~~Table~~UNITED ofSTATES ~~Contents~~SECURITIES AND EXCHANGE COMMISSION

~~UNITED~~Washington, ~~STATES SECURITIES~~D.C. ~~AND EXCHANGE COMMISSION~~20549

~~Washington,~~FORM ~~D.C. 20549~~10-Q

~~FORM~~(Mark ~~10-Q~~One)

~~(Mark~~þ ~~One~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

þFor ~~QUARTERLY~~the ~~REPORT~~quarterly ~~PURSUANT~~period TOended ~~SECTION~~March 31, ~~13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~2007

~~For the quarterly period ended December 31, 2004~~OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

oFor ~~TRANSITION~~the ~~REPORT~~transition ~~PURSUANT~~period ~~TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~from to

~~For~~Commission ~~the~~file ~~transition~~number: ~~period from to~~ 0-26802

~~Commission~~CHECKFREE ~~file number: 0-26802~~CORPORATION

~~CHECKFREE~~(Exact ~~CORPORATION~~ name of registrant as specified in its charter)

(Exact name of registrant as specified in its charter)


Delaware		58-2360335
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

~~Delaware~~4411 ~~(State~~East orJones ~~Other~~Bridge ~~Jurisdiction~~Road, ofNorcross, ~~Incorporation~~Georgia or30092 (Address ~~Organization)~~of ~~58-2360335~~Principal ~~(I.R.S.~~Executive ~~Employer~~Offices, ~~Identification~~Including ~~No.~~Zip Code)

~~4411 East Jones Bridge Road, Norcross, Georgia 30092~~(678) 375-3000 (~~Address~~Registrant’s ofTelephone ~~Principal Executive Offices~~Number, Including ~~Zip~~Area Code)

~~(678) 375-3000~~Not Applicable (~~Registrant’s~~Former ~~Telephone~~Name, ~~Number~~Former Address and Former Fiscal Year, ~~Including~~if ~~Area~~Changed ~~Code~~Since Last Report)

~~Not~~ Indicate ~~Applicable~~by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(~~Former~~d) ~~Name,~~of ~~Former~~the ~~Address~~Securities ~~and~~Exchange ~~Former~~Act ~~Fiscal~~of ~~Year,~~1934 ifduring ~~Changed~~the ~~Since~~preceding ~~Last~~12 months ~~Report~~(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for at least the past 90 days. YES þ NO o

Indicate by check mark whether the ~~registrant~~Registrant ~~(1) has~~is ~~filed~~a ~~all~~large ~~reports~~accelerated ~~required~~filer, toan beaccelerated ~~filed~~filer, ~~by Section 13~~ or ~~15(d)~~a ofnon-accelerated ~~the~~filer. ~~Securities~~See ~~Exchange~~definition ~~Act~~ of ~~1934~~an ~~during~~“accelerated ~~the~~filer ~~preceding~~and ~~12 months~~large accelerated ~~(or~~filer” ~~for~~in ~~such~~Rule 12b-2 ~~shorter~~of ~~period that~~ the ~~registrant~~Exchange ~~was required to file such reports~~Act), ~~and~~ (~~2) has been~~check ~~subject to the filing requirements for at least the past 90 days~~one):. ~~YES þ NO o~~

~~Indicate~~Large ~~by check mark whether the registrant is an~~ accelerated filer ~~(as~~þ Accelerated ~~defined~~filer ino ~~Rule 12b~~Non-2accelerated offiler ~~the Exchange Act). YES þ NO~~ o

Indicate ~~the~~by ~~number~~check ofmark ~~shares~~whether ~~outstanding of each of~~ the ~~issuer’s~~Registrant ~~classes~~is ofa ~~common~~shell ~~stock,~~company (as of ~~the~~defined ~~latest~~in ~~practicable~~Rule 12b-2 ~~date: 90,771,869 shares~~ of the ~~Common~~Exchange ~~Stock, $~~Act).01 ~~par~~YES ~~value,~~o ~~were~~NO ~~outstanding~~þ ~~at February 1, 2005.~~

~~FORM~~ Indicate ~~10-Q~~the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 87,935,627 shares of Common Stock, $.01 par value, were outstanding at April 30, 2007.

~~CHECKFREE~~FORM ~~CORPORATION~~10-Q

~~Table~~CHECKFREE ~~of Contents~~CORPORATION

		Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Consolidated Balance Sheets at		3
December 31, 2004 and June 30, 2004
Unaudited Condensed Consolidated Statements of Operations		4
For the Three and Six Months Ended December 31, 2004 and 2003
Unaudited Consolidated Statements of Cash Flows		5
For the Six Months Ended December 31, 2004 and 2003
Notes to Interim Unaudited Condensed Consolidated		6
Financial Statements For the Three and Six Months Ended December 31, 2004 and 2003
Item 2. Management’s Discussion and Analysis of Financial		14
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk		31
Item 4. Controls and Procedures		32
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders		33
Item 6. Exhibits		34
Signatures		35
Exhibit 10(A)
Exhibit 10(B)
Exhibit 10(C)
Exhibit 10(D)
Exhibit 10(E)
Exhibit 10(F)
Exhibit 10(G)
Exhibit 10(H)
Exhibit 31(A)
Exhibit 31(B)
Exhibit 32(A)
Exhibit 32(B)

Table of Contents


	Page No.
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

Unaudited Consolidated Balance Sheets As of March 31, 2007 and June 30, 2006		3

Unaudited Consolidated Statements of Operations For the Three and Nine Months Ended March 31, 2007 and 2006		4

Unaudited Consolidated Statements of Cash Flows For the Nine Months Ended March 31, 2007 and 2006		5

Notes to the Interim Unaudited Consolidated Financial Statements		6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		15

Item 3. Quantitative and Qualitative Disclosures About Market Risk		38

Item 4. Controls and Procedures		39

PART II. OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		40

Item 6. Exhibits		41

Signatures

~~Table of Contents~~2

Part I. Financial Information

Item 1. Financial Statements

CHECKFREE CORPORATION AND SUBSIDIARIES Unaudited Consolidated Balance Sheets (In thousands, except share and per share data)

	December 31,			June 30,
	March 31,			June 30,
	2004			2004
	2007			2006
	(In thousands, except share data)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	~~197~~226,~~639~~271		$	~~134~~173,~~832~~083
Settlement assets		84128,~~915~~365			82107,~~520~~128
Investments		86111,~~662~~235			73144,~~197~~530
Accounts receivable, net		~~107~~157,~~428~~834			85146,~~217~~605
Accounts receivable, related parties		4,774			26,632
Prepaid expenses and other assets		31,545			39,810
Prepaid expenses and other assets		25,748			14,727
Deferred income taxes		5,461			7,311
Deferred income taxes		20,694			49,129
Total current assets		660,711			618,467
Total current assets		527,860			466,254
PROPERTY AND EQUIPMENT, NET		122,211			100,217
PROPERTY AND EQUIPMENT, NET		87,430			91,912
OTHER ASSETS:
Capitalized software, net		94,~~147~~145			113,~~512~~755
Goodwill		~~615~~734,~~292~~937			~~612~~734,~~971~~591
Strategic agreements, net		~~209~~87,~~419~~298			~~271~~106,~~390~~005
Other intangible assets, net		1750,~~951~~016			2162,~~670~~416
Investments		74,951			68,344
Investments and restricted cash		59,309			78,559
Other noncurrent assets		410,~~407~~215			48,~~396~~779
Deferred income taxes		1058,~~094~~415			—45,240
Investment in joint venture		948			483
Total other assets		1,004,335			1,039,345
Total other assets		942,209			990,766
Total assets	$	1,787,257		$	1,758,029
Total assets	$	1,557,499		$	1,548,932
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	1213,~~686~~519		$	1216,~~234~~967
Settlement obligations		83124,~~578~~004			82103,~~611~~732
Accrued liabilities		5973,~~298~~692			6774,~~211~~366
Current portion of long-term obligations		32,~~010~~391			~~4,192~~767
Deferred revenue		3950,~~852~~584			3640,~~193~~301
Total current liabilities		~~198~~264,~~424~~190			~~202~~236,~~441~~133
ACCRUED RENT AND OTHER		4,~~977~~483			43,~~313~~844
DEFERRED INCOME TAXES		—387			172,~~492~~964
CAPITAL LEASE AND LONG-TERM OBLIGATIONS – LESS CURRENT PORTION		25,373			25,504
DEFERRED REVENUE		3,022			3,021
CAPITAL LEASE AND LONG-TERM OBLIGATIONS — LESS CURRENT PORTION		49,073			28,432
STOCKHOLDERS’ EQUITY:
Preferred stock - 50,000,000 authorized shares, $0.01 par value; no amounts issued or outstanding		—			—
Common stock - 500,000,000 authorized shares, $0.01 par value; issued and outstanding 90,663,558 and 90,164,926 shares, respectively		907			902
Common stock - 500,000,000 authorized shares, $0.01 par value; issued and outstanding 87,585,385 and 90,867,834 shares, respectively		876			909
Additional paid-in-capital		2,~~488~~366,~~273~~653			2,~~471~~482,~~062~~309
Unearned compensation		(7,292	)		—
Accumulated other comprehensive loss		49			(1,593	)
Accumulated other comprehensive loss		(359	)		(728	)
Accumulated deficit		(901,476	)		(997,990	)
Accumulated deficit		(1,152,804	)		(1,172,054	)
Total stockholders’ equity		1,466,102			1,483,635
Total stockholders’ equity		1,328,725			1,299,182
Total liabilities and stockholders’ equity	$	1,787,257		$	1,758,029
Total liabilities and stockholders’ equity	$	1,557,499		$	1,548,932

See Notes to the Interim Unaudited ~~Condensed~~ Consolidated Financial Statements

~~Table~~CHECKFREE CORPORATION AND SUBSIDIARIES Unaudited Consolidated Condensed Statements of ~~Contents~~Operations (In thousands, except per share data)

CHECKFREE CORPORATION AND SUBSIDIARIES Unaudited Condensed Consolidated Statements of Operations


	Three Months Ended						Nine Months Ended
	March 31,						March 31,
	2007			2006			2007			2006
REVENUES:

Processing and servicing		199,315			192,786			595,568			563,143
License fees		9,076			9,479			30,471			24,859
Maintenance fees		11,857			11,078			35,311			30,707
Professional fees		9,960			13,584			34,637			35,755

Total revenues		230,208			226,927			695,987			654,464


EXPENSES:
Cost of processing, servicing and support		98,197			91,351			284,956			253,026
Research and development		25,870			26,038			78,931			72,865
Sales and marketing		21,085			22,107			66,630			61,272
General and administrative		18,980			16,219			54,158			48,777
Depreciation and amortization		21,517			22,349			64,629			77,749

Total expenses		185,649			178,064			549,304			513,689


INCOME FROM CONTINUING OPERATIONS BEFORE OTHER INCOME AND EXPENSES		44,559			48,863			146,683			140,775
OTHER:
Equity in net loss of joint venture		(264	)		(973	)		(1,186	)		(2,447	)
Interest income, net		3,238			3,011			9,228			8,383


INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		47,533			50,901			154,725			146,711
INCOME TAX EXPENSE		17,513			18,720			58,211			55,180

INCOME FROM CONTINUING OPERATIONS		30,020			32,181			96,514			91,531

Income from discontinued operations before income taxes		—			13,056			—			14,311
Income tax expense on discontinued operations		—			7,581			—			8,064

Income from discontinued operations		—			5,475			—			6,247

NET INCOME	$	30,020		$	37,656		$	96,514		$	97,778


BASIC EARNINGS PER SHARE:
Continuing operations	$	0.34		$	0.35		$	1.09		$	1.01
Discontinued operations	$	—		$	0.06		$	—		$	0.07

Total basic	$	0.34		$	0.41		$	1.09		$	1.08

Weighted average number of shares		87,437			91,257			88,472			90,883


DILUTED EARNINGS PER SHARE:
Continuing operations	$	0.33		$	0.34		$	1.06		$	0.98
Discontinued operations	$	—		$	0.06		$	—		$	0.07

Total diluted	$	0.33		$	0.40		$	1.06		$	1.05

Weighted average number of shares		89,858			94,199			91,041			93,533

	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2004			2003			2004			2003
				(In thousands, except per share data)
REVENUES:
Processing and servicing:
Third parties	$	156,688		$	121,897		$	308,030		$	236,892
Related parties		7,500			9,750			15,000			19,000
Total processing and servicing		164,188			131,647			323,030			255,892
License fees		7,655			4,716			13,529			9,678
Maintenance fees		7,456			7,412			14,811			14,113
Other		6,457			6,161			12,219			11,517
Total revenues		185,756			149,936			363,589			291,200
EXPENSES:
Cost of processing, servicing and support		72,688			60,798			148,050			120,086
Research and development		19,329			16,102			39,552			31,005
Sales and marketing		16,282			13,206			30,508			25,531
General and administrative		13,430			11,672			28,465			23,195
Depreciation and amortization		43,643			42,384			87,660			92,997
In-process research and development		—			324			—			324
Total expenses		165,372			144,486			334,235			293,138
INCOME (LOSS) FROM OPERATIONS		20,384			5,450			29,354			(1,938	)
OTHER:
EQUITY IN NET LOSS OF JOINT VENTURE		(700	)		—			(1,347	)		—
INTEREST INCOME (EXPENSE), NET		1,490			(7,964	)		3,186			(9,588	)
INCOME (LOSS) BEFORE INCOME TAXES		21,174			(2,514	)		31,193			(11,526	)
INCOME TAX EXPENSE (BENEFIT)		8,131			(618	)		11,943			(2,961	)
NET INCOME (LOSS)	$	13,043		$	(1,896	)	$	19,250		$	(8,565	)
BASIC INCOME (LOSS) PER SHARE:
Income (loss) per common share	$	0.14		$	(0.02	)	$	0.21		$	(0.10	)
Equivalent number of shares		90,545			89,624			90,482			89,543
DILUTED INCOME (LOSS) PER SHARE:
Income (loss) per common share	$	0.14		$	(0.02	)	$	0.21		$	(0.10	)
Equivalent number of shares		93,019			89,624			92,764			89,543

See Notes to the Interim Unaudited Consolidated Financial Statements

~~See Notes to Interim Unaudited Condensed Consolidated Financial Statements~~4

4CHECKFREE CORPORATION AND SUBSIDIARIES Unaudited Consolidated Statements of Cash Flows (In thousands)


	Nine Months Ended
	March 31,
	2007			2006
OPERATING ACTIVITIES:
Net income	$	96,514		$	97,778
Adjustments to reconcile net income to cash provided by (used in) operating activities:
Equity in net loss of joint venture		1,185			2,447
Depreciation and amortization		64,628			78,238
Expenses related to data center		1,021			—
Deferred income tax benefit		(13,903	)		(12,316	)
Equity-based compensation		13,123			12,794
Vested warrants held by a customer		10,950			—
Gain from discontinued operations		—			(12,821	)
Net (gain)/loss on disposition of property and equipment		(280	)		310
Changes in certain assets and liabilities (net of acquisitions):
Settlement assets and obligations		(965	)		(2,194	)
Accounts receivable		(10,862	)		(2,543	)
Prepaid expenses and other		5,082			(3,927	)
Accounts payable		(3,252	)		(347	)
Accrued liabilities and other		(1,764	)		9,781
Deferred revenue		9,713			5,601

Net cash provided by operating activities		171,190			172,801


INVESTING ACTIVITIES:
Purchase of property and software		(29,851	)		(33,817	)
Purchase of property & equipment for data center facility		(11,032	)		—
Capitalization of software development costs		(472	)		(449	)
Purchase of businesses, net of cash acquired		—			(136,025	)
Proceeds from sale of business		—			18,593
Purchase of investments—Available for sale		(253,527	)		(265,097	)
Proceeds from sales and maturities of investments — Available for sale		310,463			336,618
Purchase of other investments		(1,922	)		(444	)
Proceeds from other investments		63			162
Increase in restricted cash		—			(451	)
Investment in joint venture		—			(3,190	)
Change in other assets		(1,618	)		(3,387	)

Net cash provided by (used in) investing activities		12,104			(87,487	)


FINANCING ACTIVITIES:
Principal payments under capital lease and other long-term obligations		(1,000	)		(2,226	)
Proceeds from exercise of stock options		4,420			20,762
Excess tax benefit from equity-based compensation		856			3,005
Purchase of treasury stock		(150,000	)		(7,170	)
Proceeds from associates stock purchase plan		3,727			3,220
Proceeds from data center facility		11,295			—

Net cash provided by (used in) financing activities		(130,702	)		17,591

Effect of exchange rate changes on cash and cash equivalents		596			(104	)

NET INCREASE IN CASH AND CASH EQUIVALENTS		53,188			102,801
CASH AND CASH EQUIVALENTS:
Beginning of period		173,083			101,272

End of period	$	226,271		$	204,073

~~CHECKFREE~~See ~~CORPORATION~~Notes ~~AND~~to ~~SUBSIDIARIES~~ the Interim Unaudited Consolidated ~~Statements~~Financial ~~of Cash Flows~~Statements

	Six Months Ended
	December 31,
	2004			2003
	(In thousands)
OPERATING ACTIVITIES:
Net income (loss)	$	19,250		$	(8,565	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Equity in net loss of joint venture		1,347			—
Depreciation and amortization		87,660			92,997
Deferred income tax provision (benefit)		2,285			(11,083	)
Equity-based compensation		3,035			—
Write off of convertible notes issuance costs		—			2,407
Write off of in-process research and development		—			324
Net loss on disposition of property and equipment		—			9
Change in certain assets and liabilities:
Settlement assets and obligations		(1,428	)		—
Accounts receivable		(666	)		(5,624	)
Prepaid expenses and other		(5,921	)		1,486
Accounts payable		1,026			601
Accrued liabilities and other		(12,712	)		(6,092	)
Deferred revenue		3,659			1,916
Net cash provided by operating activities		97,535			68,376
INVESTING ACTIVITIES:
Purchase of property and software		(14,117	)		(9,079	)
Capitalization of software development costs		(1,006	)		(1,625	)
Purchase of business, net of cash acquired		(3,054	)		(15,737	)
Purchase of investments – held to maturity		—			(511	)
Proceeds from maturities of investments – held to maturity		—			27,512
Purchase of investments – available for sale		(105,577	)		(125,415	)
Proceeds from investments – available for sale		85,680			124,453
Purchase of other investments		(100	)		(45	)
Proceeds from other investments		26			—
Investment in joint venture		(1,872	)		—
Net cash used in investing activities		(40,020	)		(447	)
FINANCING ACTIVITIES:
Principal payments under capital lease and other long-term obligations		(1,880	)		(1,769	)
Redemption of convertible notes		—			(172,500	)
Proceeds from stock options exercised		3,813			1,845
Proceeds from employee stock purchase plan		2,302			1,767
Net cash provided by (used in) financing activities		4,235			(170,657	)
Effect of exchange rate changes on cash and cash equivalents		1,057			—
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		62,807			(102,728	)
CASH AND CASH EQUIVALENTS:
Beginning of period		134,832			209,358
End of period	$	197,639		$	106,630

~~See~~CHECKFREE ~~Notes~~CORPORATION toAND ~~Interim~~SUBSIDIARIES NOTES ~~Unaudited~~TO ~~Condensed~~THE ~~Consolidated~~INTERIM ~~Financial~~UNAUDITED ~~Statements~~CONSOLIDATED FINANCIAL STATEMENTS

51. Basis of Presentation and Summary of Significant Accounting Policies

~~Table~~ Unaudited ofInterim ~~Contents~~Financial Information

~~CHECKFREE~~ Our ~~CORPORATION~~unaudited ~~AND~~consolidated ~~SUBSIDIARIES~~financial statements and notes included in this Quarterly Report on Form 10-Q (“Form 10-Q”), are prepared in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) and include all of the information and disclosures required by generally accepted accounting principles in the United States of America for interim financial reporting. Our results of operations for the three and nine months ended March 31, 2007 and 2006, are not necessarily indicative of our projected results for the full year.

~~Notes~~ Please read our consolidated financial statements in this Form 10-Q in conjunction with our consolidated financial statements, our significant accounting policies and our notes to ~~Interim~~the consolidated ~~Unaudited~~financial ~~Condensed~~statements ~~Consolidated~~included ~~Financial~~in ~~Statements~~our Annual Report on Form 10-K for our fiscal year ended June 30, 2006, which we filed with the SEC on September 8, 2006. In our opinion, our accompanying unaudited consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments), which are necessary for a fair representation of our financial results for the presented interim periods.

~~for~~ Recent ~~the~~Accounting ~~Three and Six Months Ended December 31, 2004 and 2003~~Pronouncements

1. In ~~Basis~~February 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Accounting ~~Presentation~~Standards 159, “The Fair Value Option for Financial Assets and ~~Summary~~Liabilities — Including an Amendment of ~~Significant~~FASB ~~Accounting~~Statement ~~Policies~~No. 115” (“SFAS 159”), which permits an entity to choose to measure many financial instruments and certain other items at fair value. Most of the provisions of SFAS 159 are elective; however the amendment to FASB Standard No. 115 applies to all entities with available-for-sale and trading securities. The FASB’s stated objective in issuing this standard is to improve financial reporting by entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently, without having to apply complex hedging accounting provisions. The provisions of SFAS 159 are effective as of the beginning of our fiscal year 2009, and we are currently evaluating the impact of the adoption of SFAS 159 on our consolidated financial statements.

~~Unaudited~~In ~~Interim~~September 2006, ~~Financial~~the ~~Information~~FASB issued SFAS 157, “Fair Value Measurements” (“SFAS 157”), which is intended to provide guidance for using fair value to measure assets and liabilities. In general, this pronouncement is intended to establish a framework for determining fair value and to expand the disclosures regarding the determination of fair value. With certain financial instruments, a cumulative effect of a change in accounting principle may be required with the impact of the change recorded as an adjustment to beginning retained earnings. The provisions of SFAS 157 are effective as of the beginning of our fiscal year 2008, and we are currently evaluating the impact of the adoption of SFAS 157 on our consolidated financial statements.

~~Our~~In ~~unaudited~~July 2006, ~~condensed~~the ~~consolidated~~FASB ~~financial~~issued ~~statements~~FASB ~~and~~Interpretation ~~notes~~No. 48, ~~included~~“Accounting infor ~~this~~Uncertainty ~~Quarterly~~in ~~Report~~Income onTaxes” ~~Form 10-Q~~ (“~~Form~~FIN ~~10-Q~~48”), ~~are~~an ~~prepared~~interpretation of SFAS 109, which is intended to increase comparability in ~~accordance~~the ~~with~~financial reporting of income taxes. FIN 48 provides additional guidance regarding the ~~rules~~recognition and ~~regulations~~measurement of ~~the United~~uncertain ~~States~~tax ~~Securities~~positions ~~and~~in ~~Exchange~~a ~~Commission~~company’s (consolidated financial statements by establishing a “~~SEC~~more-likely-than-not”) ~~and~~recognition ~~include~~threshold ~~all~~before ofa tax benefit can be recognized. Once the ~~information~~threshold ~~and disclosures~~has ~~required~~been bymet, ~~generally~~companies ~~accepted~~are ~~accounting~~required ~~principles~~to inrecognize the largest ~~United~~amount ~~States~~ of ~~America~~the benefit that is greater than 50 percent likely (on an accumulated basis) of ~~for~~being ~~interim~~realized ~~financial~~upon ~~reporting~~ultimate settlement with the taxing authority. ~~Our~~The ~~results~~provisions of ~~operations~~FIN ~~for~~48 are effective as of the ~~three~~beginning ~~and~~of ~~six~~our ~~months~~fiscal ~~ended December 31~~year 2008, ~~2004~~ and ~~2003,~~we are ~~not~~currently ~~necessarily~~evaluating ~~indicative~~the impact of ~~our~~the ~~projected~~adoption ~~results~~of ~~for~~FIN ~~the~~48 ~~full year~~on our consolidated financial statements.

~~Please~~In ~~read~~September 2006, ~~our~~the ~~condensed~~SEC ~~consolidated~~released ~~financial~~Staff ~~statements~~Accounting inBulletin ~~this~~No. 108, ~~Form~~codified ~~10-Q~~as inSAB ~~conjunction~~Topic ~~with~~1.N, ~~our~~“Considering ~~consolidated~~the ~~financial~~Effects ~~statements,~~of ~~our~~Prior ~~significant~~Year ~~accounting~~Misstatements ~~policies~~When ~~and~~Quantifying ~~our~~Misstatements ~~notes~~in toCurrent ~~the~~Year ~~consolidated~~Financial ~~financial~~Statements” ~~statements~~(“SAB ~~included~~108”). inSAB ~~our~~108 ~~Annual~~states ~~Report~~that onregistrants ~~Form~~should ~~10-K~~use ~~for~~both ~~our~~a ~~fiscal~~balance ~~year~~sheet ~~ended~~approach ~~June 30,~~and ~~2004,~~an ~~which~~income westatement ~~filed~~approach ~~with~~when ~~the~~quantifying ~~SEC~~and onevaluating ~~September 3,~~the ~~2004.~~materiality ~~In our opinion, our~~of ~~accompanying~~a ~~unaudited~~misstatement. ~~condensed~~SAB ~~consolidated~~108 ~~financial~~also ~~statements~~contains ~~reflect~~guidance ~~all~~on ~~adjustments (consisting~~correcting ~~only~~misstatements ofunder ~~normal~~the ~~recurring~~dual ~~adjustments),~~approach and ~~which~~provides ~~are~~transition ~~necessary~~guidance for ~~a fair representation of~~correcting ~~our financial results for the presented interim periods.~~

~~Stock-Based Compensation~~6

Wemisstatements ~~account~~in ~~for~~prior ~~stock-based compensation under the provisions and related interpretations of Accounting Principles Board (“APB”) Opinion 25, “Accounting for Stock Issued to Employees~~years.~~” Accordingly,~~ weAdjustments ~~are not~~ required toupon ~~record~~adoption ~~compensation~~of ~~expense~~SAB ~~when~~108 ~~stock~~must ~~options~~be ~~are granted to~~disclosed ~~our~~in ~~employees as long as~~ the ~~exercise~~notes ~~price~~to ~~is not less than~~ the ~~fair~~financial ~~market value of the stock when the option is granted~~statements. ~~Also,~~SAB we108 ~~are not required to record compensation expense when stock options are granted under our Associate Stock Purchase Plan as long as the purchase price~~ is ~~not less~~effective than 85% of the lower of the fair market value at the beginning or end of each offer period. In October 1995, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) 123, “Accounting for ~~Stock-Based~~our ~~Compensation.”~~fiscal ~~SFAS~~year ~~123~~2007 ~~allows us~~annual tofinancial ~~continue to follow the present APB Opinion 25 guidelines~~statements, ~~but requires pro-forma disclosures of net income~~ and ~~earnings per share as if~~ we ~~had~~are ~~adopted~~currently ~~the~~evaluating ~~provisions of~~ the ~~Statement.~~impact ~~In December 2002, the FASB issued SFAS 148, “Accounting for Stock-Based Compensation — Transition and Disclosure — an Amendment~~ of ~~FASB Statement No. 123,” which provides alternative methods of transition for an entity that voluntarily changes to~~ the ~~fair~~adoption ~~value based method~~ of ~~accounting~~SAB ~~for stock-based~~108 ~~employee~~on ~~compensation. We continue to account for stock-based compensation under the~~our ~~provisions~~consolidated offinancial ~~APB Opinion 25 using the intrinsic value method~~statements.

~~Had~~2. ~~compensation cost for our stock-based compensation plans been determined based on the fair~~Investments value at the grant dates for awards under those plans in accordance with the provisions of SFAS 123, our net income (loss) and net income (loss) per share would have been as follows (in thousands, except per share data):

	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2004			2003			2004			2003
Net income (loss), as reported	$	13,043		$	(1,896	)	$	19,250		$	(8,565	)
Stock-based compensation included in net income (loss)		950			553			1,880			1,696
Stock-based compensation under SFAS 123		(2,235	)		(4,808	)		(5,167	)		(10,397	)
Pro forma net income (loss)	$	11,758		$	(6,151	)	$	15,963		$	(17,266	)
Pro forma net income (loss) per share:
Basic	$	0.13		$	(0.07	)	$	0.18		$	(0.19	)
Diluted	$	0.13		$	(0.07	)	$	0.17		$	(0.19	)

Our investments consist of the following (in thousands):


	March 31,			June 30,
	2007			2006
Available-for-sale	$	374,780		$	378,678
Other investments		4,110			1,329
Restricted cash		460			453
Less: amounts classified as cash equivalents		(208,806	)		(157,371	)

Total investments	$	170,544		$	223,089

~~Table~~ The fair value of ~~Contents~~our available-for-sale securities is based on quoted market values or estimates from independent pricing services. We classify, in our consolidated balance sheet, our investments based on their expected maturities rather than contractual maturities.

