FOOL CONFERENCE CALL SYNOPSIS*
By Debora Tidwell (MF Debit)

Checkfree Corporation <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CKFR)") else Response.Write("(NASDAQ: CKFR)") end if %>
8275 North High Street
Columbus, OH 43235-1497
(614) 825-3000
http://www.checkfree.com

UNION CITY, Ca., October 27, 1996/FOOLWIRE/ --- Checkfree Corporation released their first quarter 1997 results after the market close on Wednesday October 23rd and held their conference call for analysts on Thursday morning. They posted revenues for the quarter of $32.6 million compared to $12.3 million last year. CheckFree reported an expected pre-tax loss of $11.9 million compared with pre-tax loss of $305,000 for the same period of 1995. Excluding an adjustment for purchased profits resulting from the acquisition of Servantis Systems, Inc. in February of this year, the Company reported a pre-tax loss of $5.9 million for the quarter.

The Company reported a net loss for the quarter of $7.7 million, or -$0.19 per share, compared to a net loss of $168,000, or -$0.01 per share for the same quarter in 1995. Excluding purchase profits resulting from the acquisition of Servantis Systems, Inc., the Company reported a net loss for the quarter of $3.8 million or -$0.09 per share, in line with analyst expectations.

REVENUES ON PLAN, GOOD GROWTH WITH FINANCIAL INSTITUTIONS. Their revenues are on plan for the quarter and are good considering this is always a slow quarter for software sales to the banking industry. The big news is in their contuing to extend their significant leadership position in bank signings as well as some acquisition activity that signficantly increased their leadership position. They have established that the road to growth lies in locking up these financial institutions now and gaining access to the DDA customer base. They feel that you can't get the subscriber if you don't own the opportunity and what they are doing is locking up the opportunity as much as possible by signing up as many of the banks in this early emerging stage as they can. And that continues to move very successfully.

PROVIDER OF CHOICE FOR PROCESSING SERVICES. They believe that establishing themselves as the provider of choice for processing services to the financial services industry positions them to benefit as adoption of electronic commerce takes off, and they are clearly seeing it take off now. There simply isn't any way, according to the company, around two fundamental truths -- commerce is shifting from paper to electronic and the banks are leading the shift.

BUSINESS APPLICATIONS FOR THEIR ELECTRONIC COMMERCE PLATFORMS. One of the things that is really exciting about this quarter is that they started to have significantly larger and more engaging discussions relative to the business applications of their financial electronic commerce platforms in addition to the consumer side. They believe in the next several quarters we will hear more about business embracing both of Checkfree's platform technologies, not just the consumer. They have been talking for awhile about the fact that this has been a frustration to them because so many people, including bankers, tend to talk about the consumer business because we are consumers and that seems to be the emotional issue that the media follows and that they use as consumers follow. But the fact is, on an account by account basis and overall, to the banking industry the business applications are going to grow faster in revenue once this takes off. They are beginning to see the beginning of the banks' interest and they think it is being driven by businesses coming to the banks and telling them they are interested in utilizing this electronic technology.

NEW ACCOUNTS FOR THE QUARTER. Checkfree signed 23 new financial institutions to home banking and bill payment contracts in this past quarter. Signing financial institutions is absolutely critical to developing the transaction volume down the road. When they sign a financial institution they effectively get access to all of that company's demand deposit accounts, creating a ready audience for their services. As this quarter is evidenced, that doesn't necessarily guarantee that as they sign institutions there is a smooth transition immediately in the following quarter to bringing DDAs on. They didn't have 200,000 consumer growth like they did in the past quarter. On the other hand, even though they didn't bring on any significant individual banks that had an existing account base that created that kind of immediate boost in their quarter, what was extremely encouraging is that they had such great growth from the existing accounts without any new accounts.

ESTABLISHING INDUSTRY LEADERSHIP AND MARKETSHARE. Overall with their goal to secure relationships with the top financial institutions, they are in a position to process electronic payment transactions of already a majority of the financial institutions in the country. They are in 6 of the top 10 financial institutions in the United States, 19 of the top 50, and 31 of the top 100. While they have great penetration, significant leadership, there isn't anybody else remotely close to that, it shows both that they are doing what they set out to do and they still have plenty of room for growth.

