CheckFree Falls on Revenue

Light guidance and softer-than-expected sales numbers send shares down 15%.
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beat Wall Street estimates for its first-quarter earnings, but sales were shy of expectations.

In addition, light guidance for the company's second quarter whacked shares in early trading Wednesday, sending the stock down 15%.

The company on Tuesday said it earned $31.4 million, or 34 cents a share, rising from $26.4 million, or 28 cents a share, in the same period last year.

Excluding certain items, the electronic payment services company earned $38.6 million, or 42 cents a share, compared with $43.1 million, or 46 cents a share, in the same quarter last year.

Revenue tallied $228.6 million vs. $213.7 million in the year-ago quarter.

Analysts surveyed by Thomson First Call expected an EPS of 39 cents on sales of $229.5 million.

On a conference call with analysts late Tuesday, CheckFree CEO Pete Kight said the company had performed an analysis of transaction growth and found "uneven transaction spread between quarters."

The company found a difference between quarters that begin with long months, vs. those that begin with short months, Kight said. As a result, the first and fourth quarters of the company's fiscal year have lower transaction volumes.

"There are two quarters that are always going to be lighter, and two quarters that are always going to be higher," he said.

Consistent with this pattern, the previous period -- the company's fourth fiscal quarter --

missed estimates and disappointed investors.

Over the full year, the company found no change in consumer behavior, he said.

Kight said that some of the large banks that CheckFree works with, dubbed "consumer service providers," temporarily cut their marketing programs for online transactions leading to fewer online payments, but the company does not expect that trend to continue.

The smaller portion of CheckFree's business, the non-CSP group (including walk-in bill-paying services, phone pay or direct billing), "should be growing better than it is," Kight said. "I'm not at all satisfied."

Even with the new analysis, CheckFree's forecast of its second quarter was lighter than analysts hoped. The Atlanta-based company expects revenue between $230 million and $235 million, and earnings of 33 cents to 35 cents a share. Pro forma EPS should range from 40 cents to 42 cents.

Analysts forecast EPS of 45 cents and revenue of $238.3 million for the second quarter.

CheckFree said it bought back more than 2.6 million shares for about $100 million during the quarter, and said it is looking to do more repurchases in the weeks ahead.