~~Recent~~In ~~Accounting~~the ~~Pronouncements~~three- and nine-month periods ended March 31, 2007, we sold available-for-sale investments in the amount of $122.9 million and $310.5 million, respectively. In the three- and nine-month periods ended March 31, 2006, we sold available-for-sale investments in the amount of $106.9 million and $336.6 million, respectively. We incurred no gross gains or losses on these maturities during the three- and nine-month periods ended March 31, 2007 and 2006, respectively.

~~In December 2004, the FASB issued a revision to FASB Statement No~~3. ~~123,~~ ~~“Accounting~~Goodwill for Stock Based Compensation” (“SFAS 123”). FASB Statement No. 123 (R), “Share-Based Payment” (“SFAS 123 (R)”), supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and its related implementation guidance. SFAS 123 (R) establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. SFAS 123 (R) focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. This Statement does not change the accounting guidance for share-based payment transactions with parties other than employees provided in SFAS 123 as originally issued and EITF Issue No. 96-18, “Accounting for Equity Instruments That Are Issued to Other ~~Than~~Intangible ~~Employees for Acquiring, or in Conjunction with~~Assets Selling, Goods or Services.” SFAS 123 (R) does not address the accounting for employee share ownership plans, which are subject to AICPA Statement of Position 93-6, “Employers’ Accounting for Employee Stock Ownership Plans.”

~~Based on~~As ~~the guidance~~ of ~~SFAS~~March 31, ~~123 (R)~~2007, weour ~~will~~only be required to initially measure the cost of employee services received in exchange for an award of liability instruments (i.e. awards settled in cash rather than equity) based on its current fair value; the fair value of that award will be renon-~~measured~~amortizing ~~subsequently~~intangible atasset ~~each~~is ~~reporting date through the settlement date~~goodwill. ~~Changes~~The changes in ~~fair value during~~ the ~~requisite service period will be recognized as compensation cost over that period. For~~ ~~equity~~carrying ~~settled awards, we will be required to estimate the grant-date fair~~ value of ~~employee~~goodwill ~~share options~~by ~~and~~segment ~~similar~~from ~~instruments~~June 30, ~~expected~~2006, to ~~ultimately~~March 31, be2007, ~~issued~~were toas ~~employees~~follows ~~using option-pricing models adjusted for the unique characteristics of those instruments~~ (~~unless observable market~~in ~~prices for the same or similar instruments are available~~thousands)~~. Based on the grant date fair value~~: ~~calculated, we will be required to amortize the cost of such award over the requisite service period.~~

Excess tax benefits, as defined by SFAS 123 (R), will be recognized as an addition to paid-in-capital. Cash retained as a result of those excess tax benefits will be presented in the statement of cash flows as financing cash inflows. The write-off of deferred tax assets relating to unrealized tax benefits associated with recognized compensation cost will be recognized as income tax expense unless there are excess tax benefits from previous awards remaining in paid-in capital to which it can be offset.


	Electronic				Investment
	Commerce		Software		Services		Total
Balance as of June 30, 2006	$	659,705	$	62,730	$	12,156	$	734,591
Goodwill adjustments		346		—		—		346

Balance as of March 31, 2007	$	660,051	$	62,730	$	12,156	$	734,937

~~The~~7 effective date of SFAS 123 (R) is as of the beginning of the first interim or annual reporting period that begins after June 15, 2005. We will adopt this Statement in the first quarter of our 2006 fiscal year (quarter ended September 30, 2005). We are still currently evaluating the impact that the adoption of SFAS 123 (R) will have on our financial statements.

~~In December 2004, the FASB issued FASB Statement No. 153, “Exchanges of Nonmonetary Assets” (“SFAS 153”). This Statement addresses the measurement of exchanges of nonmonetary assets.~~ The ~~guidance~~ incomponents ~~APB Opinion No. 29, “Accounting for Nonmonetary Transactions” (“APB 29”), is based on the principle that exchanges~~ of ~~nonmonetary~~our ~~assets~~various ~~should~~amortized beintangible ~~measured based on the fair value of the~~ assets exchanged. The guidance in APB 29, however, included certain exceptions to that principle. SFAS 153 amends APB 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are ~~expected to change significantly~~ as afollows ~~result~~(in ~~of the exchange. This~~thousands): Statement is effective for financial statements for fiscal years beginning after June 15, 2005. Earlier application is permitted for nonmonetary asset exchanges incurred during fiscal years beginning after the date this Statement is issued. We do not believe that the adoption of this statement will have a significant impact on our financial statements.


	March 31,			June 30,
	2007			2006
Capitalized software:
Product technology from acquisitions and strategic agreement	$	167,108		$	167,108
Internal development costs		35,116			32,970

Total		202,224			200,078
Less: accumulated amortization		(198,079	)		(196,323	)

Capitalized software, net	$	4,145		$	3,755


Strategic agreements:
Strategic agreements ⁽¹⁾	$	744,423		$	744,423
Less: accumulated amortization		(657,125	)		(638,418	)

Strategic agreements, net	$	87,298		$	106,005


Other intangible assets:
Tradenames	$	52,226		$	53,176
Customer base		89,639			89,639
Current technology		10,290			10,290
Money transfer licenses		1,700			1,700
Convenants not to compete		5,670			5,670

Total		159,525			160,475
Less: accumulated amortization		(109,509	)		(98,059	)

Other intangible assets, net	$	50,016		$	62,416

~~Table~~(1) ofStrategic ~~Contents~~agreements primarily include certain entity-level covenants not to compete.

~~FASB~~For ~~Statement~~the ~~No. 131,~~three- ~~“Disclosures~~and ~~about~~nine-month ~~Segments~~periods ofended anMarch 31, ~~Enterprise~~2007, ~~and~~amortization ~~Related~~of ~~Information”~~intangible ~~(“SFAS~~assets ~~131”),~~totaled ~~requires~~$10.7 million ~~that~~and a$32.9 million, ~~public~~respectively. ~~company~~For ~~separately report~~ the ~~financial~~three- and ~~descriptive~~nine-month periods ~~information~~ended ~~about~~March 31, ~~its~~2006, ~~reportable~~amortization ~~operating~~of ~~segments~~intangible assets totaled $11.9 million ~~Paragraph~~and $48.3 17million, respectively. ofDuring ~~SFAS~~the ~~131~~first ~~sets~~quarter ~~forth~~of ~~the aggregation~~our ~~criteria~~fiscal ~~used~~year to2007, ~~determine~~we ~~whether~~decided anto ~~operating~~discontinue ~~segment~~our stored ~~that~~value ~~does~~card ~~not~~operations. ~~otherwise~~This ~~meet the~~decision ~~quantitative~~required ~~thresholds~~us to berecord an impairment of a ~~reportable~~tradename associated ~~segment~~with ~~may~~the bestored ~~aggregated~~value incard ~~accordance~~operations with an original cost of $1.0 million. The net ~~paragraph~~book 19value of ~~SFAS~~this ~~131.~~intangible ~~EITF~~asset ~~Issue~~at ~~04-10~~the ~~“Determining~~time ~~Whether~~of tothe ~~Aggregate~~impairment ~~Operating~~was ~~Segments~~approximately $0.7 million. ~~That~~In Dothe ~~Not~~process ~~Meet~~of ~~the~~negotiating ~~Quantitative~~a ~~Thresholds”~~transaction ~~(“EITF~~with ~~04-10”)~~an outside party, ~~addresses~~we determined the ~~criteria~~fair ~~for~~market ~~aggregating~~value ~~operating~~of ~~segments~~this intangible asset to be negligible, and recorded an impairment of the entire $0.7 million.

~~We currently report our financial and operating results according to our four primary business segments (Electronic Commerce, Investment Services, Software, and Corporate)~~4. ~~The~~Discontinued ~~financial and~~Operations operating results for at least one of those primary business segments is comprised of one or more smaller business units that have been aggregated. Based upon our analysis of our current operations, we believe that such aggregations meet the criteria for aggregation under EITF 04-10 and paragraph 17 of SFAS 131. We will continue to monitor any changes in the nature and operations of each of our business segments and modify our method of aggregation as appropriate in order to remain in compliance with EITF 04-10 and SFAS 131.

~~Reclassifications~~In February 2006, we completed the sale of the assets of our M-Solutions business unit, which was part of our Investment Services segment. As a result of this disposition, the operating results of the M-Solutions business for the prior period have been reclassified as discontinued operations in the unaudited consolidated financial statements and related notes. In the three- and nine-month periods ended March 31, 2006, we included in our earnings from discontinued operations before income taxes profit of $13.1 million and $14.3 million, respectively. These amounts include a gain on sale of $12.8 million in the three- and nine-month periods ended March 31, 2006.

~~Certain~~5. ~~amounts~~Common ~~in the prior years’ financial statements have been reclassified to conform to~~Stock ~~the fiscal year 2005 presentation.~~

2 On August 3, 2005, we announced that our board of directors had approved a stock repurchase program under which we could repurchase up to $60.0 million ~~Investments~~of our common stock through July 31, 2006. During our fiscal year 2006, we repurchased a total of 707,732 shares at an average purchase price of $47.48 per share, or approximately $33.6 million in the aggregate. As of June 30, 2006, the dollar value of the shares that remained available for repurchase was approximately $26.4 million. This program expired on July 31, 2006, with such remaining approved repurchase amount still outstanding.

~~Our investments consist of the following (in thousands):~~8

	December 31,		June 30,
	2004		2004
Available-for-sale	$	335,643	$	243,526
Other investments		796		725
Less: amounts classified as cash equivalents		174,826		102,710
Total investments	$	161,613	$	141,541

On August 1, 2006, we announced that our board of directors had approved a separate stock repurchase program under which we could repurchase up to $100.0 million of our common stock through July 31, 2007. During the month of August 2006, we repurchased a total of 2,176,158 shares of common stock at an average purchase price of $37.22; in September 2006, we repurchased a total of 461,589 shares at an average purchase price of $41.15 per share, or approximately $100.0 million in the aggregate. The repurchased shares were immediately retired and cancelled.

WeOn ~~base~~November 6, ~~the~~2006, ~~fair~~we ~~value~~announced ofthat ~~available-for-sale~~our ~~securities~~board onof ~~quoted~~directors ~~market~~had ~~values.~~approved Ina ~~the~~separate ~~three~~stock ~~and~~repurchase ~~six~~program ~~months~~under ~~ended~~which ~~December 31,~~we ~~2004,~~could werepurchase ~~sold~~up ~~available-for-sale~~to ~~investments~~$100.0 million inof ~~the~~our ~~amount~~common ofstock through ~~$20~~August 1,~~638,000~~ ~~and $60,171,000, respectively~~2007. InDuring the ~~three~~month ~~and~~of ~~six months ended December~~November 312006, ~~2003,~~ we ~~sold~~ ~~available-for-sale~~repurchased ~~investments~~a intotal ~~the amount~~ of ~~$55~~1,~~477~~273,~~000~~807 ~~and~~shares ~~$61,405,000, respectively. We~~of ~~recognized~~common ~~gross~~stock ~~gains~~at ofan ~~$4,000~~average ~~and~~purchase ~~$238,000~~price ~~as well as gross losses~~ of $~~33,000~~39.25 ~~and~~per ~~$474~~share,~~000~~ ~~on these~~or ~~sales~~approximately ~~during~~$50.0 million in the ~~three months ended December 31, 2004 and 2003, respectively~~aggregate. WeThe ~~recognized gross~~repurchased ~~gains~~shares ofwere ~~$4,000~~immediately ~~and~~retired ~~$242,000 as well as gross losses of $40,000~~ and ~~$474,000~~cancelled. onThere ~~these~~were ~~sales~~no repurchases during the ~~six~~ three-months ended ~~December~~March 31, ~~2004, and 2003, respectively~~2007.

3. On ~~Goodwill~~July 27, 2006, our board of directors approved the adoption of the CheckFree Corporation 2006 Associate Stock Purchase Plan (the “2006 Plan”), and ~~Other~~on ~~Intangible~~November 1, ~~Assets~~2006, at the 2006 Annual Meeting of Stockholders, the stockholders of the Company approved and adopted the 2006 Plan. The 2006 Plan replaced the Company’s Third Amended and Restated Associate Stock Purchase Plan, which expired on December 31, 2006. The total number of shares available for awards under the 2006 Plan is 2,000,000 shares.

OnEffective ~~July~~January 1, ~~2002~~2007, weCheckFree’s ~~adopted~~401(K) ~~SFAS~~Plan’s ~~142,~~(the “~~Goodwill~~401(K) ~~and~~Plan”) ~~Other~~fiscal ~~Intangible~~year ~~Assets~~end shifted from June 30 to December 31.” ~~SFAS~~This ~~142 changes~~resulted ~~the~~in ~~accounting~~a short 6-month fiscal year for ~~goodwill~~the 401(K) Plan beginning July 1, 2006 and ~~other~~ending ~~intangible~~December 31, ~~assets~~2006. ~~Goodwill~~Prior isto noJanuary 1, ~~longer~~2007, ~~subject~~CheckFree made an annual Employer Match to the 401(K) in the form of CheckFree common stock, which was calculated ~~amortization~~and ~~over~~distributed ~~its~~into ~~estimated~~participants’ ~~useful~~accounts ~~life~~at the end of each fiscal year. ~~Rather~~Beginning January 1, 2007, ~~goodwill~~CheckFree iswill ~~subject~~no tolonger atmatch ~~least~~contributions anwith ~~annual~~CheckFree common stock, but rather, will ~~assessment~~make ~~for~~its ~~impairment~~Employer byMatch ~~applying~~in cash, on a ~~fair~~semi-~~value-based~~monthly ~~test~~basis. ~~Our~~The ~~annual~~Employer ~~impairment~~Match, ~~test~~effective isJanuary 1, ~~performed~~2007, onis ~~April 30th~~guaranteed at 50% of ~~each~~the ~~year~~associate’s semi-monthly contribution, up to 6% of eligible earnings in that period.

~~In November 2003, we completed our acquisition of HelioGraph, Ltd~~6. ~~(“HelioGraph”)~~Warrants ~~for approximately~~Held ~~$18,756,000~~by ~~in cash. Our acquisition added~~ a ~~financial transactions management~~Customer solution with straight through processing and financial messaging expertise to our reconciliation suite of products, in addition to expanding our international presence. HelioGraph is part of our International Operations business unit within our Software division. During the six-month period ended December 31, 2004, we received a refund of an escrow deposit in the amount of $223,000.

8 In October 2000, we completed an agreement to acquire various electronic billing and payment assets from a customer in exchange for shares of our common stock, cash and warrants to acquire 10.0 million shares of our common stock. In connection with a December 2003 modification of the terms of our processing services agreement with that customer, the amount of shares available under the warrant agreement was reduced to 5.0 million under a performance agreement. Under the terms of the performance agreement, the customer has the ability to earn these warrants, 3.0 million of which vest upon achievement of specific levels of active subscriber adoption of electronic billing and payment services and 2.0 million of which vest upon achievement of specific levels of electronic bills delivered. The warrants have a strike price of $32.50 and expire on September 30, 2010.

~~Table~~ During the three months ended March 31, 2007, the customer achieved the first level of ~~Contents~~active subscriber adoption of electronic billing and payment services and as a result 1.0 million warrants vested. Prior to the three months ended March 31, 2007, we did not believe it was probable that any of the warrants would vest. Accordingly, during the three months ended March 31, 2007, we recorded an $11.0 million charge for the fair value of the 1.0 million warrants earned to date. The charge for these warrants was recorded as a reduction of processing and service revenue received from this customer. Fair value was determined based on a Black-Scholes option pricing model valuation.

InWe ~~June 2004,~~currently webelieve ~~completed~~it ~~our~~is ~~acquisition~~not ofprobable ~~American~~that ~~Payment~~the ~~Systems,~~warrants ~~Inc. (“APS”) from its parent corporation UIL Holdings Corporation,~~ for ~~approximately $109,013,000 in cash, subject to certain post-closing adjustments. We completed~~ the ~~acquisition~~remaining in4 million ~~order to penetrate a part of the~~unvested ~~electronic~~shares ~~billing~~will ~~and~~vest, ~~payment market in which we had not significantly previously participated. APS is part of our Electronic Commerce division~~ and ~~a leading provider of walk-in bill payments. We treated our acquisition of APS~~ as a ~~purchase for accounting purposes~~result, ~~and,~~no ~~accordingly,~~charge ~~recorded purchased~~for ~~assets~~the ~~and liabilities based on their~~ fair ~~market~~value ~~values at the date~~ of ~~acquisition. Based~~these onwarrants ~~the~~has ~~preliminary purchase price allocation, we recorded goodwill of approximately~~been ~~$75,000,000. During the six-month period ended December 31, 2004, we made a final purchase price adjustment of $3,277,000. We~~ recorded ~~$733,000 of deferred tax assets related to our final purchase price adjustments~~.

As7. ~~of December 31, 2004, our only non~~Equity-~~amortizing~~Based ~~intangible asset is goodwill. The changes in~~Compensation ~~the carrying value of goodwill by segment from June 30, 2003 to December 31, 2004, were as follows (in thousands):~~

	Electronic					Investment
	Commerce		Software			Services		Total
Balance as of June 30, 2003	$	503,738	$	8,106		$	11,387	$	523,231
Goodwill acquired		74,957		14,783			—		89,740
Balance as of June 30, 2004		578,695		22,889			11,387		612,971
Purchase price adjustments		2,544		(223	)		—		2,321
Balance as of December 31, 2004	$	581,239	$	22,666		$	11,387	$	615,292

On July 1, 2005, we adopted, using the modified prospective application, Statement of Financial Accounting Standards 123(R), “Share Based Payment” (“SFAS 123(R)”). SFAS 123(R) requires all share-based payments to employees, including grants of employee stock options and shares purchased under an employee stock purchase plan (if certain parameters are not met), to be recognized in the financial statements based on their fair values, and did not

~~The components of our various amortized intangible assets are as follows (in thousands):~~9

	December 31,		June 30,
	2004		2004
Capitalized software:
Product technology from acquisitions and strategic agreement	$	167,458	$	167,458
Internal development costs		32,525		31,519
Total		199,983		198,977
Less: accumulated amortization		190,836		187,465
Capitalized software, net	$	9,147	$	11,512
Strategic agreements:
Strategic agreements (1)	$	744,424	$	744,424
Less: accumulated amortization		535,005		473,034
Strategic agreements, net	$	209,419	$	271,390
Other intangible assets:
Tradenames	$	50,728	$	50,728
Customer base		46,068		46,068
Current technology		2,230		2,230
Money transfer license		1,700		1,700
Covenants not to compete		2,860		2,860
Total		103,586		103,586
Less: accumulated amortization		85,635		81,916
Other intangible assets, net	$	17,951	$	21,670

change the accounting guidance for share-based payment transactions with parties other than employees provided in SFAS 123, “Accounting for Stock Based Compensation” (“SFAS 123”), as originally issued, and Emerging Issues Task Force (“EITF”) 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling Goods or Services.”

In November 2002, our stockholders approved the CheckFree Corporation 2002 Stock Incentive Plan (1the “2002 Plan”). ~~Strategic~~Under ~~agreements~~the ~~primarily~~provisions ~~include~~of ~~certain~~the ~~entity~~2002 Plan, we have the ability to grant incentive or non-~~level~~qualified ~~covenants~~stock options, stock appreciation rights (“SARs”), restricted stock, performance units or performance shares for not more than 6.0 million shares of common stock (such shares to ~~compete~~be supplied from the 12.0 million shares approved for the 1995 Plan) to certain of our key employees, officers and non-employee directors. The vesting terms of the options, SARs, restricted stock, performance units or performance shares granted under the 2002 Plan are determined by a committee of our board of directors; however, in the event of a change in control as defined in the 2002 Plan, they shall become immediately vested and exercisable. All options, SARs, restricted stock, performance units or performance shares granted under the 2002 Plan have a maximum contractual term of ten years. The 2002 Plan replaced the 1995 Plan, except that the 1995 Plan continues to exist to the extent that options granted prior to the effective date of the 2002 Plan continue to remain outstanding. At March 31, 2007, there were approximately 2.4 million additional shares available for grant under the 2002 Plan.

~~Amortization~~As of ~~intangible~~March 31, ~~assets~~2007, ~~totaled~~we ~~$34,387,000~~had ~~and~~four ~~$33,466,000~~types ~~for~~of ~~the~~equity-based ~~three months~~payment ~~ended~~arrangements ~~December 31,~~with ~~2004~~our associates: ~~and~~stock ~~2003~~options, ~~respectively.~~restricted ~~Amortization~~stock, ofassociate ~~intangible~~stock ~~assets~~purchase ~~totaled $69,061,000~~plan and ~~$75,338,000~~our ~~for~~401(k) ~~the~~match (which ~~six~~was ~~months~~discontinued, ~~ended~~effective ~~December~~January 311, ~~2004~~2007, ~~and~~see ~~2003,~~Note ~~respectively~~5 above).

9 Stock Options

~~Table~~ The following table summarizes the activity of ~~Contents~~stock options under our 1995 and 2002 Plans, from June 30, 2006 to March 31, 2007:

4. Common Stock


				Weighted Average			Aggregate
	Number of			Remaining	Weighted Average		Intrinsic
	Options			Contractual Term	Exercise Price		Value
Outstanding — Beginning of year		3,604,750			$	28.84
Granted		126,584			$	37.27
Exercised		(268,428	)		$	16.54	$	6,098,608
Cancelled		(140,697	)		$	36.70

Outstanding — End of period		3,322,209		4.2 years	$	29.81	$	24,092,300


Options exercisable at end of period		2,983,909		4.2 years	$	29.50	$	22,647,869

Weighted average per-share fair value of options granted during the period	$	20.56

InThe ~~the~~fair ~~six~~value ~~months ended December 31, 2004, we issued stock for various employee benefit programs. We issued 108,484 shares~~ of ~~common~~each ~~stock~~option togrant ~~fund~~is ~~our~~estimated ~~401(k)~~on ~~match,~~ the ~~cost~~date of ~~which~~grant ~~we accrued~~using ~~during~~ the ~~year~~Black-Scholes option-pricing ~~ended~~model ~~June 30, 2004, and 72,293 shares of common stock in conjunction~~ with ~~our~~ ~~employee~~the ~~stock~~following ~~purchase~~weighted ~~plan,~~average ~~which~~assumptions ~~were~~used ~~funded~~for ~~through~~grants ~~employee payroll deductions~~ in the ~~immediately preceding six~~nine-month ~~period.~~periods We also issued 341,837 shares of restricted stock related to a Long-Term Incentive Compensation (“LTIC”) program under our 2002 Stock Incentive Plan and recorded unearned compensation of $8,721,000 within stockholders’ equity during the six-month period ended ~~December~~March 31, ~~2004.~~2007 ~~The shares of restricted stock granted under the LTIC program have a five-year vesting period with an accelerated vesting provision of three years based on achievement of specific goals~~ and ~~objectives. We recorded an expense of approximately $1~~2006,~~429,000 for~~ ~~the six months ended December 31, 2004 related to the vesting of the restricted stock.~~respectively:

In• ~~June 2003,~~dividend weyield ~~made~~of an0% ~~offer~~in ~~(the~~all ~~“Tender~~periods; ~~Offer”)~~• toexpected ~~certain~~volatility of ~~our employees to exchange options with exercise prices greater than or equal to $44~~50.002% ~~per share that were then outstanding under our 1983 Incentive Stock Option Plan, 1983 Non-Statutory Stock Option Plan, 1993 Stock Option Plan, Third Amended~~ and ~~Restated 1995 Stock Option Plan, BlueGill Technologies, Inc~~52.4% ~~1997~~using ~~Stock Option~~a ~~Plan,~~weighted ~~BlueGill~~average ~~Technologies, Inc. 1998 Incentive and Non-Qualified Stock Option Plan, and 2002 Stock Incentive Plan, for restricted stock units~~ of ~~our common stock, and in certain cases, cash payments. Restricted stock units that we issued under~~ the ~~Tender Offer vest ratably over a three-year period. The offer period closed on July 17~~historical, ~~2003,~~implied and ~~employees~~guideline ~~holding~~company ~~1,165,035 options~~methodologies; ~~participated~~• inrisk-free ~~the~~interest ~~Tender~~rates ~~Offer. We made cash payments totaling $586,000 in July 2003, representing the cash consideration portion~~ of ~~the Tender Offer~~4.9% Weand ~~issued 51,143 shares in the six-month period ended December 31, 2004~~4.3%; Approximately 157,500 shares of restricted stock units are scheduled to vest under the 2002 Stock Incentive Plan over the next two years. We recorded an expense of approximately $1,043,000 for the six-month period ended December 31, 2004 related to the vesting of restricted stock units and ~~recorded~~• anexpected ~~expense~~lives of ~~$1,143,000 for the~~ three ~~months~~to ~~ended September 30,~~seven ~~2003, for cash payments incurred and the vesting of restricted stock units under the Tender Offer~~years.

5. We ~~Earnings~~have ~~Per~~used the simplified method as provided by Securities and Exchange Commission Staff Accounting Bulletin 107, “Share Based Payment,” to estimate the expected life of stock options granted during the quarters ended March 31, 2007 and 2006. This method allows us to estimate the expected life using the average of the vesting period and the contractual life of the stock options granted.

~~The~~In ~~following~~the ~~table~~nine ~~reconciles~~months ~~the~~ended ~~differences~~March 31, in2007 ~~our~~and ~~income~~2006, ~~and~~we ~~shares~~recognized ~~outstanding~~equity-based ~~between~~compensation ~~basic~~expense of approximately $3.1 million and ~~diluted~~$4.4 million ~~for~~related to the ~~periods~~vesting ~~indicated~~of ~~(in~~stock ~~thousands~~options and a related tax benefit of approximately $1.2 million and $1.7 million respectively. As of March 31, 2007, ~~except~~we ~~per~~had ~~share~~approximately ~~data):~~$4.8 million

	For the Three Months Ended
	December 31, 2004						December 31, 2003
					Per-							Per-
	Income		Shares		Share		Loss			Shares		Share
	(Numerator)		(Denominator)		Amount		(Numerator)			(Denominator)		Amount
Basic EPS	$	13,043		90,545	$	0.14	$	(1,896	)		89,624	$	(0.02	)
Effect of dilutive securities:
Options and warrants		—		2,474				—			—
Diluted EPS	$	13,043		93,019	$	0.14	$	(1,896	)		89,624	$	(0.02	)

	For the Six Months Ended
	December 31, 2004						December 31, 2003
					Per-							Per-
	Income		Shares		Share		Loss			Shares		Share
	(Numerator)		(Denominator)		Amount		(Numerator)			(Denominator)		Amount
Basic EPS	$	19,250		90,482	$	0.21	$	(8,565	)		89,543	$	(0.10	)
Effect of dilutive securities:
Options and warrants		—		2,282				—			—
Diluted EPS	$	19,250		92,764	$	0.21	$	(8,565	)		89,543	$	(0.10	)

of unrecognized compensation related to non-vested stock options, which we will record in our statement of operations over a weighted average recognition period of approximately 24 months.

10 Restricted Stock

~~Table~~ The following table summarizes the activity of ~~Contents~~restricted stock under our 2002 Plan, from July 1, 2006 to March 31, 2007:

Anti-dilution provisions of SFAS 128, “Earnings Per Share,” require consistency between diluted per-common-share amounts and basic per-common-share amounts in loss periods. Had we recognized net income for the three and six-month periods ended December 31, 2003, we would have included an additional 5,410,000 and 1,848,000 of in-the-money options and warrants in the diluted earnings per share calculation. Using the treasury stock purchase method prescribed by SFAS 128, this would have increased diluted shares outstanding by 2,001,000 and 195,000 for the three and six months ended December 31, 2003, respectively.