SUBSCRIBER BASE GROWTH. They increased their subscriber base 7% over the previous quarter to 780,000 which is a 28% growth on an annualized basis. The issue here is that they are signing up banks at a continually steady pace. That inevitably is going to lead to significant consumer growth. It isn't going to be a linear growth quarter to quarter. In this calendar third quarter,t he banking industry doesn't do things. That is evidenced by a lot of their large financial institutions who simply didn't do any new rollouts or big implementations in Q3, what they are doing is recognizing that a lot of their people are on vacation and so are a lot of consumers so it is a tough time to get people to sit down at home on a computer and Checkfree doesn't argue with them about that. Checkfree is working on marketing tools and learning more about helping them market the products to their consumers -- the customers coming on to the market through these financial institution relationships. But it is going to be 18 months before they smooth out and maintain a more steady new consumer addition path quarter to quarter. They are actually surprised that they got that kind of growth out of what is, in essence, existing accounts. That is pretty good growth considering it came from banks that have all been on the service and it is simply internal growth.

NATIONS BANK AND WELLS FARGO DEALS. A successful marketing program in one of their large banks can dramatically impact growth in their subscriber base during a short period of time. As important as that is, they need to be able to understand how the growth continues on "same store sales" and they are very pleased with the way that is going. There is also a lag between signing the bank and implementation of that bank. Again, it is really tough to get banks to roll things out in the third calendar quarter. In fact, Checkfree didn't try to speed that process up because they know the banks aren't going to spend a lot of consumer marketing dollars that quarter, they simply don't. Leaders like Nations Bank or Wells Fargo that clearly have defined successful campaigns have showed that they can produce impressive results. Obviously Wells Fargo isn't on their system yet even thought they have already announced that they signed them to a 5-year contract. Wells Fargo continues to sign people up at a surprising rate. Wells Fargo didn't do any major new initiatives in the past quarter. Nations Bank, in fact, didn't roll out any new states in the quarter. Just this month Nations Bank has rolled out into their Mid-Atlantic and Southern states. Nations Bank ran television ads during the World Series on their home banking initiative.

So, while certainly consumer growth is bottom line important but the key that they are focused on now for the next 18 months is owning as much of this emerging market as they can and that ownership is in acquiring the financial institution which is the equivalent of owning the cable or cellular franchise in that city. They are focused on being able to support the banks as they roll out into new states such as Nations Bank's rolling out into Georgia and Florida this month. Clearly that is going to dramatically increase Nations Bank's penetration numbers over the next two quarters.

INTUIT SERVICES CORPORATION ACQUISITION. They also announced during the quarter the agreement to acquire Intuit Services Corporation (The Motley Fool featured a Special Report on the Checkfree/Intuit Services Corp. deal in September.). This acquisition reunites them with their partners at Intuit and positions them well to compete as more and more companies join the market for electronic payment processing. The acquisition is on track to close on or around the end of the calendar year and they are more pleased with their understanding of that acquisition and the business they will be acquiring today than they were when they announced the acquisition.

COMPANY REORGANIZATION. They completed a reorganization of the company naming 3 divisions, business services, retail services, and investment services. They have installed a new CFO and announced a new COO. They are building a corporate infrastructure that they have every intention to be focused on being responsive to the customer, quick to action, and dedicated to high performance. They are clearly where they want to be in the marketplace and they are focused now on being able to execute so they are putting together absolutely the best execution team they can.

KEY DEALS SIGNED IN THE QUARTER. They completed several other key deals during the quarter including a two year extension of their Nations Bank agreement. They annuonced a new 5-year deal with Wells Fargo. Wells Fargo should come online late in the third quarter. They announced support of the bill payment service for Microsoft Money '97 and a significant increase in their relationship with Microsoft. Accomplishing that and a significant new relationship with Intuit is no mean feat. They signed a deal making their security APL engine in the portfolio accounting worldwide service the portfolio accounting and performance measurement provider for American Express Financial Direct. They think that American Express Financial Direct is going to sneak up on a lot of people and be a very significant financial player. They are impressed with the amount of resources American Express has quietly but very directly putting behind it.

ELECTRONIC BILL PRESENTMENT TECHNOLOGY. They announced an expansion of their electronic bill presentment technology making them the only company in the US currently delivering electronic bills. The program has gone successfully enough that they added Bell South, the Small Business Administration, and Capstead Mortgage to the expanded pilot. Quite frankly it was because those companies really wanted to get into the pilot with them. They are hard at work on a technology to expand that electronic bill presentment technology nationwide. They announced an agreement with MagicLine that makes their processing accessible to the nearly 1000 financial institutions on the MagicLine network. They have similar agreements with the EPS Mac Network.

* A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event. Note: Statements made by a company other than historical information may constitute forward-looking statements for which the company can claim protection under the Safe Harbor Act. Please consult the company's filings with the SEC for information on risk factors which might cause actual results to differ materially from the information contained in these forward-looking statements.