<PAGE>

                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2003

                                       OR

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________


                         Commission file number: 0-26802


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


            DELAWARE                                           58-2360335
(State or other jurisdiction of                             (I.R.S. Employer
 incorporation or organization)                            Identification No.)


                 4411 EAST JONES BRIDGE ROAD, NORCROSS, GEORGIA
                 30092 (Address of principal executive offices,
                               including zip code)


                                 (678) 375-3000
              (Registrant's telephone number, including area code)


                                 NOT APPLICABLE
              (Former name, former address and former fiscal year,
                          if changed since last report)


     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (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  X   NO
                                                      -----    -----
     Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). YES  X   NO
                                               -----    -----

     Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date: 89,232,197 shares of
Common Stock, $.01 par value, were outstanding at May 12, 2003.
<PAGE>


                                    FORM 10-Q

                              CHECKFREE CORPORATION

                                TABLE OF CONTENTS
                                -----------------
<TABLE>
<CAPTION>

                                                                                                Page No.
                                                                                                --------
<S>           <C>                                                                            <C>
PART I.  FINANCIAL INFORMATION

         Item 1.  Financial Statements.

                      Unaudited Condensed Consolidated Balance Sheets                                3
                           June 30, 2002 and March 31, 2003

                      Unaudited Condensed Consolidated Statements of Operations                      4
                           For the Three and Nine Months Ended
                           March 31, 2002 and 2003

                      Unaudited Condensed Consolidated Statements of Cash Flows                      5
                           For the Nine Months Ended
                           March 31, 2002 and 2003

                      Notes to Unaudited Condensed Consolidated                                      6
                           Financial Statements For the Three and Nine Months Ended
                           March 31, 2002 and 2003

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

         Item 3.  Quantitative and Qualitative Disclosures About Market Risk.                       31

         Item 4.  Controls and Procedures.                                                          32

PART II. OTHER INFORMATION

         Item 1.  Legal Proceedings.                                                                N/A

         Item 2.  Changes in Securities and Use of Proceeds.                                        N/A

         Item 3.  Defaults Upon Senior Securities.                                                  N/A

         Item 4.  Submission of Matters to a Vote of Security Holders.                              N/A

         Item 5.  Other Information.                                                                N/A

         Item 6.  Exhibits and Reports on Form 8-K.                                                 33

         Signatures.                                                                                34

         Certifications of CEO and CFO under Section 302 of the Sarbanes-Oxley Act of 2002.         35

</TABLE>


                                       2
<PAGE>

                          PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                     CHECKFREE CORPORATION AND SUBSIDIARIES
                 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                          JUNE 30,            MARCH 31,
                                                                                            2002                 2003
                                                                                      -----------------    -----------------
                                                                                        (IN THOUSANDS, EXCEPT SHARE DATA)
<S>                                                                                   <C>                  <C>
                                       ASSETS

Current assets:
     Cash and cash equivalents................................................             $   115,009         $    177,949
     Investments..............................................................                  90,958               50,399
     Restricted investments...................................................                      --                3,000
     Accounts receivable, net.................................................                  88,030               81,506
     Prepaid expenses and other assets........................................                   8,355               12,378
     Deferred income taxes....................................................                  11,816                8,640
                                                                                      -----------------    -----------------
         Total current assets.................................................                 314,168              333,872
Property and equipment, net...................................................                  95,625              100,570
Other assets:
     Capitalized software, net................................................                  71,845               35,261
     Goodwill, net............................................................                 530,758              529,214
     Strategic agreements, net................................................                 519,275              426,318
     Other intangible assets, net.............................................                  24,609               11,854
     Investments..............................................................                  69,788              135,690
     Restricted investments...................................................                   3,000                   --
     Other noncurrent assets..................................................                   8,409                7,536
                                                                                      -----------------    -----------------
         Total other assets...................................................               1,227,684            1,145,873
                                                                                      -----------------    -----------------
              Total...........................................................             $ 1,637,477         $  1,580,315
                                                                                      =================    =================

                        LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Accounts payable.........................................................             $    10,049         $      9,679
     Accrued liabilities......................................................                  54,914               54,500
     Current portion of long-term obligations.................................                   5,054                5,291
     Deferred revenue.........................................................                  42,410               39,439
                                                                                      -----------------    -----------------
         Total current liabilities............................................                 112,427              108,909
Accrued rent and other........................................................                   3,019                3,486
Deferred income taxes.........................................................                  39,993                6,216
Long-term obligations - less current portion..................................                   3,877                7,199
Convertible subordinated notes................................................                 172,500              172,500
Stockholders' equity:
     Preferred stock- 50,000,000 authorized shares, $.01 par value;
         no amounts issued or outstanding.....................................                      --                   --
     Common stock- 500,000,000 authorized shares, $.01 par value;
         issued 93,629,718 and 94,654,360 shares, respectively;
         outstanding 88,085,894 and 89,098,536 shares, respectively...........                     881                  891
     Additional paid-in capital...............................................               2,435,310            2,446,426
     Accumulated deficit......................................................              (1,130,405)         (1,165,618)
     Unearned compensation....................................................                    (125)                  --
     Accumulated other comprehensive income...................................                       --                 306
                                                                                      -----------------    -----------------
         Total stockholders' equity...........................................               1,305,661            1,282,005
                                                                                      -----------------    -----------------
              Total...........................................................             $ 1,637,477         $  1,580,315
                                                                                      =================    =================
</TABLE>

       See Notes to Unaudited Condensed Consolidated Financial Statements.