	Number of			Weighted		Aggregate
	Restricted			Average Grant		Intrinsic
	Stock			Date Fair Value		Value
Outstanding — Beginning of year		603,881		$	31.49
Granted		332,872		$	37.13
Vested		(86,075	)	$	29.16	$	3,663,000
Cancelled		(75,698	)	$	32.72

Outstanding — End of period		774,980		$	34.08

~~The~~In ~~weighted average diluted common shares outstanding for~~ the ~~three~~nine ~~and six~~ months ended ~~December~~ March 31, ~~2004~~2007 ~~excludes the effect of approximately 2,625,000~~ and 22006,~~778,000~~ ofwe ~~out-of-the-money options~~recognized ~~and warrants as their effect would be anti~~equity-~~dilutive.~~based ~~The weighted average diluted common~~compensation ~~shares~~expense ~~outstanding~~of ~~for~~approximately ~~the~~$6.8 million ~~three~~ and ~~six months ended December~~$4.9 31million, ~~2003,~~related ~~excludes~~to the ~~effect~~vesting of ~~approximately~~ ~~3,187,000~~shares ~~and 8,643,000~~ of restricted ~~out-of-the-money~~stock ~~options~~ and ~~warrants,~~a ~~and~~related ~~the~~tax ~~effect~~benefit of ~~2,357,000~~ ~~shares~~approximately ~~for~~$2.6 million ~~the~~and ~~assumed~~$1.9 million, respectively. ~~conversion~~As of ~~the~~March 31, ~~convertible subordinated notes~~2007, aswe ~~their~~had ~~effect would~~approximately ~~be anti-dilutive~~$13.6 million Inof ~~addition,~~unrecognized ~~for~~compensation related ~~the~~to ~~three and six months ended December 31, 2003, the after~~non-~~tax~~vested ~~effect~~shares of ~~interest~~restricted ~~expense~~stock onwhich ~~the~~we ~~convertible~~will ~~subordinated~~record ~~notes~~in ~~has~~our ~~not~~statement ~~been added back~~of tooperations ~~the~~over ~~numerator,~~a asweighted ~~its~~average ~~effect~~recognition ~~would~~period ~~also~~of beapproximately ~~anti-dilutive~~23 months.

68. ~~Reorganization~~Earnings ~~Charges~~Per Share

WeThe ~~expect~~following ~~our~~table ~~previously~~sets ~~announced~~forth ~~reorganizations~~the tocalculation beof ~~completed~~basic ~~by October 2005~~ and dodiluted ~~not anticipate~~earnings ~~additional~~per ~~charges.~~share Ain accordance ~~summary~~with ofSFAS ~~activity~~128 ~~related~~(in tothousands, ~~our~~except ~~reorganization~~per ~~reserve~~share ~~is as follows (in thousands~~amounts):

	Office Closure
	Three Months Ended					Nine Months Ended
	and Business
	March 31,					March 31,
	Exit Costs
	2007			2006		2007		2006
Balance as of June 30, 2003	$	1,537
Numerator
Cash payments, year ended June 30, 2004		(805	)
Income from continuing operations	$	30,020		$	32,181	$	96,514	$	91,531
Balance as of June 30, 2004		732
Income (loss) from discontinuing operations		—			5,475		—		6,247
Cash payments, six months ended December 31, 2004		(279	)
Numerator for basic and diluted earnings per share	$	30,020		$	37,656	$	96,514	$	97,778
Balance as of December 31, 2004	$	453
Denominator:
Basic earnings per share — weighted average shares outstanding		87,437			91,257		88,472		90,883
Effect of diluted securities:
Stock options and stock awards		2,421			2,942		2,569		2,650
Diluted earnings per share — weighted average shares outstanding		89,858			94,199		91,041		93,533
Basic earnings per share
Continuing operations	$	0.34		$	0.35	$	1.09	$	1.01
Discontinued operations		—			0.06		—		0.07
Net income	$	0.34		$	0.41	$	1.09	$	1.08
Diluted earnings per share
Continuing operations	$	0.33		$	0.34	$	1.06	$	0.98
Discontinued operations		—			0.06		—		0.07
Net income	$	0.33		$	0.40	$	1.06	$	1.05

7. The ~~Supplemental~~weighted-average ~~Disclosure~~diluted ofcommon ~~Cash~~shares ~~Flow~~outstanding ~~Information~~for ~~(in~~the ~~thousands)~~three- and nine-month periods ended March 31, 2007 excludes the effect of approximately 0.9 million out-of-the-money options and warrants, as their effect

	Six Months Ended
	December 31,
	2004		2003
Interest paid	$	360	$	5,837
Call premium paid for redemption of convertible notes	$	—	$	4,813
Income taxes paid	$	16,394	$	5,651
Supplemental disclosure of non-cash investing and financing activities:
Capital lease and other long-term asset additions	$	567	$	600
Stock funding of 401(k) match	$	29	$	3,144
Stock funding of Associate Stock Purchase Plan	$	1,694	$	1,447

11would be anti-dilutive. The weighted-average diluted common shares outstanding for the three- and nine-month periods ended March 31, 2006 excludes the effect of approximately 0.2 million and 0.9 million out-of-the-money options and warrants, respectively, as their effect would be anti-dilutive.

~~Table~~9. ofComprehensive ~~Contents~~Income

8 We report comprehensive income in accordance with SFAS 130, “Reporting Comprehensive Income” (“SFAS 130”). ~~Related~~SFAS ~~Parties~~130 requires disclosure of total non-shareowner changes in equity and its components. Total non-shareowner changes in equity include all changes in equity during a period except those resulting from investments by and distributions to shareowners. The components of accumulated other comprehensive loss, which is a component of stockholders’ equity on our consolidated balance sheet, applicable to us are (i) unrealized gains or losses on our available-for-sale securities and (ii) unrealized foreign currency translation differences. As a result, we are required to report the components of our comprehensive income, which are as follows (in thousands):

On September 1, 2000, we acquired MSFDC, L.L.C. (“TransPoint”) from Microsoft Corporation (“Microsoft”), First Data Corporation (“First Data”), and Citibank, N.A. in exchange for 17 million shares of our common stock. As part of the TransPoint acquisition, Microsoft received 8,567,250 shares of our common stock and Microsoft continued to own those shares as of December 31, 2004. Pursuant to the terms of the TransPoint acquisition, Microsoft is entitled to nominate one director to our board for such time as they own at least 6,425,438 shares of common stock. Therefore, Microsoft is considered a related party.


	Three Months Ended					Nine Months Ended
	March 31,					March 31,
	2007			2006		2007		2006
Net Income	$	30,020		$	37,656	$	96,514	$	97,778
Other comprehensive income (loss):
Foreign currency translation adjustments		(35	)		140		505		3
Unrealized holding gains (losses) on investments, net of tax		233			78		1,137		(149	)

Comprehensive income	$	30,218		$	37,874	$	98,156	$	97,632

~~In addition, we entered into a commercial alliance agreement with Microsoft as part of the TransPoint acquisition~~10. ~~Under~~Supplemental ~~the~~Disclosure ~~terms~~ of ~~the~~Cash ~~commercial~~Flow ~~alliance~~Information ~~agreement,~~(in ~~Microsoft, among~~thousands) other things, agreed to use us for pay anyone and bill presentment services offered by Microsoft. Our commercial alliance agreement also provides for a minimum fee and revenue guarantee to us of $120 million over the five year term of the agreement.

Pursuant to the terms of the TransPoint acquisition, First Data was entitled to nominate one director to our board for such time as they own at least 4,925,438 shares of common stock. Although First Data owned less than 4,925,438 shares of common stock as of December 31, 2004, First Data owned in excess of 4,925,438 shares of common stock at the time of the director’s most recent re-election to the board. On July 27, 2004, the director resigned from our board of directors. Since First Data did not maintain the required level of share ownership, they no longer have the right to appoint a member of our board of directors. Although First Data remains a customer of ours, First Data was not considered to be a related party beginning with our quarter ended September 30, 2004.


	Nine Months Ended
	March 31,
	2007		2006
Interest paid	$	414	$	63

Income taxes paid	$	54,150	$	59,971

Supplemental disclosure of non-cash investing and financing activities:
Capital lease and other long-term asset additions	$	5,187	$	1,821

Stock funding of 401(k) match	$	2,700	$	2,994

Stock funding of Associate Stock Purchase Plan	$	4,644	$	4,068

Data center facilities advances	$	8,712	$	—

~~In addition, we entered into a marketing agreement with First Data as part of the TransPoint acquisition~~11. ~~Under~~Business ~~the terms of the marketing agreement, we agreed to use certain First Data~~Segments payment processing services if, in each case using reasonable judgment, substantially similar services are not then obtainable from a third party at an overall economic cost to us that is less than the overall economic cost of First Data’s services. The marketing agreement also provides for a minimum fee and revenue guarantee to us of $60 million over the five-year term of the agreement. On January 10, 2002, we entered into an agreement for check processing services with Integrated Payment Systems Inc., a subsidiary of First Data.

~~Microsoft~~We ~~and~~operate in ~~First~~three ~~Data~~business ~~operate~~segments ~~substantially~~— ~~below~~Electronic ~~their~~Commerce, ~~minimum~~Investment ~~monthly commitments~~Services, and Software, wealong with a Corporate segment. These reportable segments are strategic business units dothrough ~~not~~which ~~expect~~we ~~these~~offer ~~customers~~different toproducts ~~increase~~and services. We evaluate the performance of our segments based on their ~~activity~~respective ~~such~~revenues ~~that~~and ~~they~~operating ~~would~~income ~~operate~~(loss). ~~above~~Segment operating income (loss) excludes acquisition-related intangible asset amortization, the SFAS 123(R) impact of options ~~minimum~~issued ~~commitments~~prior into July 1, 2004, the ~~next~~impact ~~twelve~~of ~~months~~warrants issued to a customer and integration costs associated with acquisitions.

~~9. Comprehensive Loss~~12

WeThe ~~record~~following ~~available-for-sale~~sets ~~securities~~forth atcertain ~~fair~~financial ~~value~~information ~~and~~attributable weto ~~record~~our ~~changes~~business ~~in fair value as~~segments ~~unrealized~~for ~~gains~~the orthree ~~losses~~ and wenine ~~accumulate~~months ~~these~~ended ~~items in other comprehensive income. As a result~~March 31, we2007 ~~are~~and ~~required~~2006 ~~to report the components of our comprehensive loss, which are as follows~~ (in thousands):

	Three Months Ended						~~Six~~Nine Months Ended
	December 31,						December 31,
	March 31,						March 31,
	2004			2003			2004			2003
	2007			2006			2007			2006
Net income (loss)	$	13,043		$	(1,896	)	$	19,250		$	(8,565	)
Revenues:
Other comprehensive income (loss):
Electronic Commerce, gross	$	184,710		$	169,438		$	532,152		$	496,187
Foreign currency translation adjustments		355			—			460			—
Impact of warrants to a customer		10,950			—			10,950			—
Unrealized holding gains (loss) on investments, net of tax		(697	)		(236	)		(91	)		(463	)
Electronic Commerce, net		173,760			169,438			521,202			496,187
Less: reclassification adjustments for gains (loss) realized in net income		—			93			—			93
Investment Services		30,743			27,833			90,002			78,542
Net unrealized gains (loss)		(342	)		(143	)		369			(370	)
Software		25,705			29,656			84,783			79,735
Comprehensive income (loss)	$	12,701		$	(2,039	)	$	19,619		$	(8,935	)
Total Revenue	$	230,208		$	226,927		$	695,987		$	654,464
Income from continuing operations before other income and expenses:
Segment operating income (loss):
Electronic Commerce	$	66,079		$	59,739		$	187,116		$	192,282
Investment Services		6,742			3,950			17,981			12,145
Software		3,373			7,496			17,242			15,969
Corporate		(9,296	)		(10,291	)		(31,171	)		(29,795	)
Total		66,898			60,894			191,168			190,601
Purchase accounting amortization		(10,133	)		(11,254	)		(31,256	)		(46,451	)
Impact of warrants to a customer		(10,950	)		—			(10,950	)		—
SFAS 123(R) — Stock options issued before July 1, 2004 (1)		(319	)		(777	)		(1,342	)		(3,375	)
Integration costs associated with acquisitions		(937	)		—			(937	)		—
Income from continuing operations before other income and expenses	$	44,559		$	48,863		$	146,683		$	140,775

12 (1) At the beginning of our fiscal year 2005, we implemented a new long-term incentive compensation philosophy, which significantly reduced overall participation and focused on restricted stock with limited stock options. As a result, we recorded the cost of restricted stock throughout our fiscal year 2005. In fiscal year 2006, we adopted SFAS 123(R), and are consequently recording all long-term incentive grants, both restricted stock and stock options, as an expense in our consolidated statement of operations. The adjustment for SFAS 123(R) represents the charge associated with the current vesting of options that were unvested as of July 1, 2004 under our previous compensation philosophy, which were originally accounted for utilizing APB 25.

~~Table~~12. ofPending ~~Contents~~Acquisition

10 On February 13, 2007, CheckFree and one of our wholly-owned subsidiaries (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Corillian Merger Agreement”) with Corillian Corporation (“Corillian”). ~~Business~~Pursuant ~~Segments~~to the terms of the Agreement, Merger Sub will be merged with and into Corillian and we will acquire all of the outstanding shares of Corillian common stock at a price of $5.15 per share in cash, for a total purchase price of approximately $245.0 million. We expect to fund this acquisition through a combination of cash on hand and draws under our current revolving credit facility.

WeOn ~~operate~~April 30, in2007, ~~three~~Corillian’s ~~business~~shareholders ~~segments~~approved —the ~~Electronic~~Corillian ~~Commerce,~~Merger ~~Investment~~Agreement ~~Services,~~at ~~and~~a ~~Software,~~special ~~along~~meeting ~~with~~of ashareholders. ~~Corporate~~We ~~segment.~~anticipate ~~These~~that ~~reportable~~our ~~segments~~proposed ~~are~~acquisition ~~strategic~~of ~~business~~Corillian ~~units~~will ~~through~~close ~~which~~during wethe ~~offer~~quarter ~~different~~ended ~~products~~June 30, ~~and~~2007, ~~services.~~shortly Wefollowing ~~evaluate~~ the ~~performance~~expiration ofor ~~our~~termination of ~~segments~~the ~~based~~antitrust onwaiting ~~their~~period ~~respective~~under ~~revenues~~the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and ~~operating~~the satisfaction ~~income~~or ~~(loss)~~waiver of other closing conditions. ~~Segment~~However, ~~operating~~the ~~income~~timing of closing could be ~~(loss) excludes~~affected ~~acquisition~~by ~~related~~an ~~intangible~~early ~~asset~~termination ~~amortization~~of ~~and~~the ~~significant~~antitrust ~~one-time~~waiting ~~charges.~~period or the issuance of any additional ~~There~~requests ~~are~~for noinformation ~~inter-segment~~from ~~sales~~the Department of Justice Antitrust Division.

~~The~~13. ~~following~~Subsequent ~~sets forth certain financial information attributable to our business segments~~Events ~~for the three and six months ended December 31, 2004 and 2003 (in thousands):~~

	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2004			2003			2004			2003
Revenues:
Electronic Commerce	$	142,108		$	112,488		$	280,315		$	219,043
Investment Services		23,972			21,465			46,815			41,758
Software		19,676			15,983			36,459			30,399
Total	$	185,756		$	149,936		$	363,589		$	291,200
Segment operating income (loss):
Electronic Commerce	$	50,879		$	38,961		$	97,830		$	72,883
Investment Services		5,624			4,608			8,184			9,526
Software		6,669			3,565			7,302			5,793
Corporate		(9,577	)		(9,261	)		(17,536	)		(17,223	)
Total		53,595			37,873			95,780			70,979
Purchase accounting amortization		(33,211	)		(32,099	)		(66,426	)		(72,593	)
Write off of in-process research and development costs		—			(324	)		—			(324	)
Equity in net loss of joint venture		(700	)		—			(1,347	)		—
Interest, net		1,490			(7,964	)		3,186			(9,588	)
Total income (loss) before income taxes	$	21,174		$	(2,514	)	$	31,193		$	(11,526	)

On April 2, 2007, CheckFree, CFA Software Corporation, an indirect wholly-owned subsidiary of CheckFree (“Merger Sub”), and Carreker Corporation (“Carreker”) consummated the transactions contemplated by an Agreement and Plan of Merger, dated December 29, 2006, among CheckFree, Merger Sub, and Carreker (the

~~Table~~“Carreker Merger Agreement”), and, as a result, Carreker became a wholly-owned subsidiary of CheckFree. ~~Contents~~Under the terms of the Carreker Merger Agreement, CheckFree acquired all of the outstanding shares of Carreker common stock at a price of $8.05 per share in cash, for a total purchase price of approximately $206 million. CheckFree funded approximately $136.0 million of the total purchase price from available cash on hand. We borrowed the remaining purchase price, approximately $70 million, under our current revolving credit facility. Subsequent to the acquisition closing, we repaid the balance drawn on the credit facility in full. We expect the results of Carreker’s operations to be allocated between our Electronic Commerce and Software Business segments.

~~Item~~ On 2or about April 10, 2007, the first of two related shareholder securities putative class actions were filed against CheckFree and Messrs. ~~Management~~Kight and Mangum in federal court in Atlanta styled as follows: Skubella v. CheckFree Corporation, et al., Civil Action No. 1:07-CV-0796-TWT, United States District Court for the Northern District of Georgia, Atlanta Division; Gattelaro v. CheckFree Corporation, et al., Civil Action No. 1:07-CV-0945-TWT, United States District Court for the Northern District of Georgia, Atlanta Division. The actions were filed on behalf of a putative class of all purchasers of CheckFree common stock between April 4, 2006 and August 1, 2006 and allege violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder against CheckFree and the individual defendants, as well as of Section 20(a) against the individual defendants, related to CheckFree’s ~~Discussion~~disclosures concerning its Electronic Commerce and ~~Analysis~~Payment ofServices ~~Financial~~business. Plaintiffs ~~Condition~~seek undisclosed damages. We believe the actions are without merit and ~~Results~~intend to defend vigorously. We intend to move to dismiss these lawsuits. At this time, it is not possible to predict the outcome of ~~Operations~~these matters.

~~Overview~~14

~~CheckFree~~Item 2. ~~was founded in 1981 as an electronic payment processing company and has become a~~Management’s ~~leading~~Discussion ~~provider of financial electronic commerce products~~ and ~~services.~~Analysis ~~Our current business was developed through the expansion~~ of ~~our~~Financial ~~core~~Condition ~~electronic payments business~~ and ~~the~~Results ~~acquisition~~ of ~~companies~~ ~~operating in similar or complementary businesses.~~Operations

~~We operate our business through three independent but inter-related divisions:~~Overview

• CheckFree was ~~Electronic~~founded ~~Commerce;~~in 1981 as an electronic payment processing company and has become a leading provider of financial electronic commerce products and services. Our current business was developed through the expansion of our core electronic payments business and the acquisition of companies operating similar or complementary businesses.

• We operate ~~Investment~~our ~~Services;~~business ~~and~~through three independent but inter-related divisions:

• Electronic Commerce; • Investment Services; and • Software.

Through our Electronic Commerce ~~division~~Division, we enable consumers to receive and pay bills electronically. For the ~~year~~three- and nine-month periods ended ~~June~~March 3031, ~~2004~~2007, we processed ~~approximately~~nearly ~~583~~341 million and nearly 975 million payment transactions, respectively, and delivered ~~approximately~~nearly 8259 million and 165 million electronic bills (“e-~~Bills~~bills”), respectively. For the ~~quarter~~year ended ~~December~~June 3130, ~~2004~~ 2006, we processed ~~more~~approximately ~~than 219~~1.1 ~~million~~billion payment transactions and delivered ~~almost~~approximately 33185 million e-~~Bills~~bills. The number of transactions we process ~~each year continues to grow. Transaction growth exceeded 34% for the year ended June 30, 2004,~~ and ~~was~~e-bills ~~7% for the quarter ended December 31, 2004, compared to the quarter ended September 30, 2004. On June 22, 2004,~~ we ~~acquired~~deliver ~~American~~each ~~Payment Systems,~~year ~~Inc.~~continue ~~(“APS”), a leading provider of walk-in bill payment services~~ to ~~consumers~~grow. ~~As part~~ ofOur ~~our~~ Electronic Commerce ~~division,~~Division ~~these services enable us to reach an additional group of consumers we had not previously serviced and to provide an additional service to our biller clients. The Electronic Commerce division~~ accounted for approximately 7675% of our ~~revenue~~consolidated inrevenues ~~the~~in ~~quarter~~the nine-month period ended ~~December~~March 31, ~~2004~~2007.

~~Electronic~~Our Electronic Commerce ~~division~~Division products enable consumers to:

• receive e-~~Bills~~bills through the Internet; • pay any bill – whether it arrives over the Internet or through traditional mail – to anyone; and • make payments not related to bills – to anyone.

• Through our ~~pay~~Investment ~~any~~Services ~~bill~~Division, –we ~~whether~~provide ita ~~arrives~~range ~~over~~of portfolio management services to help financial institutions, including broker dealers, money managers and investment advisors. As of March 31, 2007, our clients used the ~~Internet~~CheckFree orAPLSM ~~through~~portfolio ~~traditional~~management ~~mail~~system –(“CheckFree APL”) to ~~anyone;~~manage ~~and~~more than 2.6 million portfolios. Our Investment Services Division accounted for approximately 13% of our consolidated revenues in the nine-month period ended March 31, 2007.

• Through our ~~make~~Software ~~payments~~Division, ~~not~~we ~~related~~provide tofinancial ~~bills~~software –and toservices, ~~anyone~~including software, maintenance, support and professional services, through five product lines. These product lines are bank payment, operational risk management, transaction process management, compliance, and electronic billing. Our Software Division operates both domestically and internationally, and accounted for approximately 12% of our consolidated revenues in the nine-month period ended March 31, 2007.

~~Through~~Executive ~~our Investment Services division, we provide a range of portfolio management services~~Summary to help financial institutions, including broker dealers, money managers and investment advisors, deliver portfolio management, performance measurement and reporting services to their clients, primarily for processing separately managed accounts (“SMA” or “SMAs”). Our client base includes investment advisors, brokerage firms, banks and insurance companies. Our fee-based money manager clients are typically sponsors or managers of “wrap,” or SMAs, money management products, or institutional money managers, managing investments of institutions and high net worth individuals. As of December 31, 2004, our clients used the CheckFree APLSM portfolio accounting system to manage more than 1.7 million portfolios, representing more than $1 trillion in assets. Our Investment Services division accounted for approximately 13% of our revenue in the quarter ended December 31, 2004.

~~Our~~A number ~~portfolio~~of ~~management~~events ~~products~~have ~~and~~had ~~services~~an ~~provide~~impact on our results when comparing the ~~following~~nine-month ~~functions~~period ended March 31, 2006 with the nine-month period ended March 31, 2007:

• proposal generation; • account open and trading capabilities; • performance measurement and reporting; • tax lot accounting; • multiple strategy portfolios; • straight through processing; and • Depository Trust Corporation interfacing.

	•		The vesting of one million performance-based warrants held by a customer, resulting in a non-cash charge of $11.0 million against revenue in the quarter ended March 31, 2007;

	•		The negative impact on interest-based revenue from our largest bank customer migrating from a processing model that guarantees funds to our standard risk-based processing model during the quarter ended March 31, 2006;

1415

~~Table~~• The expiration of ~~Contents~~our agreements with First Data Corporation (“FDC”) in August 2005 and Microsoft Corporation (“Microsoft”) in December 2005, reducing year-over-year minimum-based revenue by $21.0 million, and the related completion of the amortization of intangible assets in September 2005 resulting from our September 2000 acquisition of MSFDC, L.L.C. (“TransPoint”), eliminating $16.5 million of year-over-year amortization expense; • Our acquisition of PhoneCharge, Inc. (“PhoneCharge”) for $100 million in cash in January 2006; • Our purchase of substantially all of the assets of Aphelion, Inc. (“Aphelion”) for $18.1 million in cash in October 2005; • Our purchase of substantially all of the assets of Integrated Decision Systems, Inc. (“IDS”) for $18.0 million in cash in September 2005; • Acquisition related integration costs of $0.9 million incurred during the quarter ended March 31, 2007, related primarily to our April 2007 acquisition of Carreker; • The divestiture of our M-Solutions business unit for $18.6 million in February 2006, which was accounted for as a discontinued operation; and • Slower than expected transaction growth in the quarters ended June 20, 2006 and September 30, 2006.

~~Through~~Due to growth in our Electronic Commerce and Investment Services business segments and a quarter-over-quarter decline in our Software ~~division~~business, weincluding ~~deliver~~both ~~software,~~the ~~maintenance~~positive and negative impacts of the items identified above, ~~support~~our ~~and~~consolidated ~~professional~~revenue for the quarter ended March 31, ~~services~~2007 togrew ~~large~~by ~~financial~~1.4% ~~service~~over ~~providers~~the ~~and~~quarter ~~other~~ended ~~companies~~March 31, ~~across~~2006. We earned income from continuing operations of $30.0 million in the quarter ended March 31, 2007, a ~~range~~decline of ~~industries~~nearly 7% from the $32.2 million earned in the same period last year. Through continued efforts to improve quality and ~~Our~~efficiency, ~~Software~~and ~~division~~despite isthe ~~comprised~~loss of ~~two~~the ~~units,~~previously ~~North~~mentioned ~~American~~Microsoft ~~Operations~~and FDC minimum revenue guarantees and ~~International~~interest-based revenue from a processing change at our largest bank customer, we ~~Operations~~generated $57.5 million of free cash flow for the quarter ended March 31, ~~together~~2007, ~~providing~~compared ~~three~~to ~~sets~~$62.3 million offor ~~software~~the ~~products~~quarter ended March 31, 2006. ~~ACH~~For ~~software~~the ~~and~~nine-month ~~services~~period ~~are~~ended ~~used~~March 31, 2007, our toconsolidated ~~process~~revenue grew by more than ~~two-thirds~~6% ofover the ~~United~~same ~~States’~~period ~~ten~~in ~~billion~~the ~~annual~~prior ~~Automated~~year, ~~Clearing~~again ~~House~~due to the ~~(“ACH”)~~positive ~~payments.~~and ~~CheckFree~~negative ~~Financial~~impacts ~~and~~of ~~Compliance~~the ~~Solutions~~items ~~(“CFACS”)~~highlighted ~~software~~above. ~~and~~In ~~services~~addition, with the reduction in ~~enable~~amortization ~~organizations~~expense tofrom ~~handle~~TransPoint ~~their~~intangible ~~reconciliation~~assets ~~and~~that ~~compliance~~fully ~~requirements~~amortized ~~and~~in tothe ~~provide~~quarter aended ~~financial~~September 30, ~~transactions~~2005, ~~management~~we ~~solution~~earned ~~with~~income ~~straight~~from ~~through~~continuing ~~processing~~operations of $96.5 million ~~Our~~in ithe nine-~~Solutions~~month ~~software~~period ~~and~~ended ~~services~~March 31, ~~enable~~2007, ~~end-to-end~~an ~~e-billing~~increase ~~and~~of ~~e-statement~~more ~~creation,~~than ~~delivery~~5% ~~and~~over ~~payment~~the $91.5 million earned during the ~~Our~~same ~~Software~~period ~~division~~last ~~accounted~~year. ~~for~~We ~~approximately~~generated ~~11%~~$142.6 million of ~~our~~free ~~revenue~~cash inflow ~~quarter~~for the nine-month period ended ~~December~~March 31, ~~2004~~ 2007, compared to $141.2 million for the nine-month period ended March 31, 2006. We define free cash flow as net cash provided by operating activities, exclusive of the net change in settlement accounts, less capital expenditures, plus data center reimbursements. See “Use of Non-GAAP Financial Information” for further discussion of this measure.

~~Executive~~ Our ~~Summary~~five-year agreements with Microsoft and FDC, resulting from our acquisition of TransPoint in September 2000, expired in the first six months of fiscal 2006. Our contracts with both Microsoft and FDC included monthly minimum revenue guarantees that increased annually over their five-year terms. Both agreements operated substantially below their minimum revenue guarantees throughout their duration. The following table represents the total quarterly minimum revenue guarantees we received in fiscal 2006 with the respective customer (in thousands):

For the quarter ended December 31, 2004, we earned net income of $13.0 million compared to a net loss of $1.9 million for the same period last year, and we generated $56.5 million of free cash flow, an increase of $18.8 million, or 50%, over the same period last year. For the six month period ended December 31, 2004, we earned $19.3 million of net income compared to a net loss of $8.6 million for the same period last year and we generated $84.8 million of free cash flow, an increase of $25.5 million, or 43%, over the same period last year. We became a cash basis tax payer in the current fiscal year. See “Use of Non-GAAP Financial Information” for our definition and discussion of free cash flow. Our efforts to improve quality and efficiency throughout our operations have resulted in increasingly positive operating results, allowing us to continue to invest toward the future growth of our businesses. Because of better than expected results through the first half of fiscal 2005, we have initiated previously unplanned investments of between $4.0 million and $6.0 million for the second half of fiscal 2005, across all of our business segments that are geared toward future growth.


