Francisco analyst of online financial companies, said the price drop showed that investors were focusing on other parts of CheckFree's business, such as international expansion.
CheckFree had a strong quarter, Financial DNA LLC said in a midday note to clients, "but with the equity markets now focused on inflation and CheckFree signaling that big growth is … likely to come from new markets overseas, the shares are moving south."
The company also raised its estimates for the full fiscal year. It now projects net income of 53 to 55 cents, instead of the 46 to 50 forecast in the January earnings statement.
"Banks continue to get progressively better in bringing their customers online," said Pete Kight, CheckFree's chairman and chief executive officer, in a conference call with analysts Tuesday evening. He cited U.S. Bancorp of Minneapolis, which announced last week that it had gained a million online customers in the past year.
The parent of U.S. Bank said the number of active bill-pay customers had grown by more than 250% since it eliminated the fee for the service in December 2003. Mr. Kight announced on the earnings call that U.S. Bancorp had signed a multiyear contract extension with CheckFree.
This week Bank of America reported that it had 13.1 million online banking customers at the end of the first calendar quarter, including 6.3 million who had used the bill-pay service in the previous 90 days.
David E. Mangum, CheckFree's chief financial officer, said B of A, which acquired Fleet in April 2004, expects to convert those customers to its own CheckFree-powered bill-payment system by the end of September.
But he also said the Wachovia conversion will probably not be finished until June 2006 - about three months later than originally expected. As a result, it will contribute little to CheckFree's earnings in the next fiscal year.
"What you're dealing with is a very complex migration. It's much bigger than just an EBP migration," Mr. Mangum said.
CheckFree will also lose a customer, Zions Bancorp., in the September quarter, he said. In January the Salt Lake City company announced that it would switch to the No. 2 bill-pay provider, Metavante Corp., a unit of the Milwaukee banking company Marshall & Ilsley Corp.
