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Profit Data Sends CheckFree Stock Down Open Solutions: Earnings, Demand Strong Digital Insight to Repurchase More Shares
Profit Data Sends CheckFree Stock Down
CheckFree Corp.'s stock tumbled Wednesday after the Atlanta bill payment vendor reported earnings that missed estimates for its fiscal fourth quarter, which ended June 30, and the full fiscal year.
Late Tuesday, CheckFree said its fiscal fourth-quarter net income more than doubled from a year earlier, to $29.4 million, or 31 cents a share. Revenue rose 12%, to $224.9 million. For the full fiscal year, its income nearly tripled, to $127.2 million, or $1.36 a share.
But Wall Street focused on its underlying net income, CheckFree's preferred measure of describing its operating profits. For the quarter, underlying net income was flat at $36.5 million, or 39 cents a share, which felling short of the average analyst estimate by 2 cents. Full-year underlying net income rose 21%, to $160.8 million, or $1.72 cents a share, which was also 2 cents short of the average estimate.
In late trading Wednesday the stock had dropped 14.14%, to $37.03 a share.
Pete Kight, CheckFree's chairman and chief executive, said Tuesday on a conference call with analysts that even though he was "pleased with the results" over all, a combination of misfortunes lowered its transaction volume for the quarter.
The electronic commerce division "fell short of our expectations, as you're now aware," he said. One reason for the miss was that "there are fewer billing cycles in April, and therefore consumers make fewer payments in the month."
Volume across all electronic payment channels "didn't improve as much in May and June as it has in previous quarters," Mr. Kight said.
CheckFree processed 302.2 million electronic transactions in the fourth quarter. Mr. Kight called the 3% increase from the previous quarter "transaction growth softness." Full-year processing volume rose 25%, to 1.13 billion.
Some consumers skipped payments altogether in April, he said, and the conversion of a large bank customer from the good funds payment method, in which funds are withdrawn before the payment is sent to the biller, to the risk method, in which the funds are withdrawn when the payment is sent, slowed transaction growth.
To compensate for the slower transaction growth, the electronic commerce division is expected to improve its market share this fiscal year, Mr. Kight said.
For this quarter, CheckFree expects to report net income of 29 to 31 cents a share, revenue of $226 million to $231 million, and underlying net income of 37 to 39 cents a share. For its full fiscal 2007 it forecast earnings of $1.58 to $1.62 a share and underlying net income of $1.90 to $1.94 a share. 
Open Solutions: Earnings, Demand Strong
The Glastonbury, Conn., core processing software vendor Open Solutions Inc. said earnings rose in its first full quarter since buying a bank processing unit from Bisys Group Inc.
Open Solutions reported late Tuesday that its second-quarter net income rose 7% from a year earlier, to $4.1 million, or 19 cents per diluted share. Revenue rose 127%, to $107.1 million.
The improvement is not as dramatic as the one reported for the first quarter, when earnings jumped 50% as a result of the Bisys unit purchase March 3. That quarter it credited few sales to the unit.
The company issued convertible notes and took on debt to finance the purchase.
In the second quarter "we saw continued strong demand" for Open Solutions products, Louis Hernandez Jr., its chairman and chief executive, said Tuesday in a press release. The value of contracts signed in the quarter rose 55% from a year earlier, to $56.6 million. That figure represents revenue over the life of the contracts signed.
For the third quarter, Open Solutions expects to report revenue of $104 million to $106 million and earnings of 20 to 22 cents a share.
Digital Insight to Repurchase More Shares
The Calabasas, Calif., online banking technology vendor Digital Insight Corp., which is about to complete a stock buyback program, is starting another one.
Digital Insight said Wednesday that it has authorized the repurchase of $50 million more of its shares over the next 12 months. It has less than $1 million left to spend from a $50 million program it announced May 25.
The vendor says it has spent $149.4 million on stock buybacks over the past two years. Last year it completed two $25 million programs, and in May it finished a $50 million one it began Feb. 15.