	Microsoft		FDC		Total

Quarter ended September 30, 2005	$	9,000	$	3,000	$	12,000
Quarter ended December 31, 2005		9,000		—		9,000

Total	$	18,000	$	3,000	$	21,000

~~Beyond~~Net ~~additional walk-in bill payment transaction volume and related revenue resulting from our acquisition~~ of ~~APS~~the ~~on June~~$11.0 ~~22,~~million ~~2004,~~charge wefor ~~continued~~warrants to ~~experience~~a ~~solid~~customer, ~~revenue growth in~~ our Electronic Commerce ~~business. Transaction volume, including walk-in bill payments, exceeded 219~~Division ~~million,~~generated ~~and~~revenue ~~transaction~~ growth ~~exceeded~~of 579% infrom the quarter ended ~~December~~March 31, ~~2004~~2006, ~~as compared~~ to ~~the~~ ~~same period last year. Additionally, we delivered almost 33 million e-Bills in~~ the quarter ended ~~December~~ March 31, ~~2004~~2007, anand ~~increase~~revenue growth of 77more than 7% ~~over~~from the ~~same~~nine-month period ~~last~~ended ~~year.~~March 31, We2006, ~~believe that the~~to ~~added~~the ~~availability of e~~nine-~~Bills~~month ~~make~~period ~~electronic~~ended ~~payment~~March 31, ~~offerings increasingly more compelling to consumers~~2007. ~~Continued~~Including ~~efforts~~the toimpact ~~improve~~of ~~quality~~the ~~and~~PhoneCharge ~~efficiency~~telephone ~~in our operations, combined with an~~bill ~~improving electronic versus paper~~ payment ~~rate~~business ~~and~~we ~~our~~acquired ~~ability to leverage a significant fixed cost base, have resulted~~ in ~~a steadily reducing cost per transaction~~January 2006, ~~and has offset volume–based~~ ~~pricing discounts inherent in our Electronic Commerce business.~~

~~Our Investment Services division achieved revenue growth of 12% in the quarter ended December~~16 31, 2004, as compared to the same period last year. Portfolio growth, which is dependent primarily on the growth of the United States stock market, has started to resume. We are cautiously optimistic about continued near-term portfolio growth. We continue to invest heavily in our Investment Services process platform to position ourselves to take full advantage of the emerging SMA market. We expect our near-term operating margin to lag historical levels over the next 18 to 24 months, until this development effort is complete.

~~Our~~our ~~Software~~volume ~~division~~of ~~has~~transactions ~~achieved~~processed ~~better~~grew ~~than~~by ~~expected~~16%, ~~license~~to ~~revenue~~nearly ~~growth~~341 million for the quarter ended March 31, 2007, over the more than 293 million we processed for the same period last year and by ~~two~~17%, ~~quarters~~to nearly 975 million for the nine-month period ended March 31, 2007, above the 830 million we processed in the nine-month period ended March 31, 2006. ~~Because~~We ~~license~~delivered almost 59 million e-bills in the quarter ended March 31, 2007, representing a 26% increase above the nearly 47 million e-bills we delivered during the quarter ended March 31, 2006, and we delivered more than 165 million e-bills for the nine-month period ended March 31, 2007, representing 23% growth over the nearly 135 million e-bills delivered in the same period of the prior year. Our acquisition of Aphelion in October 2005 provided additional revenue ~~carries~~to our Health and Fitness business. Offsetting growth in our core businesses were the previously mentioned $11.0 million non-cash charge against revenue for warrants held by a ~~relatively~~customer ~~high~~that ~~operating~~vested ~~margin~~in the quarter ended March 31, 2007, the decline in revenues from Microsoft and FDC, and reductions in interest-based revenue resulting from our largest ~~operating~~bank customer migrating to our standard risk-based payment processing model in the quarter ~~income~~ended ~~has~~March 31, ~~improved~~2006. Successful efforts to improve efficiency and quality have resulted in ~~this~~lower cost ~~division~~per astransaction, ~~well~~allowing us to share scale efficiencies with our customers through volume-based pricing discounts. ~~However~~When combined with the aforementioned reductions of high margin revenue minimums and interest-based revenue, weand ~~remain~~absent ~~uncertain~~the asnon-cash charge for warrants, our Electronic Commerce operating margin has increased from more than 35% for the quarter ended March 31, 2006, to ~~whether~~nearly ~~this~~36% for the quarter ended March 31, 2007, and has decreased from nearly 39% for ~~represents~~the nine-month period ended March 31, 2006, to more than 35% for the ~~beginning~~nine-month period ended March 31, 2007. See “Segment Information” below for a presentation of financial information by segment, including a ~~growth~~discussion ~~trend~~of insegment ~~software~~operating ~~sales~~margin.

15 During the quarters ended June 30, 2006 and September 30, 2006, we experienced sequential quarterly transaction growth of 3%, which was lower than our expectations. We experienced a greater-than-expected dip in transactions in April 2006 combined with transaction growth for the rest of the quarter that was not as significant as previous years, and a slowdown in consumer activity at our largest bank customer. Since then we have performed significant analysis on the causes, including a regression analysis of key transaction volume drivers on a large portion of our consumer service provider (“CSP”) customers for our last four fiscal years. To date, we have learned that the sequence of long months or short months in a given quarter, the sequence of long or short months before and after a quarter end date and the mix of processing and non-processing days within the quarter affects sequential quarterly transaction growth. We have also learned that the slowdown in consumer activity at our largest bank customer was affected by the combination of that customer’s shift to our standard risk-based processing model in the quarter ended March 31, 2006, and somewhat slower transaction growth given the industry leading consumer penetration at that customer.

~~Table~~ Our analysis has revealed a previously undetected cyclical pattern within the quarters of ~~Contents~~a given fiscal year that does not impact overall annual transaction growth. We now believe that, barring unusual events, CSP based sequential quarterly transaction growth in the first and fourth quarters of our fiscal year tends to be lower than CSP based sequential quarterly transaction growth in the second and third quarters of our fiscal year. As a result, based on what we have learned over the past nine months, we believe we are better able to forecast transaction activity. We do not believe we have identified all factors that could affect transaction growth, including various consumer behavior patterns, and we will continue to analyze our transaction growth patterns over the next several quarters. Our analysis has revealed that it is important for investors to understand the differing growth patterns between CSP and non-CSP customers. Therefore, we have enhanced the reporting of our Electronic Commerce Division metrics to include separate revenue and volume trends for our CSP, non-CSP and e-bill delivery customers. Refer to the Segment Information section of this report for a five quarter trend of these metrics.

AsOur ~~part~~Investment Services Division generated 20% year-over-year growth in portfolios managed to more than 2.6 million as of ~~our~~March 31, ~~acquisition~~2007, from about 2.2 million for the same period in the previous year, despite the expected loss of ~~TransPoint~~0.1 million low priced reporting accounts in ~~September~~the quarter ended March ~~2000~~31, we2007. ~~entered~~We ~~into~~continue ~~separate~~to ~~five~~invest heavily in the rewrite of our CheckFree APL operating system. Despite the resulting lower near-~~year~~term operating margin, we expect this investment ~~agreements~~to ~~with~~provide ~~Microsoft~~us ~~Corporation~~the opportunity to expand our services into the rapidly growing separately managed accounts (“~~Microsoft~~SMA”) and ~~First~~“SMAs”) ~~Data~~market. ~~Corporation~~In September 2005, we purchased substantially all of the assets of Integrated Decision Systems, Inc. (“~~FDC~~IDS”) and, ~~both~~in ~~of which~~February 2006, ~~include~~we ~~monthly~~divested ~~minimum~~our ~~revenue~~M-Solutions business. ~~guarantees~~Along ~~that~~with ~~have~~steady ~~increased~~underlying ~~annually~~portfolio ~~over~~growth, ~~the~~we ~~term~~expect ofour ~~the~~operating margin in ~~agreements.~~Investment ~~These~~Services ~~contracts~~to ~~will~~remain ~~expire~~around inthe ~~fiscal~~upper ~~2006,~~teens ~~which~~until we ~~expect~~complete toour ~~result~~system inrewrite aand ~~temporary~~the ~~decline~~related inmigration ~~revenue~~of ~~growth,~~our ~~primarily~~customer inbase to the ~~quarter~~new ~~ending~~operating ~~March 31, 2006~~platform. ~~The~~See ~~following~~“Segment ~~table~~Information” ~~represents~~below ~~the~~for ~~relevant~~a ~~annual~~presentation ~~minimum~~of ~~revenue~~financial ~~guarantees~~information ~~with~~by ~~Microsoft~~segment, ~~and~~including ~~FDC~~a ~~(in~~discussion ~~thousands):~~of segment operating margin.

Fiscal Year Ended June 30,	Microsoft		FDC		Total
2004	$	27,000	$	14,500	$	41,500
2005	$	33,000	$	17,500	$	50,500
2006	$	18,000	$	3,000	$	21,000

~~Both~~Our ~~agreements~~Software Division ~~are~~experienced ~~operating~~a ~~substantially~~decline ~~below~~in ~~their~~revenue ~~minimum~~of ~~levels.~~13% ~~However,~~on wea ~~believe~~quarter-over-quarter basis wedue ~~can~~to ~~manage~~lower ~~investment~~than ~~levels~~expected ~~and~~license ~~improved~~sales ~~scale~~ in ~~Electronic~~the ~~Billing~~quarter inended ~~order~~March 31, to2007 ~~maintain~~and ~~our~~a larger than ~~total~~usual ~~company~~amount ~~targeted~~of ~~operating~~professional ~~margin~~fees in the ~~mid~~quarter toended ~~upper~~March 31, ~~20%~~2006. ~~level~~On on a ~~full~~year-over-year basis, revenue grew by 6%, due primarily to growth in license sales of our treasury products within our ~~fiscal~~transaction ~~2006~~process management product line, combined with increased maintenance revenue resulting from strong license sales over the past year. ~~Additionally~~With a strong sales pipeline entering fiscal 2007, we had ~~plan~~a topositive ~~continue~~first half of the year. Our first half achievement was due primarily to ~~pursue~~the ~~other~~timing of ~~opportunities~~customer ~~for~~license ~~growth~~agreements completed earlier than we expected. However, aswe ~~our~~do not believe we ~~recent~~can ~~electronic~~overcome ~~billing~~the ~~and~~sales ~~payment~~shortfall ~~(“EBP”)~~in ~~contract~~the ~~signings~~quarter ended March 31, 2007 and ~~our~~as ~~APS~~a ~~acquisition~~result, we no longer ~~demonstrate~~expect to achieve the overall annual license sales we anticipated at the beginning of the fiscal year.

~~The~~During ~~following~~the ~~table~~quarter ended ~~sets~~September 30, ~~forth~~2006, aswe ~~percentages~~repurchased 2,637,747 shares of ~~total~~our ~~revenues~~common stock for $100 million, ~~certain~~and ~~consolidated~~during the quarter ended December 31, 2006, we repurchased another ~~statements~~1,273,807 shares for $50 million, at a combined weighted average per share price of ~~operations~~$38.35. ~~data:~~While we have another $50 million of board authorized funds available for additional share repurchases through August 1, 2007, with pending acquisition activity, we did not repurchase any shares in the quarter ended March 31, 2007. We expect to generate about $185 million of free cash flow in fiscal 2007. With cash, cash equivalents, and investments totaling nearly $397 million as of March 31, 2007, combined with an unused $300 million line of credit as of March 31, 2007, we believe we are positioned to take advantage of additional opportunities for acquisitions as they arise.

	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2004			2003			2004			2003
Total Revenues:		100.0	%		100.0	%		100.0	%		100.0	%
Expenses:
Cost of processing, servicing and support		39.1			40.6			40.7			41.2
Research and development		10.4			10.7			10.9			10.7
Sales and marketing		8.8			8.8			8.4			8.8
General and administrative		7.2			7.8			7.8			8.0
Depreciation and amortization		23.5			28.3			24.1			31.9
In-process research and development		—			0.2			—			0.1
Total expenses		89.0			96.4			91.9			100.7
Income (loss) from operations		11.0			3.6			8.1			(0.7	)
Equity in net loss of joint venture		(0.4	)		—			(0.4	)		—
Interest, net		0.8			(5.3	)		0.9			(3.2	)
Income (loss) before income taxes		11.4			(1.7	)		8.6			(3.9	)
Income tax expense (benefit)		4.4			(0.4	)		3.3			(1.0	)
Net income (loss)		7.0	%		(1.3	)%		5.3	%		(2.9	)%

In January 2007, we announced an agreement to acquire Carreker Corporation for approximately $206 million in cash. We closed on this acquisition on April 2, 2007 and utilized $70 million of our revolving credit facility to finance a portion of this acquisition. Subsequent to the acquisition closing, we repaid the balance drawn on the credit facility in full. In February 2007, we announced an agreement to acquire Corillian Corporation for approximately $245 million in cash. We expect to further utilize our revolving credit facility to finance a portion of this acquisition. On April 30, 2007, Corillian’s shareholders approved the merger agreement at a special meeting of shareholders. We anticipate that our proposed acquisition of Corillian will close during the quarter ended June 30, 2007, shortly following the expiration or termination of the antitrust waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“HSR Act”) and the satisfaction or waiver of all other closing conditions. However, the timing of closing could be affected by an early termination of the antitrust waiting period or the issuance of any additional requests for information from the Department of Justice Antitrust Division.

16 As you review our historical financial information in this Quarterly Report, you should be aware that, in the quarter ended March 31, 2006, we divested of M-Solutions, a business within our Investment Services segment. SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” requires that we report the results of operations from the divested business separately as earnings from discontinued operations for all periods presented. Therefore, we have restated historical statements of operations data for the quarter and nine-month periods ended March 31, 2006, to exclude M-Solutions from income from continuing operations.

~~Table of Contents~~18

~~Results~~ The following table sets forth, as percentages of ~~Operations~~total revenues, certain consolidated statements of operations data:

The following table sets forth total company revenue for the three- and six-month periods ended December 31, 2004, and 2003, respectively.


	Three Months Ended						Nine Months Ended
	March 31,						March 31,
	2007			2006			2007			2006
Total revenues		100.0	%		100.0	%		100.0	%		100.0	%

Expenses:
Cost of processing, services and support		42.6			40.3			40.9			38.7
Research and development		11.2			11.5			11.3			11.1
Sales and marketing		9.2			9.7			9.6			9.4
General and administrative		8.2			7.1			7.8			7.4
Depreciation and amortization		9.4			9.8			9.3			11.9

Total expenses		80.6			78.4			78.9			78.5

Income from continuing operations		19.4			21.6			21.1			21.5
Equity in net loss of joint venture		(0.1	)		(0.4	)		(0.2	)		(0.4	)
Interest, net		1.4			1.3			1.3			1.3

Income from continuing operations before income taxes		20.7			22.5			22.2			22.4
Income tax expense		7.6			8.2			8.4			8.4

Income from continuing operations		13.1			14.3			13.8			14.0

Earnings from discontinued operations before income taxes		—			5.7			—			2.2
Income tax expense on discontinued operations		—			3.3			—			1.3

Income from discontinued operations		—			2.4			—			0.9


Net income		13.1	%		16.7	%		13.8	%		14.9	%

Total Revenues (000’s)	December 31,				Change
	2004		2003		$		%
Three months ended	$	185,756	$	149,936	$	35,820		23.9%
Six months ended	$	363,589	$	291,200	$	72,389		24.9%

Results of Operations

~~Quarter-over-quarter~~The ~~revenue~~following ~~growth~~table ~~was~~sets ~~driven~~forth ~~by 26% growth in~~ our ~~Electronic~~total ~~Commerce business,~~revenues ~~12%~~for ~~growth~~the inthree- ~~our Investment Services business~~ and ~~23% growth in our Software business. Year~~nine-~~over-year~~month ~~revenue~~periods ~~growth was driven by 28% growth in our Electronic Commerce business~~ended March 31, ~~12% growth~~2007 ~~in our Investment Services business~~ and ~~20%~~2006, ~~growth in our Software business~~respectively.

~~Our~~Total ~~walk-in~~Revenues bill payment business provided more than 10% of the quarter-over-quarter and year-over-year revenue growth in our Electronic Commerce business. Overall growth in Electronic Commerce, including walk-in bill payment, continues to be driven primarily by growth in transactions processed, from approximately 139 million for the quarter ended December 31, 2003, to more than 219 million for the quarter ended December 31, 2004, and from approximately 266 million for the six-month period ended December 31, 2003, to more than 425 million for the six-month period ended December 31, 2004. Additionally, we delivered almost 33 million e-Bills in the quarter ended December 31, 2004, an increase of over 77% compared to the nearly 19 million e-Bills delivered in the quarter ended December 31, 2003, and we delivered more than 62 million e-Bills in the six-month period ended December 31, 2004, representing 88% growth over the more than 33 million e-Bills delivered in the same period last year. Lastly, with interest rates increasing since this time last year, we are experiencing growth in our interest-sensitive products, such as Account Balance Transfer (~~“ABT”~~000’s)~~. This combined growth in our Electronic Commerce division was offset somewhat by~~ our pricing practices. We have established pricing models that provide volume-based discounts in order to share scale efficiencies with our customers. As a result of transaction growth, our average revenue per transaction has, therefore, declined over time with respect to our transaction-based revenue.

Growth in Investment Services revenue was driven primarily by an increase in the number of portfolios managed, from about 1.4 million as of December 31, 2003, to more than 1.7 million as of December 31, 2004. In some cases, we are adding new portfolios to our APL system at a lower price point, driven by the increased volume coming from lower priced broker dealers, and by conscious price reductions, where we trade off near-term revenue growth against long-term strategic advantage. We believe that more favorable market conditions have resulted in resumed growth in portfolios managed. We are cautiously optimistic about resulting growth opportunities.


	March 31,				Change
	2007		2006		$		%
Three months ended	$	230,208	$	226,927	$	3,281		1.4	%
Nine months ended	$	695,987	$	654,464	$	41,523		6.3	%

WeQuarter-over-quarter ~~experienced~~revenue ~~substantial~~growth ~~license~~was ~~revenue~~driven by 3% growth in our ~~Software~~Electronic ~~business~~Commerce Division, ~~both~~10% ~~on quarter-over-quarter~~growth in our Investment Services Division and ~~year~~a 13% decline in our Software Division. Year-over-year ~~bases.~~revenue Ingrowth ~~addition~~was todriven ~~new~~by ~~business~~5% ~~resulting~~growth ~~from~~in our ~~acquisition~~ ofElectronic ~~HelioGraph~~Commerce Division, ~~Ltd.~~15% ~~(“HelioGraph”)~~growth in our Investment Services Division and 6% growth in our Software Division. During the quarter ended ~~December~~March 31, ~~2003~~2007, we ~~achieved~~recorded a non-cash charge of $11.0 million against ~~strong~~revenue ~~growth~~for inthe ~~our~~fair ~~more~~value ~~mature~~of ~~ACH~~one ~~and~~million ~~reconciliation~~performance-based ~~products.~~warrants Weheld ~~believe~~by ~~this~~a tocustomer bethat vested in the quarter. Absent this charge, our total company quarter-over-quarter revenue growth would ~~result~~have ofbeen ~~improved~~6% ~~execution~~and our year-over-year revenue growth would have been 8%, and within Electronic Commerce, our ~~Software~~quarter-over-quarter ~~division,~~revenue ~~combined~~growth ~~with~~would ~~signs~~have ofbeen ~~recovery~~9% inand ~~the~~our year-over-year revenue ~~U.S.~~growth ~~economy~~would have been 7%.

~~The~~Overall ~~following~~growth ~~tables~~in Electronic ~~set~~Commerce ~~forth~~continues ~~comparative~~to ~~revenues,~~be driven primarily by ~~type~~16% growth in transactions processed to nearly 341 million for the quarter ended March 31, 2007, from more than 293 million for the ~~three-~~quarter ended March 31, 2006, and ~~six~~by 17% growth in transactions processed to nearly 975 million for the nine-month ~~periods~~ period ended ~~December~~March 31, ~~2004~~2007, ~~and~~from ~~2003~~830 million for the nine-month period ended March 31, ~~respectively~~2006. In addition, we delivered almost 59 million e-bills in the quarter ended March 31, 2007, representing an increase of approximately

Processing and Servicing (000’s)	December 31,				Change
	2004		2003		$		%
Three months ended	$	164,188	$	131,647	$	32,541		24.7%
Six months ended	$	323,030	$	255,892	$	67,138		26.2%

1726% from the nearly 47 million e-bills we delivered during the quarter ended March 31, 2006, and we delivered more than 165 million e-bills for the nine-month period ended March 31, 2007, representing an increase of approximately 23% from the nearly 135 million e-bills we delivered during the nine-month period ended March 31, 2006. We have also experienced steady growth in our Health and Fitness business, aided by our acquisition of Aphelion in October 2005. Quarter-over-quarter and year-over-year revenue growth was negatively impacted by several factors. We have established pricing models that provide volume-based discounts in order to share scale efficiencies with our customers. Therefore, as a result of continued transaction growth and better utilization of efficiencies of scale, our CSP based average revenue per transaction continued to decline with respect to our transaction-based revenue. During fiscal 2006, our TransPoint related contracts with Microsoft and FDC expired, which, on a combined basis, negatively impacted total company revenue growth by approximately 4% on a quarter-over-quarter basis and by nearly 5% on a year-over-year basis. Also, our largest bank customer migrated from a processing model that guarantees funds, to our standard risk-based processing model, which negatively impacted our interest-based revenue. Finally, within the quarter ended March 31, 2007, we recorded a non-cash charge of $11.0 million for the fair value of one million performance-based warrants held by a bank customer that vested in the quarter.

~~Table~~ Growth in Investment Services revenue was driven primarily by growth in the number of portfolios ~~Contents~~managed, to more than 2.6 million as of March 31, 2007, from about 2.2 million as of March 31, 2006, despite the expected loss of 0.1 million low-priced reporting accounts in the quarter ended March 31, 2007. In some cases, we are adding new portfolios to CheckFree APL at a lower price, driven by the increased volume coming from broker dealers, and by price reductions, where we trade off near-term revenue growth against long-term strategic advantage. We believe that continued favorable market conditions have resulted in steady growth in portfolios managed, and we remain optimistic about resulting growth opportunities.

WeThe earn processing and servicing revenue in both our Electronic Commerce and our Investment Services businesses. While growth in portfolios managed in our Investment Services business contributed positively, our quarter-over-quarter ~~and~~decline ~~year-over-year increases~~ in ~~processing and servicing~~ revenue ~~resulted primarily from the aforementioned growth~~ in ~~transactions processed in~~ our ~~Electronic~~Software ~~Commerce~~Division ~~business. This growth in transactions~~ was ~~driven~~the ~~primarily~~result ~~by our walk-in bill payment business. Our traditional electronic bill payment business continued to grow as well, with sequential transaction growth~~ of ~~7% remaining within our historical growth range of 6% to 10%.~~lower Wethan ~~delivered~~expected ~~almost~~license ~~33 million~~sales ~~e-Bills~~ in the quarter ended ~~December~~March 31, ~~2004~~2007, ~~representing~~and an ~~increase~~ ofunusually ~~more~~large ~~than~~volume ~~77%~~of professional ~~from~~services ~~the~~revenue ~~nearly 19 million e-Bills delivered~~ in the quarter ended ~~December~~ March 31, ~~2003,~~2006. ~~and we delivered more than 62 million e~~Year-~~Bills in the six~~over-~~months~~year ~~ended December 31, 2004, representing~~ growth ~~of 88% over the more than 33 million e-Bills delivered~~ in ~~the same~~our ~~period~~Software ~~last~~Division ~~year.~~has ~~Additionally,~~been ~~with~~driven ~~interest~~primarily ~~rates~~by ~~increasing~~increased ~~over~~sales ~~the~~of ~~past~~our ~~year,~~treasury weproducts ~~have~~combined ~~experienced~~with ~~growth~~increased inmaintenance revenue resulting from ~~our~~new ~~interest-sensitive~~license ~~products,~~sales ~~such as ABT. Overall quarter-over-quarter~~ and ~~year-over-year~~positive ~~growth~~annual ~~in processing and servicing revenue was somewhat~~customer retention, offset by ~~tier-based~~lower ~~volume~~professional ~~pricing~~services ~~discounts within both our Electronic Commerce and Investment Services businesses~~revenue.

License Fees (000’s)	December 31,				Change
	2004		2003		$		%
Three months ended	$	7,655	$	4,716	$	2,939		62.3%
Six months ended	$	13,529	$	9,678	$	3,851		39.8%

The following tables set forth comparative revenue and expenses, by type, for the three- and nine-month periods ended March 31, 2007 and 2006, respectively.

~~License~~Processing ~~fees relate to our Software division. Significant quarter-over-quarter~~ and ~~year-over-year~~ ~~license~~Servicing ~~fee revenue growth has taken place primarily in our more traditional ACH and~~(000’s) reconciliation product lines. The acquisition of HelioGraph in the quarter ended December 31, 2003, has also contributed to license growth. Despite two quarters of strong license revenue growth in fiscal 2005, we remain uncertain as to whether this represents the beginning of a general trend in continued software sales growth.

Maintenance Fees (000’s)	December 31,				Change
	March 31,				Change
	2004		2003		$		%
	2007		2006		$		%
Three months ended	$	7199,~~456~~315	$	7192,~~412~~786	$	446,529		03.6%4	%
Six months ended	$	14,811	$	14,113	$	698		4.9%
Nine months ended	$	595,568	$	563,143	$	32,425		5.8	%

~~Maintenance~~We ~~revenue,~~earn ~~which~~processing ~~represents~~and ~~annually~~service ~~renewable~~revenue ~~product~~in ~~support~~both ~~for~~our Electronic Commerce and our ~~software~~Investment ~~customers,~~Services Divisions. Quarter-over-quarter revenue growth of 3.4% is ~~isolated~~driven toprimarily ~~our~~by ~~Software~~growth ~~business,~~in payment transactions processed and ~~tends~~e-bills todelivered ~~grow~~within ~~with~~Electronic ~~incremental~~Commerce ~~license~~and ~~sales~~by portfolio ~~from~~growth ~~previous~~within ~~periods~~Investment Services. ~~Our~~Total ~~maintenance~~payment ~~base~~transactions ~~has~~ increased asby a16%, ~~result~~from ofmore ~~recent~~than ~~license~~293 million ~~sales~~for the three-months ended March 31, 2006 to nearly 341 million for the three-months ended ~~customer~~March 31, ~~retention~~2007, ~~rates~~composed ~~exceeding~~of 8024%, ~~and~~growth ~~moderate~~in ~~price~~CSP ~~increases~~based ~~across~~transactions ~~all~~and ~~our~~a ~~software product~~6% ~~lines.~~decline ~~However,~~in ~~quarter~~non-~~over-quarter~~CSP ~~maintenance~~based transactions. Increased revenue ~~growth~~from isCSP ~~negatively~~based ~~impacted~~payment transaction growth was offset by tier-based volume pricing discounts, the ~~timing~~December 2005 expiration of ~~cash~~the ~~collections~~monthly onminimum ~~annual~~revenue ~~maintenance~~guarantees from ~~billing.~~Microsoft, Weand ~~defer~~the ~~revenue~~negative ~~recognition~~impact on interest-based revenue from the migration of our largest ~~maintenance~~bank ~~billings~~customer ~~until~~from ~~cash~~a isprocessing ~~collected,~~model that guarantees funds to our standard risk-based processing model; which, ~~can~~on ~~cause~~a ~~quarterly~~combined ~~fluctuations~~basis, resulted in a $0.07 decrease in revenue per transaction ~~Year~~quarter-over-~~year~~quarter. ~~maintenance~~This ~~growth~~revenue ~~has~~per ~~been~~transaction ~~positively~~decrease ~~impacted~~does bynot reflect the ~~acquisition~~$11.0 million non-cash ofwarrant ~~HelioGraph~~charge in the quarter ended ~~December~~March 31, ~~2003~~2007. Our acquisition of PhoneCharge in January 2006 provided significant transaction growth in relatively high-priced phone-based payments in our non-CSP based business. This growth was offset by a decline in walk-in payments as many of our customers shifted to a consumer fee-based pricing model which provides us with fewer, but more profitable, transactions and a decline in payments made directly at biller websites. The change in the mix within the non-CSP area resulted in a $0.09 increase in revenue per transaction. We delivered nearly 59 million

Other Revenues (000’s)	December 31,				Change
	2004		2003		$		%
Three months ended	$	6,457	$	6,161	$	296		4.8%
Six months ended	$	12,219	$	11,517	$	702		6.1%

~~Other~~e-bills ~~revenue~~in ~~consists~~the ~~mostly~~quarter ofended ~~consulting~~March 31, ~~and~~2007, ~~implementation~~representing ~~fees~~an ~~across~~increase ~~all three~~ of ~~our~~approximately 26% ~~businesses,~~over ~~and with~~ the ~~acquisition~~nearly of47 million ~~APS~~e-bills wedelivered ~~have~~in ~~added~~the ~~revenue~~same ~~associated~~period ~~with~~in ~~stored~~the ~~value cards~~previous ~~to this category~~year. We experienced ~~completed~~quarter-over-quarter agrowth ~~significant~~in ~~software~~our ~~services~~Health ~~engagement~~& ~~during~~Fitness ~~fiscal 2004~~business, ~~which~~resulting ~~has~~in ~~resulted~~part inby added arevenue ~~dampening~~from inour ~~growth~~acquisition ~~during~~of ~~fiscal~~Aphelion in October 2005. We ~~This~~experienced ~~has~~20% ~~been~~growth ~~offset by~~in ~~incremental~~portfolios ~~services~~managed ~~revenue~~in ~~provided~~our Investment Services Division, from ~~the~~approximately ~~acquisitions~~2.2 million as of March 31, ~~HelioGraph~~2006, into ~~the~~more ~~quarter~~than ~~ended December~~2.6 million as of March 31, ~~2003~~2007, ~~and~~despite ~~APS~~the expected loss of 0.1 million low priced reporting accounts in the quarter ended ~~June~~March 3031, ~~2004~~2007.

