After 23 years, electronic-payment processor CheckFree
Shares of the Atlanta-based company are moving sharply higher on the news, up nearly 9%, recouping losses from late last week that followed a much-anticipated update from Bank of America
Fortunately, companywide growth metrics were a little more robust. The electronic commerce division processed 205.8 million transactions and delivered 29.6 million e-bills -- increases of 25% and 14%, respectively, over the prior quarter -- driving a 27% gain in processing and servicing revenues to $158.8 million. In the past year, electronic transactions (including walk-in bill payments at retail locations) have grown 62%, and the number of e-bills delivered has more than doubled.
To generate transactions, CheckFree needs subscribers, and to enroll subscribers, more outlets such as Yahoo
CheckFree also provides portfolio management services and software to financial institutions, and both of those divisions reported solid double-digit revenue growth for the quarter. Electronic commerce, though, which represents three-fourths of total revenues, posted a 30% improvement, helped by transaction growth, which surged 25%, triple the average growth rate from the past four quarters.
The firm's first-quarter results surpassed both street expectations, as well as internal forecasts, and the momentum is expected to continue. The company reaffirmed full-year guidance of $0.39 to $0.45, a quadrupling of the $0.11 earned last year. Underlying earnings, which exclude acquisition-related amortization and other one-time items, are projected to rise from $1.05 to between $1.26-$1.30.
CheckFree is the dominant force in an emerging and quickly growing industry, with a clean balance sheet, accelerating growth, and ample free cash flow. Furthermore, the company has little large-scale competition (though providers could always turn to in-house solutions). Pricing pressure remains a concern, though, and lucrative guaranteed-minimum contracts with Microsoft
Fool contributor Nathan Slaughter, despite his fear of technology, enjoys paying bills online without stamps, envelopes, or the fear of late fees.