18 Year-over-year revenue growth of 5.8% was also driven primarily by growth in payment transactions processed and e-bills delivered within Electronic Commerce and by portfolio growth within Investment Services. Total payment transactions increased by 17%, from 830 million for the nine-month period ended March 31, 2006, to nearly 975 million for the nine-month period ended March 31, 2007, composed of 25% growth in CSP based transactions and a decline of 2% in non-CSP based transactions. Increased revenue from CSP based payment transaction growth was offset by tier-based volume pricing discounts, the expiration of the monthly minimum revenue guarantees from Microsoft in December 2005 and FDC in August 2005, and the negative impact on interest-based revenue from the migration of our largest bank customer from a processing model that guarantees funds to our standard risk-based processing model; which, on a combined basis, resulted in a $0.12 decrease in revenue per CSP transaction year-over-year. This revenue per transaction decrease does not reflect the $11.0 million non-cash warrant charge in the quarter ended March 31, 2007. Our acquisition of PhoneCharge in January 2006 provided significant transaction growth in relatively high-priced phone-based payments in our non-CSP based business. This growth was offset by a decline in walk-in payments as customers began shifting to a consumer fee-based pricing model, which provides us with fewer, but more profitable, transactions and a decline in payments made directly at biller websites. The change in the mix within the non-CSP area resulted in a $0.14 increase in revenue per non-CSP transaction. We delivered more than 165 million e-bills during the three-month period ended March 31, 2007, representing an increase of 23% over the nearly 135 million e-bills delivered in the same period in the previous year. We experienced year-over-year growth in our Health & Fitness business, resulting in part from our acquisition of Aphelion in October 2005. We experienced 20% growth in portfolios managed in our Investment Services division, from approximately 2.2 million as of March 31, 2006, to more than 2.6 million as of March 31, 2007, despite the expected loss of 0.1 million low priced reporting accounts in the quarter ended March 31, 2007.

~~Table~~License ofFees ~~Contents~~(000’s)

Cost of Processing, Servicing and Support (000’s)	December 31,
	March 31,				Change
	2004				2003
	2007		2006		$			%
	$		% Revenue		$			% Revenue
Three months ended	$	9,076	$	9,479	$	(403	)		-4.3	%
Three months ended	$	72,688		39.1%	$	60,798			40.6%
Nine months ended	$	30,471	$	24,859	$	5,612			22.6	%
Six months ended	$	148,050		40.7%	$	120,086			41.2%

InLicense ~~Electronic~~fees ~~Commerce,~~relate ~~our~~primarily ~~electronic~~to ~~payment~~our ~~rate~~Software ~~has~~Division. ~~improved~~The ~~from~~quarter-over-quarter ~~78% as of December 31,~~decline ~~2003,~~in tolicense ~~83%~~revenue asis ofdue ~~December 31,~~to ~~2004. Electronic payments carry a significantly~~ lower ~~variable cost per unit~~ than ~~paper-based~~expected ~~payments~~license ~~and~~sales ~~are far less likely to result~~ in ~~a costly customer care claim. The acquisition of APS brought with it a significant number of exclusively electronic payment transactions, accounting for about three points of~~ the ~~five~~quarter ~~percentage~~ended ~~point increase we experienced in our electronic payment rate~~March 31, ~~year~~2007. Year-over-year. Ingrowth ~~addition~~in tolicense ~~leveraging~~fees ~~a significant~~revenue ~~fixed-cost~~is ~~processing~~due ~~infrastructure, we continue~~ to ~~focus~~increased ~~investments~~sales onof ~~additional efficiency and quality improvements through Six-Sigma based improvements in~~ our ~~customer~~global ~~care~~treasury ~~processes~~products ~~and~~in ~~information~~fiscal ~~technology~~year ~~infrastructure~~2007, due in ~~order~~large part to ~~drive~~the ~~improvement~~successful inintegration ~~our~~of ~~cost~~products ~~per~~resulting ~~transaction.~~from ~~These~~our ~~drivers~~acquisition of ~~expense~~Accurate ~~efficiency~~in ~~were~~April 2005. ~~offset~~While ~~somewhat~~a byportion ~~two~~of ~~factors over~~ the ~~past year.~~missed ~~First,~~sales ~~the~~have ~~gross~~simply been ~~margin~~delayed ofby ~~our~~a ~~walk-in~~quarter, ~~bill~~we ~~payment~~do ~~business~~not isbelieve ~~less~~we ~~than~~can overcome the ~~remainder~~sales ~~of our~~shortfall ~~electronic billing and payment business. Additionally,~~ in the quarter ended ~~September~~March 3031, ~~2004,~~ we2007 ~~incurred~~and, as a ~~charge~~result, ofwe ~~approximately~~no ~~$2.6 million~~longer expect to ~~provide~~achieve ~~for~~the anoverall ~~anticipated~~annual ~~loss~~license sales inwe ~~a software~~anticipated ~~services~~at ~~engagement~~the ~~with~~beginning aof ~~large~~the ~~customer~~fiscal year.

Research and Development (000’s)	December 31,
	2004				2003
	$		% Revenue		$		% Revenue
Three months ended	$	19,329		10.4%	$	16,102		10.7%
Six months ended	$	39,552		10.9%	$	31,005		10.7%

Maintenance Fees (000’s)

Including capitalized development costs of $0.6 million for the quarter ended December 31, 2004, and $0.7 million for the quarter ended December 31, 2003, gross expenditures for research and development were $19.9 million, or 10.7% of total revenue, for the quarter ended December 31, 2004, and were $16.8 million, or 11.2% of total revenue, for the quarter ended December 31, 2003. Including capitalized development costs of $1.0 million for the six-month period ended December 31, 2004, and $1.6 million for the six-month period ended December 31, 2003, gross expenditures for research and development were $40.6 million, or 11.2% of total revenue, for the six-month period ended December 31, 2004, and $32.6 million, or 11.2% of total revenue, for the six-month period ended December 31, 2003. Our acquisitions of APS and HelioGraph have added a moderate level of research and development spending. We continue to invest heavily in product enhancement and productivity improvement initiatives, particularly in our Investment Services and Electronic Commerce businesses. We incurred a slight delay in a major development effort in Investment Services as we transitioned detailed requirements knowledge to a new development during the quarter ended December 31, 2004, causing the slight variation in development costs as a percentage of revenue, however we expect research and development costs to increase as a percentage of revenue due to this project in the coming quarters.


	March 31,				Change
	2007		2006		$		%
Three months ended	$	11,857	$	11,078	$	779		7.0	%
Nine months ended	$	35,311	$	30,707	$	4,604		15.0	%

Sales and Marketing (000’s)	December 31,
	2004				2003
	$		% Revenue		$		% Revenue
Three months ended	$	16,282		8.8%	$	13,206		8.8%
Six months ended	$	30,508		8.4%	$	25,531		8.8%

Maintenance fees, which represent annually renewable product support for our software customers, primarily relate to our Software Division, and tend to grow with incremental license sales from previous periods. Our maintenance base continues to grow as a result of recent license sales, high annual customer retention, and moderate

1921

~~Table~~price increases across all our of ~~Contents~~our Software businesses. However, our September 2005 acquisition of IDS within our Investment Services business resulted in a new source of maintenance revenue for us and represents nearly half of our year-over-year growth in maintenance revenue. We recognize maintenance fees ratably over the term of the related contractual support period. Based on the nature of maintenance fees, we would expect minimal future growth without continued incremental license sales.

~~Sales~~Professional ~~and~~Fees ~~marketing costs, as a percentage of total revenue, have remained fairly consistent~~(000’s) on a quarter-over-quarter and year-over-year basis. The slight drop in the six-month period ended December 31, 2004, is the result of the predominance of revenue growth occurring within our Electronic Commerce business, which has less associated variable sales costs as compared to our other businesses. Our acquisition of APS and HelioGraph have provided incremental sales and marketing personnel and program costs both on quarter-over-quarter and year-over-year bases.

General and Administrative (000’s)	December 31,
	March 31,				Change
	2004				2003
	2007		2006		$			%
	$		% Revenue		$			% Revenue
Three months ended	$	9,960	$	13,584	$	(3,624	)		-26.7	%
Three months ended	$	13,430		7.2%	$	11,672			7.8%
Nine months ended	$	34,637	$	35,755	$	(1,118	)		-3.1	%
Six months ended	$	28,465		7.8%	$	23,195			8.0%

~~Incremental~~Professional ~~general~~fees ~~and~~revenue ~~administrative~~consists ~~costs, on an absolute dollar basis, have resulted~~ primarily ~~from~~of ~~facilities~~consulting and ~~other~~implementation ~~non-redundant~~fees ~~expenses~~across all ~~related~~three toof our ~~acquisitions~~divisions. ofOur ~~APS~~expanded ~~and HelioGraph.~~product ~~Additionally,~~lines weover ~~are~~the ~~experiencing~~past ~~increasing~~several ~~quarterly~~years ~~Sarbanes-Oxley~~have ~~Section 404~~given us ~~compliance~~additional ~~costs~~opportunities asto weprovide ~~prepare~~services ~~for~~to our ~~first~~customers. ~~internal~~Because ~~controls~~professional ~~certification~~fees asare typically ofproject ~~June 30~~oriented, ~~2005. Finally,~~they inwill ~~the~~fluctuate ~~quarter~~from ~~ended~~period ~~September 30,~~to ~~2004, we incurred approximately $2~~period.~~0 million~~ ofOur ~~bad~~quarter-over-quarter ~~debt~~and ~~expense resulting from a formula~~year-~~based~~over-year ~~accounts~~declines ~~receivable reserve that was mostly recovered~~ in ~~the~~professional ~~quarter~~fees ~~ended~~are ~~December 31,~~due ~~2004.~~primarily ~~The~~to ~~recovery~~a islarger ~~the~~than ~~primary~~usual ~~reason~~volume ~~for the drop in general~~of ~~and~~professional ~~administrative~~fee ~~costs as a percentage of total~~ revenue in the quarter ended ~~December~~March 31, ~~2004. We~~2006, ~~continue~~within ~~to expect~~ our ~~general~~Software ~~and administrative costs to run between 7% and 8% of revenue and are managing these costs accordingly~~Division.

Depreciation and Amortization (000’s)	December 31,
	2004				2003
	$		% Revenue		$		% Revenue
Three months ended	$	43,643		23.5%	$	42,384		28.3%
Six months ended	$	87,660		24.1%	$	92,997		31.9%

Cost of Processing, Servicing and Support (000’s)

Depreciation and amortization expense has increased by $1.3 million quarter-over-quarter primarily due to the amortization of intangible assets associated with the acquisitions of APS and HelioGraph, more than offsetting the drop in amortization associated with intangible assets that fully amortized since December 31, 2003. On a year-over-year basis, the drop in amortization associated with fully amortized intangible assets has more than offset the increase in amortization associated with intangible assets recorded as a result of the acquisitions of APS and HelioGraph. Depreciation expense associated with tangible assets remained essentially flat on quarter-over-quarter and year-over-year bases.


	March 31,
	2007					2006
			%					%
	$		Revenue			$		Revenue
Three months ended	$	98,197		42.7	%	$	91,351		40.3	%
Nine months ended	$	284,956		40.9	%	$	253,026		38.7	%

In-Process Research & Development (000’s)	December 31,
	2004				2003
	$		% Revenue		$		% Revenue
Three months ended	$	—		—	$	324		0.2%
Six months ended	$	—		—	$	324		0.1%

Cost of processing, servicing and support, as a percentage of revenue, has increased by 2.4% on a quarter-over-quarter basis and by 2.2% on a year-over-year basis. Excluding the non-cash warrant charge in the quarter ended March 31, 2007, cost of processing, as a percentage of revenue, has increased by 0.4% on a quarter-over-quarter basis and by 1.6% on a year-over-year basis. This is due in large part to the previously mentioned loss of high margin Microsoft and FDC revenues in the first half of fiscal 2006 and the negative impact on interest-based revenue from our largest customer changing payment processing models in the quarter ended March 31, 2006. In both Electronic Commerce and Investment Services, we continue to focus investment on additional efficiency and quality improvement within our customer care processes and our information technology infrastructure, and are leveraging a significantly fixed cost infrastructure to drive improvement in cost per transaction processed and cost per portfolio managed. Within Electronic Commerce, our electronic payment rate is currently 84%. Electronic payments carry a significantly lower variable cost per unit than paper-based payments and are far less likely to result in a costly customer care claim. It is difficult to raise the electronic rate above the 84% level as it takes an increasing number of relatively small merchants to sign up for electronic payment receipt to improve the number a single percentage point. Also, a portion of the PhoneCharge transactions are credit card payments, carrying interchange fees, which place downward pressure on gross margins for that part of the business. Relatively high growth in credit card payments in the future could place downward pressure on the gains we expect from continued Six Sigma-based process improvements within our Electronic Commerce business. Looking forward, we expect some near-term pressure on our gross margin as we invest in resources to support our high-availability disaster recovery efforts. These efforts began in earnest in the quarter ended June 30, 2006, and we expect continued incremental investment in this area throughout fiscal 2007 and into fiscal 2008.

~~We recorded immaterial research and development costs totaling $0.3 million related to our~~22 ~~acquisition of HelioGraph in the quarter ended December 31, 2003.~~

20Research and Development (000’s)


	March 31,
	2007					2006
			%					%
	$		Revenue			$		Revenue
Three months ended	$	25,870		11.3	%	$	26,038		11.5	%
Nine months ended	$	78,931		11.3	%	$	72,865		11.1	%

Equity in Net Loss of Joint Venture (000’s)	December 31,
	2004					2003
	$			% Revenue		$		% Revenue
Three months ended	$	(700	)		(0.4)%	$	—		—
Six months ended	$	(1,347	)		(0.4)%	$	—		—

In addition to combined incremental research and development costs of approximately $0.8 million quarter-over-quarter and approximately $2.8 million year-over-year from our acquisitions of IDS in September 2005, Aphelion in October 2005 and PhoneCharge in January 2006, we continue to invest in product enhancement and productivity improvement initiatives in all of our core businesses. We are also continuing the rewrite of our operating system within Investment Services, for which we expect initial deployment and testing in calendar 2007 and which is currently scheduled to begin customer migration in fiscal 2008.

InSales ~~April 2004,~~and weMarketing ~~announced a joint venture, OneVu Limited~~ (~~“OneVu”~~000’s)~~, with Voca Limited~~ (“Voca”), designed to create an integrated electronic billing and payment network for billers and banks in the United Kingdom. We account for the joint venture on the equity basis of accounting and the equity in the net loss of the joint venture represents our portion of the loss incurred by the joint venture during the indicated periods. The joint venture is still in its formative stage and therefore we do not expect it to become profitable in the foreseeable future.

Net Interest (000’s)	December 31,
	March 31,
	2004						2003
	2007						2006
	$			%Revenue			$			%Revenue
				%						%
Three months ended:
	$			Revenue			$			Revenue
Interest income	$	1,810					$	1,718
Three months ended	$	21,085			9.2	%	$	22,107			9.7	%
Interest expense		(320	)					(2,461	)
Nine months ended	$	66,630			9.6	%	$	61,272			9.4	%
Call premium expense		—						(4,813	)
Unamortized note issuance cost		—						(2,408	)
Net interest	$	1,490			0.8%		$	(7,964	)		(5.3)%
Six months ended:
Interest income	$	3,717					$	3,311
Interest expense		(531	)					(5,678	)
Call premium expense		—						(4,813	)
Unamortized note issuance cost		—						(2,408	)
Net interest	$	3,186			0.9%		$	(9,588	)		(3.2)%

OnThe a quarter-over-quarter ~~basis,~~decline ~~despite~~in asales ~~modest~~and ~~decrease~~marketing incost ~~average~~is ~~cash~~due ~~and~~primarily ~~invested~~to the ~~assets,~~timing ~~interest~~of ~~income~~industry ~~increased~~conference bycosts ~~approximately~~within $0our Investment Services Division.~~1 million~~ ~~due~~About to25% anof the increase in ~~investment yield~~our ~~since last~~ year.-over-year Wesales ~~carried~~and ~~$172.5 million~~marketing ofcosts ~~6.5%~~are ~~convertible~~the ~~notes~~combined ~~throughout~~result ~~much~~ of our ~~the~~acquisitions ~~quarter~~of ~~ended~~IDS ~~December~~in September 312005, ~~2003.~~Aphelion Wein ~~redeemed~~October 2005 ~~the~~and ~~notes~~PhoneCharge in ~~full on December~~January ~~12, 2003~~2006. ~~Interest~~ ~~expense~~Excluding ~~decreased~~the ~~significantly from~~ $211.50 million warrant charge in total company revenue for the quarter ended ~~December~~March 31, ~~2003~~ 2007, year-to-date ~~$0.3 million~~sales inand ~~the~~marketing ~~quarter~~costs, ~~ended~~as ~~December 31,~~a ~~2004~~percentage of revenue, ~~due~~remains ~~primarily~~consistent toat 9.4%. ~~the~~In ~~reduced~~addition ~~interest~~to ~~expense~~the ~~upon redemption~~impact of acquisitions, the ~~notes.~~year-over-year ~~Additionally,~~increase asin asales ~~result~~and marketing ofcosts, ~~the~~is ~~redemption,~~mainly wedue ~~incurred~~to a ~~charge~~general ofincrease ~~$4.8 million~~in ~~for~~sales acosts ~~2.79%~~in ~~call~~our ~~premium~~Software ~~for~~Division related ~~early~~to ~~redemption~~license ofsales ~~the~~growth ~~notes,~~ and an ~~additional~~increase ~~$2.4 million~~in marketing program costs in Electronic Commerce ~~charge~~geared totoward ~~write~~improved ~~off~~consumer ~~the~~adoption ~~remaining~~and ~~unamortized~~greater ~~note~~insight ~~issuance~~into ~~costs~~consumer behavior.

OnGeneral ~~a year-over-year basis, again despite a decrease in average cash~~ and ~~invested~~Administrative ~~assets,~~(000’s) interest income increased by approximately $0.4 million due primarily to an increase in investment yield since last year. Additionally, during the quarter ended September 30, 2004, we received nearly $0.5 million of interest associated with a sales tax rebate program from assets purchased in 2001, providing interest unrelated to invested assets. As a result of the aforementioned redemption of $172.5 million of 6.5% convertible notes on December 12, 2003, our year-over-year interest expense declined from $5.7 million for the six months ended December 31, 2003, to $0.5 million for the six months ended December 31, 2004. The call premium expense of $4.8 million and the $2.4 million charge for unamortized note issuance costs resulted from the early redemption of the notes.


	March 31,
	2007					2006
			%					%
	$		Revenue			$		Revenue
Three months ended	$	18,980		8.2	%	$	16,219		7.1	%
Nine months ended	$	54,158		7.8	%	$	48,777		7.4	%

~~Table~~ Absent the $11.0 million non-cash charge against revenue for warrants that vested in the period ended March 31, 2007, general and administrative costs as a percentage of ~~Contents~~total revenue would be 7.9% for the three-months ended March 31, 2007 and 7.7% for the nine-months ended March 31, 2007. Despite incremental cost associated with acquisitions, we have largely been able to leverage corporate general and administrative resources through elimination of redundancy.

Income Tax Expense (Benefit) (000’s)	December 31,
	2004				2003
	$		Effective Rate		$			Effective Rate
Three months ended	$	8,131		38.4%	$	(618	)		24.6%
Six months ended	$	11,943		38.3%	$	(2,961	)		25.7%

~~Under~~Depreciation ~~normal circumstances we would expect a blended statutory effective tax rate of about 39%. For the three-month~~ and ~~the~~Amortization ~~six-month periods ended December 31, 2004, our effective tax rate~~(000’s) was slightly lower due to research and experimentation tax credits recorded in the fiscal year. For the three-month and six-month periods ended December 31, 2003, our effective tax benefit was offset by federal alternative minimum taxes and the temporary suspension of state-level net operating loss carryover credits.

Segment Information


	March 31,
	2007					2006
			%					%
	$		Revenue			$		Revenue
Three months ended	$	21,517		9.4	%	$	22,349		9.8	%
Nine months ended	$	64,629		9.3	%	$	77,749		11.9	%

WeDepreciation ~~evaluate~~and amortization expenses resulting from the ~~performance~~purchase of ~~our~~operating ~~segments~~fixed assets ~~based~~and oncapitalized ~~revenues~~software ~~and~~development ~~operating~~costs ~~income~~increased ~~(loss)~~to $11.4 of million for the ~~respective~~quarter ~~segments~~ended March 31, 2007, from $11.2 million ~~Segment~~for ~~operating~~the ~~income~~quarter ~~(loss)~~ended March ~~excludes~~31, ~~acquisition~~2006, ~~related~~and ~~intangible asset~~to ~~amortization~~$33.4 million ~~related~~for the tonine-month ~~various~~period ~~business~~ended ~~and~~March 31, ~~asset~~2007, ~~acquisitions~~from ~~and~~$31.8 million ~~significant~~for ~~one~~the nine-~~time~~month period ended ~~charges~~March 31, 2006. ~~The~~It ~~following~~should ~~table~~be ~~sets~~noted ~~forth~~that ~~revenue~~approximately $11.0 million of property, plant and equipment ~~operating~~additions ~~income~~on byour ~~segment~~balance sheet for the nine-month period ended March 31, 2007, relate to expenditures for the ~~periods~~addition of a data center facility. We do not expect to begin depreciation of ~~noted:~~this asset until it becomes operational some time in the second quarter of fiscal 2008. The remainder of our depreciation and amortization expense represents purchase accounting amortization.

	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2004			2003			2004			2003
	(in thousands)
Revenues:
Electronic Commerce	$	142,108		$	112,488		$	280,315		$	219,043
Investment Services		23,972			21,465			46,815			41,758
Software		19,676			15,983			36,459			30,399
Total revenues	$	185,756		$	149,936		$	363,589		$	291,200
Segment operating income (loss):
Electronic Commerce	$	50,879		$	38,961		$	97,830		$	72,883
Investment Services		5,624			4,608			8,184			9,526
Software		6,669			3,565			7,302			5,793
Corporate		(9,577	)		(9,261	)		(17,536	)		(17,223	)
Purchase accounting amortization:
Electronic Commerce		(32,559	)		(31,049	)		(65,122	)		(70,570	)
Investment Services		(151	)		(231	)		(302	)		(463	)
Software		(501	)		(819	)		(1,002	)		(1,560	)
Write off of in-process research and development costs — Software		—			(324	)		—			(324	)
Total income (loss) from operations	$	20,384		$	5,450		$	29,354		$	(1,938	)

Despite additional amortization from intangible assets acquired from IDS in September 2005, Aphelion in October 2005 and PhoneCharge in January 2006, purchase accounting amortization expense decreased overall because of intangible assets that fully amortized during fiscal 2006. In particular, completion of the amortization of the TransPoint strategic agreements in the quarter ended September 30, 2005 resulted in a decrease in amortization expense of approximately $16.5 million on a year-over-year basis.

22Equity in Net Loss of Joint Venture (000’s)


	March 31,
	2007						2006
				%						%
	$			Revenue			$			Revenue
Three months ended	$	(264	)		(0.1	)%	$	(973	)		(0.4	)%
Nine months ended	$	(1,186	)		(0.2	)%	$	(2,447	)		(0.4	)%

~~Electronic~~ In ~~Commerce~~April 2004, ~~Segment~~we ~~Information:~~announced a joint venture, OneVu Limited (“OneVu”), with Voca Limited (“Voca”), to create an integrated electronic billing and payment network for billers and banks in the United Kingdom. We have an equity interest of approximately 46.6% in OneVu and, therefore, we account for our interest in OneVu under the equity method of accounting. We provided 100% of OneVu’s necessary working capital requirements during its formative stage and, therefore, the equity in net loss of OneVu represented 100% of losses incurred by OneVu through March 31, 2006. In March 2006, we entered into an additional funding arrangement with Voca related to OneVu whereby both joint venture partners contributed approximately $830,000 in exchange for a security interest in OneVu subordinate to our previous funding. OneVu obtained a line of credit facility from a bank in the amount of approximately $2.7 million and we have guaranteed the credit facility. Accordingly, beginning in April 2006, we continued to record the operations of OneVu on the equity basis of accounting now recognizing 46.6% of the results of operations of OneVu. Because of our debt guarantee, our portion of the operating losses has caused the carrying value of our investment in the joint venture to fall below zero, becoming a liability in the quarter ended September 30, 2006. The liability will continue to increase as long as the joint venture incurs losses and will be reduced by our share of any profits.

Electronic Commerce Revenues (000’s)	December 31,				Change
	2004		2003		$		%
Three months ended	$	142,108	$	112,488	$	29,620		26.3%
Six months ended	$	280,315	$	219,043	$	61,272		28.0%

~~Revenue~~Net ~~growth~~Interest ~~in Electronic Commerce was primarily the result of an increase in transactions~~(000’s) processed, including those added by our walk-in bill payment business, an increase in e-Bills distributed, and an increase in revenue from interest-sensitive products, such as ABT, somewhat offset by contractual volume-based price discounts.

We offer two basic levels of electronic billing and payment services to our customers – a “Full Service” offering and a “Payment Services” offering. Customers that use our Full Service offering generally outsource their electronic billing and payment process to us. A Full Service customer may or may not use a CheckFree-hosted user interface, but uses a broad array of services, including payment processing, payment warehouse, claims processing, e-Bill, online proof of payment, various levels of customer care, and other aspects of our service. Also, while a Full Service customer may have its own payment warehouse, we maintain a customer record and payment history within our payment warehouse to support the Full Service customer’s servicing needs. Customers in the Full Service category may contract to pay us either on a per-subscriber basis, a per-transaction basis, or a blend of both. The distinction between Full Service and Payment Services is based solely on the types of service the customer receives, not on our pricing methodology. Customers that utilize our Payment Services offering receive a limited subset of our electronic billing and payment services, primarily remittance processing, including our newly acquired walk-in bill payment business. Additionally, within Payment Services, we provide services to billers for electronic bill delivery, biller direct hosting and payments, as well as other payment services, such as ABT. A third category of revenue we simply refer to as “Other Electronic Commerce” includes our Health and Fitness business and other ancillary revenue sources, such as consumer service provider and biller implementation and consulting services and fees associated with the issuance of stored value cards.


	March 31,
	2007						2006
				%						%
	$			Revenue			$			Revenue
Three months ended
Interest Income	$	3,362					$	3,238
Interest expense		(124	)					(227	)

Net interest	$	3,238			1.4	%	$	3,011			1.3	%


Nine months ended
Interest Income	$	10,095					$	9,085
Interest expense		(867	)					(702	)

Net interest	$	9,228			1.3	%	$	8,383			1.3	%

~~The~~While ~~following~~our ~~table~~average ~~provides~~balances ain ~~historical~~cash, ~~trend~~cash ofequivalents ~~revenues,~~and ~~underlying~~investments ~~transaction~~has ~~metrics~~decreased both quarter-over-quarter and year-over-year, the increase in average yields in fiscal 2007 have resulted in only modestly higher quarter-over-quarter and ~~subscriber~~year-over-year ~~metrics,~~interest ~~where~~income. ~~appropriate,~~We have utilized significant amounts of cash for acquisitions and the repurchase of shares of our ~~Electronic~~common stock, ~~Commerce~~but ~~business~~much ~~over~~of ~~the~~these ~~last~~expenditures ~~six~~have been replenished by positive operating cash flows over ~~quarters~~the periods in question.

	Three Months Ended
	12/31/04		9/30/04		6/30/04		3/31/04		12/31/03		9/30/03
	(In millions)
Full Service
Revenues	$	102.4	$	99.1	$	96.2	$	94.0	$	91.8	$	85.5
Active Subscribers		6.9		6.4		5.9		5.5		5.0		4.6
Transactions processed		142.9		133.5		123.9		115.5		106.1		94.3
Payment Services
Revenues	$	31.3	$	30.5	$	14.0	$	12.8	$	12.0	$	11.9
Transactions processed		76.5		72.3		41.3		36.7		33.1		32.4
Other Electronic Commerce
Revenues	$	8.4	$	8.6	$	8.3	$	8.4	$	8.7	$	9.2
Totals
Electronic Commerce revenues	$	142.1	$	138.2	$	118.4	$	115.2	$	112.5	$	106.6
Transactions processed		219.4		205.8		165.2		152.2		139.2		126.7

Our interest expense has increased quarter-over-quarter and year-over-year due to increased activity in the lease financing of data processing equipment. However, $11.3 million of the increase in capital lease and long-term obligations relates to the financing of a new data center whereby interest will be capitalized to the facility until its expected opening in the second quarter of fiscal 2008.

23 On April 2, 2007, we closed on our acquisition of Carreker for approximately $206 million in cash, $70 million of which we financed through our revolving credit facility with the remainder funded by our non-restricted cash. We also expect to close our acquisition of Corillian for approximately $245 million in cash during the quarter ending June 30, 2007, subject to the expiration or termination of the HSR Act waiting period and the satisfaction or waiver of other closing conditions. We expect to use our non-restricted cash and our revolving credit facility to fund this acquisition. As a result, until operating cash flows are sufficient to pay off the outstanding credit facility and replenish cash balances, we expect a near term decline in interest income and a near term increase to interest expense beginning in the quarter ending June 30, 2007.

~~Table~~Income ofTax ~~Contents~~Expense (000’s)

The primary driver behind the increase in Full Service revenue from $91.8 million for the quarter ended December 31, 2003, to $102.4 million for the quarter ended December 31, 2004, was 35% growth in Full Service transactions processed from 106.1 million for the quarter ended December 31, 2003, to 142.9 million for the quarter ended December 31, 2004. The impact of transaction growth was offset by general volume-based pricing tier discounts and particularly by a December 2003 revision to our contract with our largest customer, Bank of America, where subscriber pricing was replaced with transaction-based pricing including volume discounts commensurate with this customer’s volume. Since the quarter ended December 31, 2003, Full Service revenue per transaction has declined from $0.87 to $0.72 as of December 31, 2004.


	March 31,
	2007					2006
			Effective					Effective
	$		Rate			$		Rate
Three months ended	$	17,513		36.8	%	$	18,720		36.8	%

Nine months ended	$	58,211		37.6	%	$	55,180		37.6	%

~~Payment~~Our ~~Services~~federal ~~revenue~~statutory ~~has~~tax ~~increased~~rate ~~substantially~~is 35%, ~~from~~and ~~$12.0 million~~our ~~for~~overall ~~the~~blended ~~quarter~~statutory ~~ended December 31,~~rate ~~2003~~(federal, state toand ~~$31~~foreign combined) approaches 39%.~~3 million~~ Our effective rate of 36.8% for the ~~quarter~~three-month period ended ~~December~~March 31, ~~2004.~~2007, Inand ~~addition~~of ~~to continued~~37.6% ~~growth~~for inthe ~~transactions~~nine-month ~~processed~~period ~~from~~ended ~~our~~March 31, ~~existing~~2007, ~~customer~~are ~~base,~~consistent with the ~~primary~~prior ~~driver~~year ~~of the~~rates ~~increase~~and inare ~~revenue~~lower ~~has~~than ~~been~~ our ~~acquisition~~blended ofstatutory ~~APS~~rate ondue ~~June 22,~~to ~~2004. This walk~~tax-infree ~~bill~~municipal ~~payment~~interest ~~business~~income ~~contributed~~earned ~~significant~~on ~~transaction~~investments ~~volume~~and atfederal aresearch ~~revenue~~and ~~per~~experimentation ~~transaction~~tax ~~rate~~credits. Upon ~~substantially~~the ~~higher~~filing ~~than~~of ~~our~~tax ~~core~~returns ~~Payment~~during ~~Services~~the ~~business.~~quarters ~~The~~ended ~~addition~~March 31, of2007 ~~APS~~and ~~can~~2006, beour ~~seen~~year-to-date ~~clearly~~reconciliation inof ~~the~~actual ~~increase~~to inestimated ~~both~~tax ~~revenue~~liability, ~~and~~resulted ~~transactions~~in ~~processed~~a ~~beginning~~lower inquarterly ~~the~~effective ~~quarter ended~~rate ~~September 30,~~as ~~2004,~~compared into the ~~historical~~nine-month ~~trends~~effective ~~above~~rate for both years.

The ~~decline~~decrease in ~~Other~~income ~~Electronic~~tax ~~Commerce~~expense ~~revenue~~for ~~from~~ the three- ~~and six-~~month ~~periods~~period ended ~~December 31,~~ ~~2003, to the three- and six-month periods ended December~~March 31, ~~2004,~~2007 ~~was~~as ~~due~~ compared to the ~~loss of~~same aperiod ~~large~~last ~~Health~~year, and ~~Fitness~~the ~~customer~~increase ~~since~~in ~~last~~income ~~year,~~tax ~~combined~~expense ~~with~~for ~~lower~~the ~~consulting~~nine-month ~~service~~period ~~revenue~~ended inMarch 31, ~~the~~2007 ~~division.~~as

Electronic Commerce Operating Income (000’s)	December 31,				Change
	2004		2003		$		%
Three months ended	$	50,879	$	38,961	$	11,918		30.6%
Six months ended	$	97,830	$	72,883	$	24,947		34.2%

~~Our~~compared ~~ratio of electronic payments~~ to ~~total~~the ~~payments~~same ~~improved~~period ~~from~~last ~~78% as of December 31~~year, ~~2003, to~~both ~~83%~~on asan ofabsolute ~~December 31~~dollar basis, ~~2004. Electronic payments carry a significantly lower variable cost per unit than paper payments and~~ are ~~far~~the ~~less likely to~~ result ~~in a costly customer care inquiry or~~of ~~claim. Due to continued improvement in quality and efficiency and~~ the ~~leverage~~change ~~we have experienced~~ in ~~our~~taxable ~~existing fixed cost base, we have realized a significant reduction in cost per transaction over the past year, which resulted in an increase in operating~~ income. ~~Despite our new walk-~~in ~~bill payments operation providing a relatively low operating margin,~~ the ~~overall~~respective ~~operating margin in our Electronic Commerce business has increased from 35% for the quarter ended December 31~~periods, ~~2003,~~as ~~to 36% for~~ the ~~quarter ended December 31, 2004, and from 33% for the six~~ period-~~months~~over-period ~~ended~~effective ~~December 31, 2003,~~rates toare ~~35% for the six-months ended December 31, 2004~~consistent.

~~Investment~~Earnings ~~Services~~from ~~Segment~~Discontinued ~~Information:~~Operations (000’s)

Investment Services Revenues (000’s)	December 31,				Change
	March 31,
	2004		2003		$		%
	2007				2006
Three months ended	$	23,972	$	21,465	$	2,507		11.7%
			%				%
Six months ended	$	46,815	$	41,758	$	5,057		12.1%
	$		Revenue		$		Revenue
Three months ended	$	—		—	$	13,056		5.8	%
Nine months ended	$	—		—	$	14,311		2.2	%

~~Quarter-over-quarter~~In ~~and~~the ~~year-over-year~~quarter ~~revenue~~ended ~~growth in Investment Services was driven primarily by an increase in portfolios managed from almost 1.4~~March ~~million as of December~~ 31, ~~2003~~2006, ~~to more~~we ~~than~~divested ~~1.7 million~~the asassets of ~~December 31~~M-Solutions, ~~2004.~~a ~~We have provided certain incentives for customers~~business towithin ~~sign~~our ~~multi-year~~Investment ~~contracts~~Services ~~and~~Division. ~~are~~SFAS ~~experiencing~~144, a“Accounting ~~mix~~for ~~shift~~the ~~toward~~Impairment ~~lower~~or ~~priced~~Disposal ~~services, both~~ of ~~which~~Long-Lived weAssets,” ~~expect~~requires tothat ~~result~~we inreport ~~lower~~the ~~revenue~~results ~~per~~of ~~average~~operations ~~portfolio~~from ~~managed.~~the ~~Growth~~divested ~~in portfolios~~business, ~~managed~~separately isas ~~typically~~earnings ~~tied~~from todiscontinued ~~the~~operations ~~growth~~for inall ~~the~~periods Upresented.S. ~~stock~~M-Solutions historically ~~market.~~provided Wemodest ~~have~~earnings ~~experienced~~on ~~renewed growth~~both inquarterly ~~portfolios,~~ and asannual ~~a result, we are cautiously optimistic about continued near-term portfolio growth~~bases.

24Income Tax Expense on Discontinued Operations (000’s)


	March 31,
	2007				2006
			Effective				Effective
	$		Rate		$		Rate
Three months ended	$	—		—	$	7,581		58.1	%

Nine months ended	$	—		—	$	8,064		56.3	%

Investment Services Operating Income (000’s)	December 31,				Change
	2004		2003		$			%
Three months ended	$	5,624	$	4,608	$	1,016			22.0%
Six months ended	$	8,184	$	9,526	$	(1,342	)		(14.1)%

Earnings from discontinued operations includes a $12.8 million gain on the sale of M-Solutions in the quarter ended March 31, 2006. Our book basis gain on the sale includes the impact of the write-off of goodwill, which is non-deductible for tax purposes. The higher tax basis gain on the sale resulted in an effective tax rate of 58.1% for the quarter ended March 31, 2006, and of 56.3% for the nine-month period ended March 31, 2006.

~~The~~Segment ~~quarter-over-quarter growth in operating income is due primarily to the aforementioned~~Information growth in revenue, in addition to a formula-based accounts receivable reserve that reversed in the quarter ended December 31, 2004, which lowered expenses for the quarter. We began work on an enhanced version of our operating system in the Investment Services division, but experienced a brief delay in research and development spending in the quarter ended December 31, 2004, as we transitioned detailed requirements knowledge to a new development partner that will be programming the new system. Our operating margin improved from 21% for the quarter ended December 31, 2003, to 23% for the quarter ended December 31, 2004, as a result of these factors, but we expect our margin to be about 20% for at least the next 18 to 24 months as we complete work on the project.

~~The~~We ~~year-over-year~~evaluate ~~decline~~the inperformance ~~operating~~of ~~income~~our issegments ~~due~~based ~~primarily~~on tototal ~~additional~~revenues ~~spending~~and onoperating ~~the~~income ~~enhanced~~(loss) of ~~operating~~the ~~system~~respective ~~project,~~segments. ~~and~~Segment tooperating aincome ~~lesser~~(loss) excludes ~~extent,~~acquisition-related intangible ~~efforts~~asset amortization related to ~~improve~~various ~~operational~~business ~~quality~~and asset ~~standards~~acquisitions, ~~through~~the ~~Six~~impact ~~Sigma~~of ~~quality~~warrants ~~programs.~~issued ~~Our~~to ~~operating~~a ~~margin~~customer, integration ~~has~~costs ~~declined~~associated ~~from~~with ~~23%~~acquisitions ~~for~~and the SFAS ~~six~~123(R) equity-~~month~~based ~~period~~compensation ~~ended~~expense ~~December 31,~~related ~~2003,~~ to ~~17%~~stock ~~for~~options ~~the~~granted ~~six-month~~before ~~period~~the ~~ended December 31, 2004,~~implementation ~~due~~of ~~primarily~~our tocurrent ~~project~~incentive ~~spending.~~compensation ~~As mentioned above~~philosophy, wewhich ~~expect~~significantly ~~our~~reduced ~~going~~overall ~~forward margin to~~participation ~~average~~and ~~approximately~~focused ~~20%~~on ~~until~~restricted ~~completion~~stock ofwith ~~the~~limited ~~enhanced~~stock ~~version~~options, ofbeginning ~~the~~July 1, ~~operating system~~2004.

~~Software~~ The ~~Segment~~following ~~Information:~~table sets forth total revenues, operating income (loss) and certain other financial information by segment in thousands, for the periods noted in accordance with note 11 to our financial statements included in this quarterly report and SFAS 131 “Disclosures about Segments of an Enterprise and Related Information”:

Software Revenues (000’s)	December 31,				Change
	2004		2003		$		%
Three months ended	$	19,676	$	15,983	$	3,693		23.1%
Six months ended	$	36,459	$	30,399	$	6,060		19.9%

In addition to incremental maintenance and services revenue provided from our acquisition of HelioGraph in the quarter ended December 31, 2003, we have experienced strong license revenue growth both on a quarter-over-quarter and year-over-year basis. We believe this to be the result of improved execution within our Software division. It is too early to determine whether the growth experienced in the first half of fiscal 2005 is sustainable in the near-term.


	Three Months Ended						Nine Months Ended
	March 31,						March 31,
	2007			2006			2007			2006
Revenues:
Electronic Commerce, gross	$	184,710		$	169,438		$	532,152		$	496,187
Impact of warrants to a customer		10,950			—			10,950			—

Electronic Commerce, net		173,760			169,438			521,202			496,187
Investment Services		30,743			27,833			90,002			78,542
Software		25,705			29,656			84,783			79,735

Total Revenue	$	230,208		$	226,927		$	695,987		$	654,464


Income from continuing operations before other income and expenses:
Segment operating income (loss):
Electronic Commerce	$	66,079		$	59,739		$	187,116		$	192,282
Investment Services		6,742			3,950			17,981			12,145
Software		3,373			7,496			17,242			15,969
Corporate		(9,296	)		(10,291	)		(31,171	)		(29,795	)
Purchase accounting amortization		(10,133	)		(11,254	)		(31,256	)		(46,451	)
Impact of warrants to a customer		(10,950	)		—			(10,950	)		—
SFAS 123(R) — Stock options issued before July 1, 2004⁽¹⁾		(319	)		(777	)		(1,342	)		(3,375	)
Integration costs associated with acquisitions		(937	)		—			(937	)		—

Income from continuing operations before other income and expenses	$	44,559		$	48,863		$	146,683		$	140,775

Software Operating Income (000’s)	December 31,				Change
	2004		2003		$		%
Three months ended	$	6,669	$	3,565	$	3,104		87.1%
Six months ended	$	7,302	$	5,793	$	1,509		26.0%


(1)		At the beginning of our fiscal year 2005, we implemented a new long-term incentive compensation philosophy, which significantly reduced overall participation and focused on restricted stock with limited stock options. As a result, we recorded the cost of restricted stock throughout our fiscal year 2005. In fiscal year 2006, we adopted SFAS 123(R), and are consequently recording all long-term incentive grants, both restricted stock and stock options, as an expense in our consolidated statement of operations. The adjustment for SFAS 123(R) represents the charge associated with the current vesting of options that were unvested as of July 1, 2004 under our previous compensation philosophy, which were originally accounted for utilizing APB 25.

~~The~~Electronic ~~increase~~Commerce inSegment ~~quarter-over-quarter operating income is due to growth in high margin license~~Information: revenue. The increase in year-over-year operating income is dampened somewhat by a $2.6 million charge in the quarter ended September 30, 2004, where we provided for a loss on a services contract for a large customer.

~~Corporate~~Electronic ~~Segment~~Commerce ~~Information:~~Revenues – Gross (000’s)

Corporate Operating Loss (000’s)	December 31,						Change
	March 31,						Change
	2004			2003			$			%
	2007			2006			$			%
Three months ended	$	(9184,~~577~~710	)	$	(9169,~~261~~438	)	$	~~(316~~15,272	)		(39.~~4)%~~0	%
Six months ended	$	(17,536	)	$	(17,223	)	$	(313	)		(1.8)%
Nine months ended	$	532,152		$	496,187		$	35,965			7.2	%

25 Overall growth in Electronic Commerce, including our PhoneCharge telephone bill payment business acquired in January 2006, continues to be driven primarily by 16% growth in transactions processed to nearly 341 million for the quarter ended March 31, 2007, from 293 million for the quarter ended March 31, 2006, and by 17% growth in transactions processed to nearly 975 million for the nine-month period ended March 31, 2007, from 830 million for the nine-month period ended March 31, 2006. During the fiscal year ended June 30, 2006, our TransPoint related contracts with Microsoft and FDC expired which, on a combined basis, negatively impacted total company revenue growth by nearly 5% on a year-over-year basis. Also, during the quarter ended March 31, 2006, our largest bank customer migrated from a processing model that guarantees funds, to our standard risk-based processing model, which has since negatively impacted our interest-based revenue.

~~Table~~ As of ~~Contents~~the quarter ended September 30, 2006, we began reporting a new set of Electronic Commerce Division metrics. Our transaction-based metrics are now divided between CSP and non-CSP results. CSPs are organizations, such as banks, brokerage firms, Internet portals and content sites, Internet-based banks, Internet financial sites, and

~~Corporate results represent costs for legal, human resources, finance and various other~~27 ~~unallocated overhead expenses. We have been able to leverage our infrastructure costs by limiting additional corporate costs primarily to increased regulatory compliance costs.~~

~~Purchase~~personal ~~Accounting~~financial ~~Amortization:~~management software providers. Non-CSP results include agent-based payments, phone-based payments and ancillary payment products including our biller direct and account balance transfer businesses. We believe the distinction between CSP and non-CSP results provide investors greater insight into the key underlying trends of our business.

Purchase Accounting Amortization Expense (000’s)	December 31,				Change
	2004		2003		$			%
Three months ended	$	33,211	$	32,099	$	1,112			3.5%
Six months ended	$	66,426	$	72,593	$	(6,167	)		(8.5)%

The following table provides a historical trend of revenue, underlying transaction metrics, and subscriber metrics, where appropriate, for our Electronic Commerce Division over the last five quarters.

Purchase accounting amortization represents amortization of intangible assets resulting from our various acquisitions from 1998 forward. On a quarter-over-quarter basis, the increase in purchase accounting amortization is due to the recording of intangible assets associated with our acquisitions of APS and HelioGraph. The decrease in year-over-year purchase accounting amortization is the result of older intangible assets that became fully amortized since the quarter ended December 31, 2003.


	Three Months Ended
	3/31/07		12/31/06		9/30/06		6/30/06		3/31/06
	(in millions, except revenue per transaction and revenue
	per e-bill delivered)
Transactions
CSP:
Revenue	$	122.5	$	116.8	$	114.2	$	111.8	$	113.8
Revenue per transaction	$	0.45	$	0.46	$	0.48	$	0.49	$	0.52
Transactions processed		269.6		251.5		235.7		227.5		217.3

Non-CSP:
Revenue	$	39.6	$	38.3	$	36.2	$	34.4	$	36.0
Revenue per transaction	$	0.56	$	0.54	$	0.48	$	0.46	$	0.47
Transactions processed		71.2		70.5		76.0		74.7		76.0

Total Transactions:
Revenue	$	162.1	$	155.1	$	150.4	$	146.2	$	149.8
Transactions processed		340.9		322.0		311.7		302.2		293.3

e-bill Delivery
Revenue	$	9.8	$	8.7	$	8.5	$	8.0	$	7.4
Revenue per e-bill delivered	$	0.17	$	0.16	$	0.16	$	0.16	$	0.16
e-bills delivered		58.7		54.9		51.8		50.0		46.7

Other Electronic Commerce⁽¹⁾
Revenue	$	12.8	$	12.6	$	12.1	$	12.3	$	12.2

Other Performance Metrics
Active subscribers⁽²⁾		11.6		11.1		10.5		10.0		9.7

In-Process Research & Development (000’s)	December 31,
(1)	“Other Electronic Commerce” includes our Health & Fitness products, ancillary revenue sources such as implementation and consulting services.
	2004				2003
(2)	“Active” refers to subscribers who have viewed or paid a bill in the last 90 days at a Consumer Service Provider that out-sources essentially all of its electronic billing and payment (EBP) functions to CheckFree.
	$		% Revenue		$		% Revenue
Three months ended	$	—		—	$	324		0.2%
Six months ended	$	—		—	$	324		0.1%

WeDuring ~~recorded~~the ~~immaterial~~quarters ~~research~~ended June 30, 2006 and ~~development~~September 30, ~~costs~~2006, ~~totaling~~we ~~$0.~~experienced sequential quarterly transaction growth of 3 ~~million~~%, ~~related~~which towas lower than our expectations. We experienced a ~~acquisition~~greater-than-expected ofdip ~~HelioGraph~~in transactions in April 2006 combined with transaction growth for the rest of the quarter ~~ended~~that ~~December 31~~was not as significant as previous years, ~~2003~~and a slowdown in consumer activity at our largest bank customer. Since then we have performed significant analysis on the causes, including a regression analysis of key transaction volume drivers on a large portion of our CSP customers for our last four fiscal years. We have learned that the sequence of long months or

~~Inflation~~28

Weshort ~~believe~~months in a given quarter, the ~~effects~~sequence of ~~inflation~~long ~~have~~or ~~not~~short ~~had~~months abefore ~~significant~~and ~~impact~~after ona quarter-end ~~our~~date ~~results~~and the mix of processing and non-processing days within the quarter affects ~~operations~~sequential quarterly transaction growth. We have also learned that the slowdown in consumer activity at our largest bank customer was affected by the combination of that customer’s shift to our standard risk-based processing model in the quarter ended March 31, 2006, and a somewhat slower transaction growth rate given the industry leading consumer penetration at that customer.

26 Our analysis has revealed a previously undetected cyclical pattern within the quarters of a given fiscal year that does not impact overall annual transaction growth. We now believe that, barring unusual events, CSP based sequential quarterly transaction growth in the first and fourth quarters of our fiscal year tends to be lower than CSP based sequential quarterly transaction growth in the second and third quarters of our fiscal year. As a result, based on what we have learned over the past nine months, we believe we are better able to forecast transaction growth. We do not believe we have identified all factors that could affect transaction growth, including various consumer behavior patterns, and we will continue to analyze our transaction growth patterns for evidence of other such factors. Our analysis has revealed that it is important for investors to understand the differing growth patterns between CSP and non-CSP customers. Therefore, as previously mentioned, we have enhanced the reporting of our Electronic Commerce Division metrics to include separate revenue and volume trends for our CSP, non-CSP and e-bill delivery customers.

~~Table~~ Total payment transactions increased by 16%, from more than 293 million for the three-months ended March 31, 2006 to nearly 341 million for the three-months ended March 31, 2007, composed of 24% ~~Contents~~growth in CSP based transactions and 6% decline in non-CSP based transactions. Increased revenue from CSP based payment transaction growth was offset by tier-based volume pricing discounts, and the negative impact on interest-based revenue from the migration of our largest bank customer from a processing model that guarantees funds to our standard risk-based processing model; which, on a combined basis, resulted in a $0.07 decrease in revenue per transaction quarter-over-quarter. Our acquisition of PhoneCharge in January 2006 provided significant transaction growth in relatively high-priced phone-based payments in our non-CSP based business. This growth was offset by a decline in walk-in payments as many of our customers shifted to a consumer fee-based pricing model which provides us with fewer, but more profitable, transactions and a decline in payments made directly at biller websites. The change in the mix within the non-CSP area resulted in a $0.09 increase in revenue per transaction.

~~Liquidity~~ Total payment transactions increased by 17%, from 830 million for the nine-month period ended March 31, 2006, to nearly 975 million for the nine-month period ended March 31, 2007, composed of 25% growth in CSP based transactions and ~~Capital~~a ~~Resources~~2% decline in non-CSP based transactions. Increased revenue from CSP based payment transaction growth was offset by tier-based volume pricing discounts, the expiration of the monthly minimum revenue guarantees from Microsoft in December 2005 and FDC in September 2005, and the negative impact on interest-based revenue from the migration of our largest bank customer from a processing model that guarantees funds to our standard risk-based processing model; which, on a combined basis, resulted in a $0.12 decrease in revenue per CSP transaction year-over-year. Our acquisition of PhoneCharge in January 2006 provided significant transaction growth in relatively high-priced phone-based payments in our non-CSP based business. This growth was offset by a decline in walk-in payments as customers began shifting to a consumer fee-based pricing model, which provides us with fewer, but more profitable, transactions and a decline in payments made directly at biller websites. The change in the mix within the non-CSP area resulted in a $0.14 increase in revenue per non-CSP transaction.

~~The~~We ~~following~~delivered ~~chart~~nearly ~~summarizes~~59 million ~~our~~e-bills ~~Consolidated~~in ~~Statement~~the quarter ended March 31, 2007, representing an increase of ~~Cash~~26% ~~Flows~~over ~~for~~the nearly 47 million e-bills delivered in the ~~three~~same ~~months~~period in the previous year. We delivered more than 165 million e-bills during the nine-month period ended ~~September~~March 3031, ~~2004~~2007, representing ~~and~~an increase of 23% over the ~~three~~nearly 135 million e-bills ~~and~~delivered ~~six~~in the same period in the previous year. Although revenue per e-~~month~~bill ~~periods~~has remained relatively consistent at $0.16 over the past few years, during the quarter ended ~~December~~March 31, ~~2004:~~2007, revenue per e-bill increased to $0.17 due to our recent decision to reduce the delivery of screen scraped bills that generate no revenue.

							Six Months
	Three Months Ended						Ended
	September 30,			December 31,			December 31,
	2004			2004			2004
	(in thousands)
Net cash provided by operating activities	$	31,674		$	65,861		$	97,535
Net cash used in investing activities		(31,277	)		(8,743	)		(40,020	)
Net cash provided by financing activities		786			3,449			4,235
Effect of exchange rate changes		488			569			1,057
Net increase in cash and cash equivalents	$	1,671		$	61,136		$	62,807

The quarter-over-quarter and year-over-year increases in Other Electronic Commerce revenue are primarily due to our acquisition of Aphelion in October 2005, designed to enhance growth in our Health and Fitness products.

~~As of December 31, 2004, we had $284.3 million of cash, cash equivalents and short-term~~29 investments on hand, and an additional $75.0 million in long-term investments. Our balance sheet reflects a current ratio of 2.7 and working capital of $329.4 million. Due to revenue growth and processing efficiency improvement, we have experienced a significant increase in net cash provided by operating activities over the past several years. We fully utilized our federal net operating loss carryover credits late in the quarter ended September 30, 2004, and as a result, we are now a full federal taxpayer. Despite having to pay full federal income taxes, we generated $65.9 million of net cash provided by operating activities during the three months ended December 31, 2004, and we expect to generate over $200 million of net cash provided by operating activities in the fiscal year ending June 30, 2005. Considering our existing cash and investment balances and expectations of net cash provided by operating activities for the year, we believe we will have sufficient cash to meet our presently anticipated requirements for the foreseeable future. Our board of directors has approved up to $40 million for the purpose of repurchasing shares of our common stock through August 2005. As of December 31, 2004, no such purchases have taken place. To the extent we require additional cash, we have access to an untapped $185 million revolving credit facility. We have no immediate plans to borrow against the credit facility.

~~From~~Electronic anCommerce ~~investing~~Operating ~~perspective,~~Income ~~we used $40.0 million of cash during the six-month period ended~~(000’s) December 31, 2004. Of this amount, we used $20.0 million in the net purchases of investments, $14.1 million in capital expenditures, $3.1 million in the working capital adjustments associated with acquisitions, $1.9 million for an investment in our United Kingdom-based joint venture, OneVu, and $1.0 million in the capitalization of software development costs. We expect to spend no more than $40 million on purchases of property and equipment in fiscal 2005.

From a financing perspective, we generated $4.2 million of cash for the six-month period ended December 31, 2004. Proceeds of $3.8 million from exercised employee stock options and $2.3 million from our associate stock purchase plan were offset by $1.9 million of payments for capital leases and other long-term obligations.


	March 31,				Change
	2007		2006		$			%
Three months ended	$	66,079	$	59,739	$	6,340			10.6	%

Nine months ended	$	187,116	$	192,282	$	(5,166	)		-2.7	%

~~While~~Our ~~the~~ongoing ~~timing~~efforts ofto ~~cash~~improve ~~payments~~quality and ~~collections~~efficiency ~~will~~in ~~cause~~our ~~fluctuations~~operations, ~~from~~combined ~~quarter~~with toa ~~quarter~~substantial ~~and~~electronic ~~the~~versus ~~level~~paper payment rate of ~~expected~~84% ~~capital~~and ~~expenditures~~our ~~could~~ability ~~change~~to leverage our fixed cost base, wehave ~~expect~~resulted toin ~~generate~~a ~~more than~~lower ~~$160 million~~cost ofper ~~free~~transaction, ~~cash~~and ~~flow~~have ~~for~~offset ~~the~~volume-based ~~fiscal~~pricing ~~year~~discounts inherent ~~ending~~in ~~June 30,~~our ~~2005~~business. WeBased ~~define~~on ~~free~~gross ~~cash~~revenues, our quarter-over-quarter operating margin has ~~flow~~increased asto ~~net~~nearly ~~cash~~36% ~~provided~~for bythe ~~operating~~quarter ~~activities~~ended March 31, ~~exclusive~~2007, offrom ~~the~~more ~~net~~than ~~change~~35% infor ~~settlement~~the quarter ~~accounts~~ended March 31, ~~less~~2006, ~~capital~~and ~~expenditures.~~our ~~See~~year-over-year ~~“Use~~operating ofmargin ~~Non-GAAP~~has ~~Financial~~declined ~~Information”~~from ~~below~~nearly 39% for athe ~~discussion~~nine-month ofperiod ~~this~~ended ~~measure~~March 31, 2006, to more than 35% for the nine-month period ended March 31, 2007.

~~Our~~Although ~~agreement~~offset tosomewhat ~~use~~by aour ~~bank~~acquisitions ~~routing~~of ~~number~~PhoneCharge toand ~~process~~Aphelion, ~~payments~~the ~~contains~~high-margin revenue ~~certain~~loss ~~financial covenants~~resulting ~~related~~from tothe ~~tangible~~expected ~~net~~expiration ~~worth,~~of ~~cash~~our ~~flow~~contracts ~~coverage,~~with ~~debt~~FDC ~~service~~in ~~coverage~~August 2005 and ~~maximum~~ ~~levels~~Microsoft ofin ~~debt~~December 2005, tocombined ~~cash~~with ~~flow,~~the asnegative ~~defined.~~impact Weon ~~are~~our ininterest-based ~~compliance~~revenue ~~with~~from ~~all~~a large ~~covenants~~bank ascustomer ofmigrating ~~December~~to a processing model that guarantees funds to our standard ~~31,~~risk-based ~~2004~~processing model, ~~and~~resulted doin ~~not~~downward ~~anticipate~~pressure ~~any~~on ~~change~~our inoperating ~~the~~margin ~~foreseeable~~as ~~future~~we entered fiscal 2007.

27Investment Services Segment Information:

~~Table~~Investment ofServices ~~Contents~~Revenues (000’s)

Use of Non-GAAP Financial Information


	March 31,				Change
	2007		2006		$		%
Three months ended	$	30,743	$	27,833	$	2,910		10.5	%

Nine months ended	$	90,002	$	78,542	$	11,460		14.6	%

WeQuarter-over-quarter ~~supplement~~revenue ~~our~~growth ~~reporting~~of 10.5% and year-over-year revenue growth of ~~cash~~14.6% in ~~flow~~Investment ~~information~~Services ~~determined~~was primarily due to an increase in ~~accordance~~portfolios ~~with~~managed ~~GAAP~~to more than 2.6 ~~(Generally~~million ~~Accepted~~as ~~Accounting~~of ~~Principles~~March 31, in2007 ~~the~~from ~~United~~nearly ~~States~~2.2 million as of ~~America)~~March 31, by2006. ~~using~~In ~~“free~~the ~~cash~~quarter ended ~~flow”~~March 31, in2007, ~~this~~we ~~Quarterly~~experienced ~~Report~~lower onthan ~~Form~~normal ~~10-Q~~professional fee revenue as customer execution of a ~~measure~~new toprofessional ~~evaluate~~services ~~our~~contracts ~~liquidity~~was delayed until the fourth quarter of fiscal 2007. We continue ~~define~~to ~~free cash~~provide ~~flow~~incentives asfor ~~GAAP~~our ~~net~~customers ~~cash~~to ~~provided~~sign bymulti-year ~~operating~~contracts ~~activities~~and are experiencing a business mix shift to lower priced services, ~~exclusive~~both of ~~the~~which ~~net~~we ~~change~~expect to result in a modest ~~settlement~~reduction ~~accounts~~to ~~and~~our ~~less~~revenue ~~capital~~per ~~expenditures.~~average Weportfolio ~~believe~~managed. ~~free~~Growth ~~cash~~in ~~flow~~portfolios ~~provides~~managed ~~useful~~is typically ~~information~~tied to ~~management~~the ~~and~~growth ~~investors~~in the U.S. stock market. In addition, we realized a full nine months of revenue in ~~understanding~~the ~~our~~nine-month ~~financial~~period ~~results~~ended ~~and~~March 31, ~~assessing~~2007 from our acquisition of IDS against only seven months ~~prospects~~of ~~for~~operations ~~future~~in ~~performance~~the nine-month period ended March 31, 2006. We ~~also~~remain ~~use~~cautiously ~~free~~optimistic ~~cash~~about the ~~flow~~opportunity asfor acontinued ~~factor~~portfolio ingrowth ~~determining~~through ~~long-term incentive~~fiscal ~~compensation~~2007 as demand for ~~senior~~separately ~~management~~managed accounts continues to improve.

WeInvestment ~~exclude~~Services ~~the~~Operating ~~net~~Income ~~change in settlement accounts from free cash flow because we believe this facilitates management~~(000’s ~~and investors’ ability to analyze operating cash flow trends. In~~) connection with our walk-in bill payment business, our balance sheet reflects settlement assets and settlement obligations. The settlement assets represent payment receipts in transit to us from agents, and the settlement obligations represent scheduled but unpaid payments due to billers. Balances in settlement accounts fluctuate daily based on deposit timing and payment transaction volume. These timing differences are not reflective of our liquidity, and thus, we exclude the net change in settlement accounts from free cash flow.

As a technology company, we make significant capital expenditures in order to update our technology and to remain competitive. Our free cash flow reflects the amount of cash we generated that remains, after we have met those operational needs, for the evaluation and execution of strategic initiatives such as acquisitions, stock and/or debt repurchases and other investing and financing activities, including servicing additional debt obligations.


	March 31,				Change
	2007		2006		$		%
Three months ended	$	6,742	$	3,950	$	2,792		70.7	%

Nine months ended	$	17,981	$	12,145	$	5,836		48.1	%

~~Free~~Our ~~cash~~operating ~~flow~~margins ~~does~~have ~~not~~increased ~~solely~~to ~~represent~~nearly ~~residual~~22% ~~cash flow available~~ for ~~discretionary expenditures,~~the ~~as certain of our non~~three-~~discretionary~~month ~~obligations~~period ~~are~~ended ~~also funded out of free cash~~March ~~flow. These consist primarily of payments on capital leases and other long-term commitments~~31, ~~if any~~2007, asfrom ~~reflected~~more inthan ~~the~~14% ~~table~~for ~~entitled “Contractual Obligations” in~~ the ~~“Liquidity and Capital Resources” section of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report on Form 10~~three-Kmonth ~~for~~period ~~the fiscal year~~ ended ~~June~~March 3031, ~~2004~~2006, ~~which~~ ~~was filed with the Securities~~ and ~~Exchange~~have ~~Commission on September 3, 2004, and in our~~increased ~~Quarterly~~to ~~Report~~20% ~~on Form 10-Q~~ for the ~~quarter~~nine-month period ended ~~September~~March 3031, ~~2004~~2007, ~~which~~from ~~was~~nearly ~~filed~~16% ~~with~~for the ~~Securities~~ ~~and~~nine-month ~~Exchange~~period ended ~~Commission on November~~March 931, ~~2004~~2006.

~~Our free cash flow for the three- and six-month periods ended December 31, 2004 and December~~30 ~~31, 2003, is calculated as follows (in thousands):~~

	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2004			2003			2004			2003
Net cash provided by operating activities	$	65,861		$	41,374		$	97,535		$	68,376
Excluding: Net change in settlement accounts		(63	)		—			1,428			—
Less: Capital expenditures		(9,238	)		(3,653	)		(14,117	)		(9,079	)
Free cash flow	$	56,560		$	37,721		$	84,876		$	59,297

While we continue to incur significant spending on the enhanced operating system project, CheckFree EPL ^SM (Enhanced Portfolio Lifecycle), and we continue to invest in resources designed to improve future operational quality standards through Six Sigma quality programs, the divestiture of our unprofitable M-Solutions business in March 2006 was the primary driver of our increased margin in the current year. We expect our future margin to remain around the upper teens to low 20% level until completion of CheckFree EPL ^SM, for which we expect initial deployment and testing in calendar 2007 and which is currently scheduled to begin customer migration in fiscal 2008.

~~Net~~Software ~~cash~~Segment ~~provided by (used in) investing activities for the three-month periods ending~~Information: December 31, 2003, and December 31, 2004, was $48.8 million and $(8.7) million, respectively. Net cash provided by (used in) financing activities was $(171.1) million for the three months ended December 31, 2003, and was $3.4 million for the three months ended December 31, 2004. Net cash used in investing activities for the six-month periods ending December 31, 2003, and December 31, 2004, was $40.0 million and $0.4 million, respectively. Net cash provided by (used in) financing activities was $(170.7) million for the six months ended December 31, 2003, and was $4.2 million for the six months ended December 31, 2004.

~~Our~~Software ~~free~~Revenues ~~cash flow should be considered in addition to, and not as a substitute for, net cash~~(000’s) provided by operating activities or any other amount determined in accordance with GAAP. Further, our measure of free cash flow may not be comparable to similar titled measures reported by other companies.


	March 31,				Change
	2007		2006		$			%
Three months ended	$	25,705	$	29,656	$	(3,951	)		-13.3	%

Nine months ended	$	84,783	$	79,735	$	5,048			6.3	%

~~Table~~ We incurred a quarter-over-quarter revenue decline of ~~Contents~~13.3% as a result of lower than expected license sales within our operations risk management and treasury products in the quarter ended March 31, 2007, combined with higher than normal professional services revenue in the quarter ended March 31, 2006.

~~Recent~~ On ~~Accounting~~a ~~Pronouncements~~year-over-year basis we incurred revenue growth of 6.3%, due mainly to growth in license sales of our treasury and securities products and related maintenance services revenue, offset somewhat by a decline in professional services revenue. While our sales pipelines steadily improved through fiscal 2006 and into 2007, we do not believe we can overcome the sales shortfall in the quarter ended March 31, 2007 and as a result, we no longer expect to achieve the overall annual license sales we anticipated at the beginning of the year.

InSoftware ~~December 2004,~~Operating ~~the~~Income ~~Financial Accounting Standards Board issued a revision to Financial Accounting Standards Board~~ (“FASB”) Statement No. 123, “Accounting for Stock Based Compensation” (“SFAS 123”). FASB Statement No. 123 (R), “Share-Based Payment” (“SFAS 123 (R)”), supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and its related implementation guidance. SFAS 123 (R) establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity000’s ~~equity instruments or that may be settled by the issuance of those equity instruments. SFAS 123 (R~~) ~~focuses primarily on accounting for transactions in which an entity obtains employee~~ services in share-based payment transactions. This Statement does not change the accounting guidance for share-based payment transactions with parties other than employees provided in SFAS 123 as originally issued and EITF Issue No. 96-18, ”Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services.” SFAS 123 (R) does not address the accounting for employee share ownership plans, which are subject to AICPA Statement of Position 93-6, “Employers’ Accounting for Employee Stock Ownership Plans.”

Based on the guidance of SFAS 123 (R), we will be required to initially measure the cost of employee services received in exchange for an award of liability instruments (i.e., awards settled in cash rather than equity) based on its current fair value; the fair value of that award will be re-measured subsequently at each reporting date through the settlement date. Changes in fair value during the requisite service period will be recognized as compensation cost over that period. For equity settled awards, we will be required to estimate the grant-date fair value of employee share options and similar instruments expected to ultimately be issued to employees using option-pricing models adjusted for the unique characteristics of those instruments (unless observable market prices for the same or similar instruments are available). Based on the grant date fair value calculated, we will be required to amortize the cost of such award over the requisite service period.


	March 31,				Change
	2007		2006		$			%
Three months ended	$	3,373	$	7,496	$	(4,123	)		-55.0	%

Nine months ended	$	17,242	$	15,969	$	1,273			8.0	%

~~Excess~~Our ~~tax~~operating ~~benefits,~~margin asdecreased ~~defined~~from bymore ~~SFAS~~than ~~123~~25% ~~(R),~~for ~~will~~the bequarter ~~recognized~~ended asMarch 31, an2006 ~~addition~~ to ~~paid-in-capital.~~more ~~Cash~~than ~~retained~~13% asfor ~~a result of those excess tax benefits will be presented in~~ the ~~statement~~ ofquarter ~~cash~~ended ~~flows~~March 31, as2007, ~~financing~~and ~~cash~~remained ~~inflows.~~fairly ~~The~~consistent ~~write-off~~at ofabout ~~deferred tax assets relating to~~20% ~~unrealized~~for ~~tax~~the ~~benefits associated with recognized compensation cost will be recognized as income tax expense unless there are excess tax benefits from previous awards remaining in paid~~nine-inmonth ~~capital to~~periods ~~which~~ended itMarch 31, ~~can~~2007 beand ~~offset~~2006.

The ~~effective~~quarter-over-quarter ~~date~~decline ofwas ~~SFAS~~due ~~123~~primarily ~~(R)~~to isless asthan ofexpected ~~the~~high ~~beginning~~margin ~~of the first interim or annual~~license ~~reporting~~revenue ~~period that begins after June 15, 2005. We will adopt this Statement~~ in the ~~first~~ quarter of ~~our 2006 fiscal year (quarter~~ ended ~~September~~March 3031, ~~2005)~~2007. WeYear-over-year ~~are~~growth ~~still~~in ~~currently~~high ~~evaluating~~margin ~~the~~license sales ~~impact~~was ~~that~~somewhat ~~the~~offset ~~adoption~~by ofan ~~SFAS~~increase ~~123~~in ~~(R)~~sales ~~will~~and ~~have~~marketing onexpenses, ~~our~~resulting ~~financial~~in ~~statements~~consistent margin performance.

InCorporate ~~December 2004,~~Segment ~~the FASB issued FASB Statement No. 153, “Exchanges of Nonmonetary Assets”~~Information: (“SFAS 153”). This Statement addresses the measurement of exchanges of nonmonetary assets. The guidance in APB Opinion No. 29, “Accounting for Nonmonetary Transactions” (“APB 29”), is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. The guidance in APB 29, however, included certain exceptions to that principle. SFAS 153 amends APB 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. This Statement is effective for financial statements for fiscal years beginning after June 15, 2005. Earlier application is permitted for nonmonetary asset exchanges incurred during fiscal years beginning after the date of this Statement is issued. We do not believe that the adoption of this statement will have a significant impact on our financial statements.

~~FASB~~Corporate Statement No. 131, “Disclosures about Segments of an Enterprise and Related Information” (“SFAS 131”), requires that a public company separately report the financial and descriptive information about its reportable operating segments. Paragraph 17 of SFAS 131 sets forth the aggregation criteria used to determine whether an operating segment that does not otherwise meet the quantitative thresholds to be a reportable segment may be aggregated in accordance with paragraph 19 of SFAS 131. EITF Issue 04-10 “Determining Whether to Aggregate Operating ~~Segments~~Loss ~~That Do Not Meet the Quantitative Thresholds”~~ (~~“EITF 04-10”~~000’s)~~, addresses the criteria for aggregating~~ ~~operating segments.~~


	March 31,						Change
	2007			2006			$			%
Three months ended	$	(9,296	)	$	(10,291	)	$	995			-9.7	%

Nine months ended	$	(31,171	)	$	(29,795	)	$	(1,376	)		4.6	%

~~Table~~ Our ofCorporate ~~Contents~~segment represents costs for legal, human resources, finance, executive and various other unallocated overhead expenses. The 9.7% quarter-over-quarter decline in corporate costs is primarily due to a year-

~~We currently report our financial and operating results according to our four primary business~~31 segments (Electronic Commerce, Investment Services, Software, and Corporate). The financial and operating results for at least one of those primary business segments are comprised of one or more smaller business units that have been aggregated. Based upon our analysis of our current operations, we believe that such aggregations meet the criteria for aggregation under EITF 04-10 and paragraph 17 of SFAS 131. We will continue to monitor any changes in the nature and operations of each of our business segments and modify our method of aggregation as appropriate in order to remain in compliance with EITF 04-10 and SFAS 131.

~~Application~~to-date oftrue ~~Critical~~up ~~Accounting~~in ~~Policies~~accrued incentive compensation costs recorded in the quarter ended March 31, 2007. We continue to leverage our infrastructure costs in the face of increasing revenues and despite operations added through acquisition. Aside from the one-time incentive compensation accrual true-up in the quarter ended March 31, 2007, we expect our Corporate operating expenses to remain around 4.5% of our consolidated revenues.

~~The~~Impact ~~preparation~~ of ~~financial~~Warrants ~~statements~~Issued ~~in conformity with GAAP requires us~~ to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Critical accounting policies are those policies that are both important to the portrayal of our financial conditions and results of operations, and they require our most difficult, subjective or complex judgments, often as a ~~result of~~Customer ~~the need to make estimates about the effect of matters that are inherently uncertain. In our~~(000’s): Annual Report on Form 10-K for the fiscal year ended June 30, 2004, as filed with the Securities and Exchange Commission on September 3, 2004, we described the policies and estimates relating to intangible assets, equity instruments issued to customers and deferred income taxes as our critical accounting policies, and since then, we have made no changes to our reported critical accounting policies.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995


	March 31,					Change
	2007			2006		$			%
Three months ended	$	(10,950	)	$	—	$	(10,950	)		-100.0	%

Nine months ended	$	(10,950	)	$	—	$	(10,950	)		-100.0	%

~~Except~~In ~~for~~ the ~~historical information contained herein, the matters discussed in this Quarterly Report on Form 10~~three-Qmonth ~~include~~period ~~certain~~ended ~~forward-looking statements within the meaning of Section~~March ~~27A of the Securities Act of 1933~~31, ~~as amended~~2007, ~~and~~we ~~Section 21E~~incurred ofa ~~the~~non-cash ~~Securities~~charge ~~Exchange Act~~ of ~~1934, as amended, which are intended to be covered by the safe harbors created thereby~~$11.0 ~~Those~~million ~~statements~~against ~~include,~~revenue ~~but~~in ~~may not be limited to, all statements regarding~~ our ~~and~~Electronic ~~management’s intent,~~Commerce ~~belief and expectations~~segment, ~~such~~resulting asfrom ~~statements~~warrants ~~concerning~~we ~~our~~issued ~~future~~to ~~profitability and our~~a ~~operating and growth strategy~~customer. ~~Words~~The ~~such as “believe~~charge,” ~~“anticipate,”~~which ~~“expect,”~~has ~~“will,”~~no ~~“may,” “should,”~~associated ~~“intend~~costs,” ~~“plan,”~~directly ~~“estimate,”~~impacted ~~“predict,”~~operating ~~“potential,”~~income ~~“continue,”~~by ~~“likely” and similar~~$11.0 ~~expressions~~million. ~~are~~During ~~intended~~the toquarter, ~~identify~~one ~~forward~~million performance-~~looking~~based ~~statements.~~warrants ~~Investors~~vested ~~are~~as ~~cautioned~~the ~~that all~~customer ~~forward-looking~~achieved ~~statements~~an ~~contained~~active insubscriber ~~this~~base ~~Quarterly~~exceeding ~~Report~~5 million. onEITF ~~Form 10~~96-~~Q and in other statements we make involve risks and uncertainties including~~18, ~~without~~“Accounting ~~limitation,~~for ~~the factors set forth under~~Equity ~~the~~Instruments ~~caption~~That ~~“Business~~Are –Issued ~~Business~~to ~~Risks”~~Other ~~included~~Than inEmployees ~~our Annual Report on Form 10-K~~ for ~~the year ended June 30~~Acquiring, ~~2004,~~or ~~and other factors detailed from time to time~~ in ~~our~~Conjunction ~~other filings~~ with ~~the~~Selling, ~~Securities~~Goods ~~and Exchange Commission. One~~ or ~~more~~Services,” ofrequires ~~these~~us ~~factors~~to ~~have~~measure ~~affected, and in~~ the ~~future could~~fair ~~affect~~value ~~our~~of ~~businesses and financial results in~~ the ~~future~~warrants ~~and~~at ~~could cause actual results to differ materially from plans and projections. Although we believe that~~ the ~~assumptions~~earlier ~~underlying the forward-looking statements contained herein are reasonable, any~~ of the ~~assumptions could be~~ ~~inaccurate.~~date ~~Therefore,~~when ~~there~~a ~~can~~performance becommitment nois ~~assurance~~reached ~~that~~or the ~~forward-looking~~date ~~statements~~at ~~included~~which ~~in this~~performance ~~Quarterly~~is ~~Report on Form 10-Q will prove to be accurate~~complete. InThe fair ~~light~~value ofwas ~~the~~determined ~~significant uncertainties~~using ~~inherent~~a ~~in the forward~~Black-~~looking~~Scholes ~~statements~~valuation ~~included~~of ~~herein,~~ the ~~inclusion~~warrants ofand ~~such information~~was ~~should~~accounted ~~not~~for ~~be regarded~~ as a ~~representation~~charge byagainst usrevenue ~~or any other person that our objectives and plans will be achieved. All forward-looking statements made~~ in ~~this~~accordance ~~Quarterly Report~~with onEITF ~~Form 10~~01-Q09, ~~are~~“Accounting ~~based~~for onConsideration ~~information~~Given ~~presently~~by ~~available to our management. We assume no~~a ~~obligation~~Vendor to ~~update~~a ~~any forward-looking statements~~Customer.”

30Purchase Accounting Amortization (000’s):


	March 31,				Change
	2007		2006		$			%
Three months ended	$	10,133	$	11,254	$	(1,121	)		-10.0	%

Nine months ended	$	31,256	$	46,451	$	(15,195	)		-32.7	%

~~Item~~ Purchase 3accounting amortization represents amortization of intangible assets resulting from our various acquisitions and negatively impacts our operating income in our Electronic Commerce, Investment Services and Software segments. ~~Quantitative~~The quarter-over-quarter decrease of $1.1 million in purchase accounting amortization is due primarily to intangible assets that have fully amortized since March 31, 2006. The year-over-year decrease of $15.2 million in purchase accounting amortization is due primarily to the September 2005 expiration of the TransPoint strategic agreements intangible asset that reduced year-over-year amortization expense by $16.5 million, offset somewhat by incremental amortization resulting from our acquisitions of PhoneCharge in January 2006 and ~~Qualitative~~Aphelion ~~Disclosures~~in ~~About~~October 2005. ~~Market~~The ~~Risk~~following chart breaks out the charge, by segment, for each of the periods presented.

We now maintain multiple offices in the United Kingdom and Canada. As a result, we have assets and liabilities outside the United States that are subject to fluctuations in foreign currency exchange rates. We utilize pounds sterling as the functional currency for the United Kingdom, and the Canadian dollar as the functional currency for Canada. Due to the relatively immaterial nature of the amounts involved, our economic exposure from fluctuations in foreign exchange rates is not significant enough at this time to engage in forward foreign exchange contracts and other similar instruments.


	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2007		2006		2007		2006
Electronic Commerce	$	8,865	$	9,110	$	27,359	$	40,037
Investment Services		484		547		1,452		1,508
Software		784		1,597		2,445		4,906

Total	$	10,133	$	11,254	$	31,256	$	46,451

~~Our international sales contributed less than four percent of our revenue for the six months~~32 ended December 31, 2004. We market, sell and license our products throughout the world. As a result, our future revenue could be affected by weak economic conditions in foreign markets that could reduce demand for our products.

~~Our~~SFAS ~~exposure~~123(R) to— ~~interest~~Options ~~rate~~Issued ~~risk~~Before ~~includes the yield we earn on invested cash~~July 1, ~~cash equivalents~~2004 ~~and investments and interest-based revenue earned on products such as our ABT product.~~(000’s): ~~Our outstanding lease obligations carry fixed interest rates.~~

As part of processing certain types of transactions, we earn interest from the time money is collected from our customers until the time payment is made to merchants. These revenues, which are generated from trust account balances not included in our consolidated balance sheet, are included in processing and servicing revenue. We use derivative financial instruments to manage the variability of cash flows related to this interest rate-sensitive portion of processing and servicing revenue. Accordingly, we enter into interest rate swaps to effectively fix the interest rate on a portion of our interest rate-sensitive revenue. As of December 31, 2004, we have entered into interest rate swap transactions totaling $125 million.


	March 31,				Change
	2007		2006		$			%
Three months ended	$	319	$	777	$	(458	)		-58.9	%

Nine months ended	$	1,342	$	3,375	$	(2,033	)		-60.2	%

~~The~~Upon ~~swaps~~our ~~are~~adoption ~~designated~~of SFAS 123(R), we recorded compensation cost relating to the vesting of all stock options that remained unvested as ~~cash~~of ~~flow~~July 1, ~~hedges~~2005, ~~and~~as ~~they~~well ~~are~~as for all new stock option grants after our adoption date. The compensation cost to be recorded is based on ~~our~~the ~~balance~~fair ~~sheet~~value at ~~fair~~the ~~value~~grant dates. ~~Because~~The ofamount ~~the~~recorded ~~high~~during ~~degree~~the ofthree- ~~effectiveness~~and ~~between~~nine-month ~~the~~periods ~~interest~~ended ~~rate~~March 31, ~~swaps and~~2007 ~~underlying~~and ~~interest~~2006 ~~rate~~represent equity-~~sensitive~~based ~~revenue,~~compensation ~~fluctuations~~relating into the ~~fair~~vesting ~~value~~ of ~~the~~options ~~swaps~~that ~~are~~were still ~~generally~~unvested ~~offset~~as byof ~~the~~July 1, ~~changes~~2005 ~~resulting~~but ~~from~~were ~~the~~granted ~~variability~~before ofour ~~cash~~implementation ~~flows~~of ~~from~~our ~~the~~current ~~underlying~~incentive ~~interest~~compensation ~~rate~~philosophy ~~sensitive~~on ~~revenue.~~July 1, A2004, 1%which ~~increase~~significantly inreduced ~~interest~~overall ~~rates~~participation ~~would~~and focused ~~decrease~~on ~~the~~restricted ~~fair~~stock ~~value~~awards ~~of derivatives~~with bylimited ~~about~~stock $1options grants.~~9 million.~~ ~~Such~~The ~~decline~~charge inimpacted the operating ~~fair~~income ~~value~~ of ~~the~~our ~~swap~~Electronic ~~would~~Commerce, ~~decrease~~Investment Services and Software segments, and the ~~cash~~operating ~~flows~~expense of ~~the~~our ~~underlying~~Corporate ~~hedged~~segment. ~~interest~~The ~~rate~~following ~~sensitive~~chart ~~revenue~~breaks out the charge, by ~~100~~segment, for ~~basis~~each ~~points~~of the periods presented.

Our investment policy does not allow us to enter into derivative financial instruments for speculative or trading purposes. We maintain a system of internal controls that includes policies and procedures covering the authorization, reporting and monitoring of derivative activity. Further, the policy allows us to enter into derivative contracts only with counter-parties that meet certain credit rating and/or financial stability criteria. The counter-parties to these contracts are major financial institutions, and we believe the risk of loss is remote.


	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2007		2006		2007		2006
Electronic Commerce	$	232	$	563	$	976	$	2,449
Investment Services		33		80		138		347
Software		14		35		59		150
Corporate		40		99		169		429

Total	$	319	$	777	$	1,342	$	3,375

31Integration costs associated with acquisitions (000’s):


	March 31,				Change
	2007		2006		$		%
Three months ended	$	937	$	—	$	937		—

Nine months ended	$	937	$	—	$	937		—

~~Item~~ In 4December 2006, we entered into a merger agreement with Carreker Corporation and in February 2007, we entered into a merger agreement with Corillian Corporation. ~~Controls~~The $0.9 million of integration costs in the period ended March 31, 2007 represent incremental period costs associated with integration planning activities primarily for the Carreker acquisition within our Software segment and ~~Procedures~~includes third-party integration planning assistance and related travel costs, but a small portion related to Corillian, within our Electronic Commerce segment. The following chart breaks out the charge, by segment, for each of the periods presented.

~~Disclosure Controls and Procedures. Disclosure controls and procedures are controls and other~~33 procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information we are required to disclose in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management as appropriate to allow timely decisions regarding required disclosure.

As of end of the period covered by this report, our management, with the participation of our chief executive officer and chief financial officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 promulgated under the Exchange Act. Based upon this evaluation, our chief executive officer and our chief financial officer concluded that our disclosure controls and procedures were (1) designed to ensure that material information relating to our company is accumulated and made known to our management, including our chief executive officer and chief financial officer, in a timely manner, particularly during the period in which this report was being prepared and (2) effective, in that they provide reasonable assurance that information we are required to disclose in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.


	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2007		2006		2007		2006
Electronic Commerce	$	35	$	—	$	35	$	—
Software		902		—		902		—

Total	$	937	$	—	$	937	$	—

~~Management~~Cyclicality ~~believes, however, that a controls system, no matter how well designed~~ and ~~operated,~~ ~~cannot provide absolute assurance that the objectives of the controls system are met, and~~Seasonality ~~no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.~~

~~Internal~~During ~~Controls.~~the ~~There~~quarters ~~has~~ended ~~been~~June 30, no2006 ~~change~~and inSeptember 30, ~~our~~2006, ~~internal~~we ~~control~~experienced ~~over~~lower ~~financial~~than expected ~~reporting~~sequential quarterly transaction growth within our Electronic Commerce business. By ~~(as~~conducting ~~defined~~a inregression ~~Rules 13a-15(f)~~analysis ~~and~~of ~~15d-15(f)~~key ~~promulgated~~transaction ~~under~~volume ~~the~~drivers ~~Exchange~~on ~~Act)~~a ~~during~~large portion of our ~~fiscal~~CSP ~~quarter~~customers ~~ended~~for ~~December 31~~our last four fiscal years, ~~2004~~to date, we have learned that ~~has~~the ~~materially~~sequence ~~affected~~of long months and short months in a given quarter, the sequence of long or isshort ~~reasonably~~months ~~likely~~before toand after a ~~materially~~quarter ~~affect,~~end ~~our~~date ~~internal~~and ~~control~~the ~~over~~mix ~~financial~~of ~~reporting~~processing and non-processing days within the quarter effects sequential quarterly transaction growth.

32 While we see no overall annual impact on transaction growth, our analysis has revealed a previously undetected cyclical pattern within the four quarters of a given fiscal year. We now believe that barring unusual events, CSP based sequential quarterly transaction growth in the first and fourth quarters of our fiscal year has tended to be lower than CSP based sequential quarterly transaction growth in the second and third quarters of our fiscal year. We will continue to study consumer behavior patterns over the next several quarters to further refine our understanding of transaction growth.

~~Table~~ We typically experience a seasonal quarterly pattern to license sales within our Software Division. License sales are typically lowest in the first quarter of ~~Contents~~our fiscal year and typically highest in the fourth quarter of our fiscal year. However, the timing of the execution of our contracts in any given quarter may skew this seasonal pattern.

~~Part II. Other Information~~Inflation

~~Item~~ We 4.believe ~~Submission~~the effects of ~~Matters~~inflation tohave not had a ~~Vote~~significant ofimpact ~~Security~~on ~~Holders~~our results of operations.

~~The~~Liquidity ~~2004~~and ~~Annual~~Capital ~~Meeting of Stockholders of the Company was held on Wednesday, October 27,~~Resources ~~2004, for the following purpose:~~

~~(1)~~ The Tofollowing ~~elect~~chart ~~three~~summarizes ~~Class~~our ~~III~~consolidated ~~Directors~~statements ~~each~~of tocash ~~serve~~flows for athe three-~~year~~ ~~term~~and nine-month ~~expiring~~periods atended ~~the~~March 31, 2007 ~~Annual Meeting of Stockholders or until their respective successors have been elected or appointed.~~:

Proposal 1: The Board of Directors’ proposal to elect the following three nominees as Class III Directors of the Company, to serve until the 2007 Annual Meeting of Stockholders or until his successor is elected and qualified was approved, with the following vote:


	Three			Nine
	Months			Months
	Ended			Ended
	March 31, 2007
	(in thousands)
Net cash provided by operating activities	$	64,708		$	171,190
Net cash provided by (used in) investing activities		(3,461	)		12,104
Net cash provided by (used in) financing activities		11,481			(130,702	)
Effect of exchange rates		(165	)		596

Net increase in cash and cash equivalents	$	72,563		$	53,188

	Number of Shares Voted
Director Nominees	For		Withhold Authority		Total
Peter J. Kight		81,181,999		2,635,959		83,817,958
Lewis C. Levin		50,415,212		33,402,746		83,817,958
Jeffrey M. Wilkins		81,027,248		2,790,710		83,817,958

As of March 31, 2007, we had $337.5 million of cash, cash equivalents and short-term investments on hand, and an additional $59.3 million in long-term investments. Our balance sheet reflects a current ratio of 2.5 and working capital of $396.5 million. Due primarily to processing efficiency improvement, we experienced a significant increase in net cash provided by operating activities over the past several years. For the nine-month period ended March 31, 2007, we generated $171.2 million of net cash from operating activities. To the extent we require additional cash, we have access to an unused $300.0 million revolving credit facility as of March 31, 2007. Our

~~The following are our directors whose terms of office continued after the Annual Meeting: William~~34 ~~P. Boardman (term expires in 2005), James D. Dixon (term expires in 2005), Mark A. Johnson (term expires in 2006) and Eugene F. Quinn (term expires in 2006).~~

33 $206 million acquisition of Carreker closed on April 2, 2007, and we utilized approximately $70 million of our credit facility to finance a portion of the acquisition. Subsequent to the acquisition closing, we repaid the balance drawn on the credit facility in full. In February 2007, we also announced an agreement to acquire Corillian Corporation for $245 million in cash. We expect the Corillian acquisition to close in the quarter ended June 30, 2007, subject to the expiration or termination of the HSR Act waiting period and the satisfaction or waiver of other closing conditions. We expect to utilize our revolving credit facility to finance a portion of this acquisition.

~~Table~~ From an investing perspective, we generated net cash of ~~Contents~~$12.1 million in the nine-month period ended March 31, 2007. We generated $55.0 million from the net sales of investments. We used $40.9 million in capital expenditures, $1.5 million for the change in other assets, and $0.5 million in the capitalization of software development costs.

~~Item~~ From 6a financing perspective, we used net cash of $130.7 million ~~Exhibits~~in the nine-month period ended March 31, 2007. We received $11.3 million in reimbursements from our data center financing facility, $3.7 million from our Associate Stock Purchase Plan, $4.4 million from the exercise of stock options, and $0.9 million from the excess tax benefit related to our equity-based compensation. In addition, we used $150.0 million to purchase shares of our common stock and $1.0 million for payments on our capital leases and other long-term obligations.

Exhibit		Exhibit
Number		Description
10(a)*		CheckFree Services Corporation 401(k) Plan.
10(b)*		Prototype Defined Contribution Plan and Trust, sponsored by SunTrust Bank – Basic Plan Document #02, June 2002 (prototype plan for CheckFree Services Corporation 401(k) Plan).
10(c)*		First Amendment to Revolving Credit Agreement, made and entered into as of December 7, 2004, by and among CheckFree Corporation, CheckFree Services Corporation, and CheckFree Investment Corporation, the several banks and other financial institutions from time to time party thereto (the “Lenders”), and SunTrust Bank, in its capacity as administrative agent for the Lenders, as issuing bank, and as swingline lender.
10(d)*		Form of Restricted Stock Award Agreement for Non-Employee Directors.
10(e)*		Form of Performance Accelerated Restricted Stock Award Agreement.
10(f)*		Form of Restricted Stock Award Agreement.
10(g)*		Form of Nonstatutory Stock Option Agreement under the 2002 Stock Incentive Plan.
10(h)*		Form of Incentive Stock Option Agreement under the 2002 Stock Incentive Plan.
31(a)*		Certification pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a) of the Chief Executive Officer.
31(b)*		Certification pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a) of the Chief Financial Officer.
32(a)+		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Chief Executive Officer.
32(b)+		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Chief Financial Officer.

In July 2006, our board of directors approved up to $100.0 million for the purpose of repurchasing shares of our common stock through July 31, 2007, and in October 2007 authorized an additional $100.0 million for the same purpose through August 1, 2007. As of March 31, 2007, we have used $150.0 million to purchase 3,911,554 shares of our common stock under this program.

* While ~~Filed~~the ~~with~~timing ~~this~~of ~~report~~cash payments and collections will cause fluctuations from quarter to quarter and the level of expected capital expenditures could change, we expect to generate free cash flow in the range of about $185 million for the fiscal year ending June 30, 2007. +We ~~Furnished~~define free ~~with~~cash flow as net cash provided by operating activities, exclusive of the net change in settlement accounts, less capital expenditures, plus data center reimbursements. See “Use of Non-GAAP Financial Information” for a discussion of this ~~report~~measure.

34 Our agreement to use a bank routing number to process payments contains certain financial covenants related to tangible net worth, cash flow coverage, debt service coverage and maximum levels of debt to cash flow, as defined. We are in compliance with all covenants as of March 31, 2007, and do not anticipate any change in the foreseeable future.

~~Table~~Contractual ~~of Contents~~Obligations

~~Signatures~~ Pursuant to a series of leasing and financing arrangements with a consortium of banks for the purpose of funding the construction of up to two new data centers, we have incurred approximately $18.1 million of debt during the nine-month period ended March 31, 2007. The first data center facility will become operational late in calendar 2007, upon which time we will make minimum lease payments representing the interest charge on the outstanding balances. The lease agreements will expire on April 12, 2013, unless terminated earlier pursuant to the terms of the lease agreements. Upon expiration of the agreements, we must elect to (i) purchase the facility for a defined amount; (ii) request a five year renewal of the lease agreements; or (iii) sell the facility as an agent for the bank consortium. It is too early to determine which option we would choose and, therefore, the most conservative course would be to assume our purchase of the facility for the full outstanding balance under the agreements on April 12, 2013. For more information, see “Data Center Facility” under note 8 “Financing Agreements” to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2006.

~~Pursuant~~Use ~~to the requirements~~ of ~~the~~Non-GAAP ~~Securities~~Financial ~~Exchange Act of 1934, the registrant has duly~~Information ~~caused this report to be signed on its behalf by the undersigned thereunto duly authorized.~~

	CHECKFREE CORPORATION
Date: February 8, 2005	By:	/s/ David E. Mangum
		David E. Mangum, Executive Vice President and Chief Financial Officer* (Principal Financial Officer)
Date: February 8, 2005	By:	/s/ John J. Browne, Jr.
		John J. Browne, Jr., Vice President, Controller, and Chief Accounting Officer (Principal Accounting Officer)

We supplement our reporting of cash flow information determined in accordance with GAAP (Generally Accepted Accounting Principles in the United States of America) by using “free cash flow” in this Quarterly Report on Form 10-Q as a measure to evaluate our liquidity. We define free cash flow as GAAP net cash provided by operating activities, exclusive of the net change in settlement accounts, less capital expenditures, plus data center reimbursements. We believe free cash flow provides useful information to management and investors in understanding our financial results and assessing our prospects for future performance. We also use free cash flow as a factor in determining long-term incentive compensation for senior management.

* In his capacity as Executive Vice President and Chief Financial Officer, Mr. Mangum is duly authorized to sign this report on behalf of the Registrant.35

35 We exclude the net change in settlement accounts from free cash flow because we believe this facilitates management’s and investors’ ability to analyze operating cash flow trends. The settlement assets represent payment receipts in transit to us from agents, and the settlement obligations represent scheduled but unpaid payments due to billers. Balances in settlement accounts fluctuate daily based on deposit timing and payment transaction volume. These timing differences are not reflective of our liquidity, and thus, we exclude the net change in settlement accounts from free cash flow.

~~Table~~ As a technology company, we make significant capital expenditures in order to update our technology and to remain competitive. Our free cash flow reflects the amount of ~~Contents~~cash we generated that remains, after we have met those operational needs, for the evaluation and execution of strategic initiatives such as acquisitions, stock and/or debt repurchases and other investing and financing activities, including servicing additional debt obligations. During the fourth quarter of fiscal 2006, we entered into a credit facility to finance the construction of up to two data centers. Amounts we spend to construct these data centers are included in our capital expenditures, but will be fully reimbursed by the credit facility. The reimbursements from the credit facility are added to our free cash flow measure because these expenditures do not impact our overall liquidity. The data center reimbursements line represents a change to our definition of free cash flow as of the quarter ended June 30, 2006.

~~EXHIBIT~~ Free ~~INDEX~~cash flow does not solely represent residual cash flow available for discretionary expenditures, as certain of our non-discretionary obligations are also funded out of free cash flow. These consist primarily of payments on capital leases and other long-term commitments, if any, as reflected in the table entitled “Contractual Obligations” in the “Liquidity and Capital Resources” section of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2006, which we filed with the SEC on September 8, 2006.

Exhibit Number		Exhibit Description
10(a)*		CheckFree Services Corporation 401(k) Plan.
10(b)*		Prototype Defined Contribution Plan and Trust, sponsored by SunTrust Bank – Basic Plan Document #02, June 2002 (prototype plan for CheckFree Services Corporation 401(k) Plan).
10(c)*		First Amendment to Revolving Credit Agreement, made and entered into as of December 7, 2004, by and among CheckFree Corporation, CheckFree Services Corporation, and CheckFree Investment Corporation, the several banks and other financial institutions from time to time party thereto (the “Lenders”), and SunTrust Bank, in its capacity as administrative agent for the Lenders, as issuing bank, and as swingline lender.
10(d)*		Form of Restricted Stock Award Agreement for Non-Employee Directors.
10(e)*		Form of Performance Accelerated Restricted Stock Award Agreement.
10(f)*		Form of Restricted Stock Award Agreement.
10(g)*		Form of Nonstatutory Stock Option Agreement under the 2002 Stock Incentive Plan.
10(h)*		Form of Incentive Stock Option Agreement under the 2002 Stock Incentive Plan.
31(a)*		Certification pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a) of the Chief Executive Officer.
31(b)*		Certification pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a) of the Chief Financial Officer.
32(a)+		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Chief Executive Officer.
32(b)+		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Chief Financial Officer.

Our free cash flow for the three- and nine-month periods ended March 31, 2007, and 2006, is calculated as follows:

* Filed with this report. + Furnished with this report.


	Three Months Ended						Nine Months Ended
	March 31,						March 31,
	2007			2006			2007			2006
	(in thousands)						(in thousands)
Net cash provided by operating activities	$	64,708		$	72,539		$	171,190		$	172,801
Excluding : Net change in settlement accounts		1,057			(68	)		965			2,194
Less: Capital expenditures		(15,348	)		(10,175	)		(40,883	)		(33,817	)
Plus: Data Center Reimbursements		7,105			—			11,295			—

Free cash flow	$	57,522		$	62,296		$	142,567		$	141,178

36 Net cash provided by (used in) investing activities for the quarters ended March 31, 2007 and 2006, was $(3.5) million and $(79.4) million, respectively, and for the nine-month periods ended March 31, 2007 and 2006, was $12.1 million and $(87.5) million, respectively. Net cash provided by (used in) financing activities for the quarters ended March 31, 2007 and 2006, was $11.5 million and $4.3 million, respectively, and for the nine-month period ended March 31, 2007 and 2006, was $(130.7) million and $17.6 million, respectively.

Our free cash flow should be considered in addition to, and not as a substitute for, net cash provided by operating activities or any other amount determined in accordance with GAAP. Further, our measure of free cash flow may not be comparable to similarly titled measures reported by other companies.

Recent Accounting Pronouncements

In February 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS 159, “The Fair Value Option for Financial Assets and Liabilities – Including an Amendment of FASB Statement No. 115” (“SFAS 159”), which permits an entity to choose to measure many financial instruments and certain other items at fair value. Most of the provisions of SFAS 159 are elective; however the amendment to SFAS 115 applies to all entities with available-for-sale and trading securities. The FASB’s stated objective in issuing the standard is to improve financial reporting by entities by providing them with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedging accounting provisions.

The provisions of SFAS 159 are effective as of the beginning of our fiscal year 2009, and we are currently evaluating the impact of the adoption of SFAS 159 on our consolidated financial statements.

In September 2006, the FASB issued SFAS 157, “Fair Value Measurements” (“SFAS 157”), which is intended to provide guidance for using fair value to measure assets and liabilities. In general, this pronouncement is intended to establish a framework for determining fair value and to expand the disclosures regarding the determination of fair value. With certain financial instruments, a cumulative effect of a change in accounting principle may be required with the impact of the change recorded as an adjustment to opening retained earnings. The provisions of SFAS 157 are effective as of the beginning of our fiscal year 2008, and we are currently evaluating the impact of the adoption of SFAS 157 on our consolidated financial statements.

In July 2006, the FASB issued FASB Interpretation (“FIN”) No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”), an interpretation of SFAS 109, which is intended to increase comparability in the financial reporting of income taxes. FIN 48 provides additional guidance regarding the recognition and measurement of uncertain tax positions in a company’s consolidated financial statements by establishing a “more-likely-than-not” recognition threshold before a tax benefit can be recognized. Once the threshold has been met, companies are required to recognize the largest amount of the benefit that is greater than 50 percent likely (on an accumulated basis) of being realized upon ultimate settlement with the taxing authority. The provisions of FIN 48 are effective as of the beginning of our fiscal year 2008, and we are currently evaluating the impact of the adoption of FIN 48 on our consolidated financial statements.

In September 2006, the Securities and Exchange Commission (“SEC”) released Staff Accounting Bulletin (“SAB”) No. 108, codified as SAB Topic 1.N, “Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”). SAB 108 states that registrants should use both a balance sheet approach and an income statement approach when quantifying and evaluating the materiality of a misstatement. SAB 108 also contains guidance on correcting misstatements under the dual approach and provides transition guidance for correcting misstatements in prior years. Adjustments required upon adoption of SAB 108 must be disclosed in the notes to the financial statements. SAB 108 is effective for our fiscal year 2007 annual financial statements and we are currently evaluating the impact of the adoption of SAB 108 on our consolidated financial statements.

Recent and Pending Acquisitions

In January 2007, we announced an agreement to acquire Carreker Corporation for approximately $206 million in cash. We closed on this acquisition on this acquisition on April 2, 2007. We funded approximately $136 million of the total purchase price from available cash on hand and borrowed the remaining purchase price of approximately $70 million under our revolving credit facility. Subsequent to the acquisition closing, we repaid the balance drawn on the credit facility in full.

On February 13, 2007, we entered into a definitive agreement to acquire Corillian. Pursuant to the terms of the merger agreement, a wholly owned subsidiary of ours will be merged with and into Corillian, with Corillian continuing after the merger as the surviving corporation and our subsidiary. At the effective time of the merger, each issued and outstanding share of Corillian’s common stock will be converted into the right to receive $5.15 in cash (the “Merger Consideration”), and each holder of an option to purchase shares of Corillian common stock will be entitled to receive a per share cash payment equal to the amount by which the Merger Consideration exceeds the exercise price of such option (if any), less any applicable withholding taxes. The total purchase price will be approximately $245 million on a fully diluted basis. We expect to fund this acquisition through a combination of cash on hand and draws under our current revolving credit facility.

On April 30, 2007, Corillian’s shareholders approved the merger agreement at a special meeting of shareholders. We anticipate that our proposed acquisition of Corillian will close during the quarter ended June 30, 2007, shortly following the expiration or termination of the antitrust waiting period under the HSR Act and the satisfaction or waiver of all other closing conditions. However, the timing of closing could be affected by an early termination of the antitrust waiting period or the issuance of any additional requests for information from the Department of Justice Antitrust Division.

Subsequent Events

On or about April 10, 2007, the first of two related shareholder securities putative class actions were filed against CheckFree and Messrs. Kight and Mangum in federal court in Atlanta styled as follows: Skubella v. CheckFree Corporation, et al., Civil Action No. 1:07-CV-0796-TWT, United States District Court for the Northern District of Georgia, Atlanta Division; Gattelaro v. CheckFree Corporation, et al., Civil Action No. 1:07-CV-0945-TWT, United States District Court for the Northern District of Georgia, Atlanta Division. The actions were filed on behalf of a putative class of all purchasers of CheckFree common stock between April 4, 2006 and August 1, 2006 and allege violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder against CheckFree and the individual defendants, as well as of Section 20(a) against the individual defendants, related to CheckFree’s disclosures concerning its Electronic Commerce and Payment Services business. Plaintiffs seek undisclosed damages. We believe the actions are without merit and intend to defend vigorously. We intend to move to dismiss these lawsuits. At this time, it is not possible to predict the outcome of these matters.

Application of Critical Accounting Policies

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Critical accounting policies are those policies that are both important to the portrayal of our financial conditions and results of operations, and they require our most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. In our Annual Report on Form 10-K for the fiscal year ended June 30, 2006, as filed with the Securities and Exchange Commission on September 8, 2006, we described the policies and estimates relating to intangible assets, equity instruments issued to customers and deferred income taxes as our critical accounting policies, and since then, we have made no changes to our reported critical accounting policies.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

Except for the historical information contained herein, the matters discussed in this Quarterly Report on Form 10-Q include certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. Those statements include, but may not be limited to, all statements regarding our and management’s intent, belief and expectations, such as statements concerning our future profitability and our operating and growth strategy. Words such as “believe,” “anticipate,” “expect,” “will,” “may,” “should,” “intend,” “plan,” “estimate,” “predict,” “potential,” “continue,” “likely” and similar expressions are intended to identify forward-looking statements. Investors are cautioned that all forward-looking statements contained in this Quarterly Report on Form 10-Q and in other statements we make involve risks and uncertainties including, without limitation, the factors set forth under the caption “Risk Factors” included in our Annual Report on Form 10-K for the year ended June 30, 2006, and other factors detailed from time to time in our filings with the Securities and Exchange Commission. One or more of these factors have affected, and in the future could affect our businesses and financial results in the future and could cause actual results to differ materially from plans and projections. Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate. Therefore, there can be no assurance that the forward-looking statements included in this Quarterly Report on Form 10-Q will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. All forward-looking statements made in this Quarterly Report on Form 10-Q are based on information presently available to our management. We assume no obligation to update any forward-looking statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We maintain offices in the United Kingdom, Australia, and Luxembourg. As a result, we have assets and liabilities outside the United States that are subject to fluctuations in foreign currency exchange rates. We utilize pounds sterling as the functional currency for the United Kingdom, the Australian dollar for our Australian subsidiary, and the euro as the functional currency for our Luxembourg operations. Due to the relatively immaterial nature of the amounts involved, our economic exposure from fluctuations in foreign exchange rates is not significant enough at this time to engage in a formal hedging program that would require use of various types of financial instruments to mitigate this risk.

While our international sales represented less than five percent of our consolidated revenues for the three and nine months ended March 31, 2007, we market, sell and license our products throughout the world. As a result, our future revenue could be somewhat affected by weak economic conditions in foreign markets that could reduce demand for our products.

Our exposure to interest rate risk includes the yield we earn on invested cash, cash equivalents and investments and interest-based revenue earned on products such as our ABT product. Our outstanding lease obligations carry fixed interest rates.

balances not included in our consolidated balance sheet, are included in processing and servicing revenues. We use derivative financial instruments to manage the variability of cash flows related to this interest rate-sensitive portion of processing and servicing revenue. Accordingly, from time to time we enter into interest rate swaps to effectively fix the interest rate on a portion of our interest rate-sensitive revenue. As of March 31, 2007, we did not have any outstanding interest rate swap arrangements.

Item 4. Controls and Procedures

Disclosure Controls and Procedures. Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information we are required to disclose in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management as appropriate to allow timely decisions regarding required disclosure.

As of the end of the period covered by this report, our management, with the participation of our chief executive officer and chief financial officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 promulgated under the Exchange Act. Based upon this evaluation, our chief executive officer and our chief financial officer concluded that, as of March 31, 2007, our disclosure controls and procedures were (1) designed to ensure that material information relating to our company is accumulated and made known to our management, including our chief executive officer and chief financial officer, in a timely manner and (2) effective, in that they provide reasonable assurance that information we are required to disclose in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Management believes, however, that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

Internal Controls. There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act) during our fiscal quarter ended March 31, 2007, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II. Other Information

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On November 6, 2006, we announced that our board of directors had approved a stock repurchase program under which we could repurchase up to $100.0 million of our common stock through August 1, 2007. During the quarter ended March 31, 2007, we did not repurchase any shares of our common stock.

(d)

(c)

Approximate Dollar

Total Number of

Value of Share that

(a)

(b)

Shares Purchased

May Yet Be

Total Number

Average

as Part of Publicly

Purchased Under

of Shares

Price Paid

Announced Plans or

the Plans or

Period

Purchased

per Share

Programs

January 1, 2007 to January 31, 2007

—

N/A

—

50,000,000

February 1, 2007 to February 28, 2007

—

N/A

—

50,000,000

March 1, 2007 to March 31, 2007

—

N/A

—

50,000,000

Total

—

50,000,000

Item 6. Exhibits


*Exhibit*		*Exhibit*
*Number*		*Description*

2		Agreement and Plan of Merger, dated February 13, 2007, between CheckFree Corporation, CF Oregon, Inc. and Corillian Corporation (Reference is made to Exhibit 2 to the Company’s Current Report on Form 8-K dated February 13, 2007, filed with the Securities and Exchange Commission on February 14, 2007, and incorporated herein by reference).

3		Amended and Restated By-Laws of CheckFree Corporation, as of February 8, 2007 (Reference is made to Exhibit 3 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2006, filed with the Securities and Exchange Commission on February 8, 2007, and incorporated herein by reference).

10(a)*		CheckFree Services Corporation 401(K) Plan Adoption Agreement.

10(b)		Letter Agreement, dated February 16, 2007, between Matthew S. Lewis and CheckFree Services Corporation (Reference is made to Exhibit 10(a) to the Company’s Current Report on Form 8-K dated February 15, 2007, filed with the Securities and Exchange Commission on February 22, 2007, and incorporated herein by reference).

31(a)*		Certification pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a) of the Chief Executive Officer.

31(b)*		Certification pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a) of the Chief Financial Officer.

32(a)+		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Chief Executive Officer.

32(b)+		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Chief Financial Officer.

* Filed with this report.

+ Furnished with this report.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	CHECKFREE CORPORATION

Date: May 10, 2007	By:	/s/ David E. Mangum David E. Mangum, Executive Vice President and
		Chief Financial Officer* (Principal Financial Officer)

Date: May 10, 2007	By:	/s/ Samuel R. Schwartz Samuel R. Schwartz, Senior Vice President,
		Controller, and Chief Accounting Officer*
		(Principal Accounting Officer)

In their capacities as Executive Vice President and Chief Financial Officer, and as Senior Vice President, Controller, and Chief Accounting Officer, Mr. Mangum and Mr. Schwartz are each duly authorized to sign this report on behalf of the Registrant.

EXHIBIT INDEX


*Exhibit*		*Exhibit*
*Number*		*Description*

2		Agreement and Plan of Merger, dated February 13, 2007, between CheckFree Corporation, CF Oregon, Inc. and Corillian Corporation (Reference is made to Exhibit 2 to the Company’s Current Report on Form 8-K dated February 13, 2007, filed with the Securities and Exchange Commission on February 14, 2007, and incorporated herein by reference).

3		Amended and Restated By-Laws of CheckFree Corporation, as of February 8, 2007 (Reference is made to Exhibit 3 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2006, filed with the Securities and Exchange Commission on February 8, 2007, and incorporated herein by reference).

10(a)*		CheckFree Services Corporation 401(K) Plan Adoption Agreement.

10(b)		Letter Agreement, dated February 16, 2007, between Matthew S. Lewis and CheckFree Services Corporation (Reference is made to Exhibit 10(a) to the Company’s Current Report on Form 8-K dated February 15, 2007, filed with the Securities and Exchange Commission on February 22, 2007, and incorporated herein by reference).

31(a)*		Certification pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a) of the Chief Executive Officer.

31(b)*		Certification pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a) of the Chief Financial Officer.

32(a)+		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Chief Executive Officer.

32(b)+		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Chief Financial Officer.


*		Filed with this report.

+		Furnished with this report.

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