                                       3
<PAGE>


                     CHECKFREE CORPORATION AND SUBSIDIARIES
            UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                             THREE MONTHS ENDED                   NINE MONTHS ENDED
                                                                  MARCH 31,                           MARCH 31,
                                                       --------------------------------     -------------------------------
                                                           2002              2003               2002              2003
                                                       --------------    --------------     --------------    -------------
                                                                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                       <C>              <C>                 <C>             <C>
Revenues:
     Processing and servicing.......................       $ 108,603        $  121,899         $  313,056       $  352,398
     License fees...................................           7,085             5,703             18,890           16,647
     Maintenance fees...............................           5,595             6,563             17,804           19,066
     Other..........................................           3,303             7,136             12,849           18,930
                                                       --------------    --------------     --------------    -------------
         Total revenues.............................         124,586           141,301            362,599          407,041
                                                       --------------    --------------     --------------    -------------

Expenses:
     Cost of processing, servicing and support......          66,961            59,103            202,816          177,994
     Research and development.......................          13,464            13,595             43,554           39,104
     Sales and marketing............................          13,142            13,631             43,418           40,582
     General and administrative.....................           9,654             9,656             32,638           28,657
     Depreciation and amortization..................         100,831            57,011            334,863          170,987
     Impairment of intangible assets................              --                --            155,072               --
     Reorganization charge..........................          15,871                --             15,871               --
                                                       --------------    --------------     --------------    -------------
         Total expenses.............................         219,923           152,996            828,232          457,324
                                                       --------------    --------------     --------------    -------------
Loss from operations................................         (95,337)          (11,695)          (465,633)         (50,283)
Interest, net.......................................          (1,272)           (1,589)            (2,987)          (4,055)
Loss on investments.................................              --            (1,297)                --           (3,228)
                                                       --------------    --------------     --------------    -------------
Loss before income taxes and cumulative effect of
     accounting change..............................         (96,609)          (14,581)          (468,620)         (57,566)
Income tax benefit..................................         (19,150)           (6,751)           (87,081)         (25,247)
                                                       --------------    --------------     --------------    -------------
Loss before cumulative effect of accounting
     change.........................................         (77,459)           (7,830)          (381,539)         (32,319)
Cumulative effect of accounting change..............              --                --                 --           (2,894)
                                                       --------------    --------------     --------------    -------------
Net loss............................................       $ (77,459)       $   (7,830)        $ (381,539)      $  (35,213)
                                                       ==============    ==============     ==============    =============

Basic and diluted loss per share:
     Basic and diluted net loss per common share
        before cumulative effect of accounting
        change......................................       $   (0.89)       $    (0.09)        $    (4.37)      $    (0.36)
     Cumulative effect of accounting change.........              --                --                 --            (0.03)
                                                       --------------    --------------     --------------    -------------
     Net loss per common share......................       $   (0.89)       $    (0.09)        $    (4.37)      $    (0.40)
                                                       ==============    ==============     ==============    =============
     Equivalent number of shares....................          87,446            88,949             87,250           88,672
                                                       ==============    ==============     ==============    =============
</TABLE>

       See Notes to Unaudited Condensed Consolidated Financial Statements.


                                       4
<PAGE>


                     CHECKFREE CORPORATION AND SUBSIDIARIES
            UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                                  NINE MONTHS ENDED
                                                                                      MARCH 31,
                                                                           ---------------------------------
                                                                                2002              2003
                                                                           ---------------    --------------
                                                                                    (IN THOUSANDS)

<S>                                                                          <C>               <C>
Operating activities:
     Net loss........................................................          $ (381,539)       $ (35,213)
     Adjustments to reconcile net loss to net cash provided by
       operating activities:
     Depreciation and amortization...................................             334,863          170,987
     Deferred income tax provision...................................             (87,081)         (24,274)
     Impairment of intangible assets.................................             155,072               --
     Non-cash portion of reorganization charge.......................               1,640               --
     Cumulative effect of accounting change..........................                  --            2,894
     Impact of warrants issued to customer...........................                  --             (644)
     Loss on investments.............................................                  --            3,228
     Net loss on disposition of property and equipment...............                  --              426

     Change in certain assets and liabilities:
         Accounts receivable.........................................              14,713            6,524
         Prepaid expenses and other..................................               1,755           (3,301)
         Accounts payable............................................              (2,542)            (370)
         Accrued liabilities and other ..............................               7,968           (1,370)
         Deferred revenue............................................              (4,802)          (2,971)
                                                                           ---------------    --------------
              Net cash provided by operating activities..............              40,047          115,916

Investing activities:
     Purchase of property and software...............................             (17,307)         (20,800)
     Proceeds from sale of property and software.....................                  --              580
     Capitalization of software development costs....................              (3,632)          (3,133)
     Purchase of investments - held to maturity......................             (77,615)         (38,031)
     Proceeds from maturities of investments - held to maturity......              59,169          102,047
     Increase in restricted investments..............................              (3,000)               --
     Purchase of other investments...................................                  --              (85)
     Purchase of investments - available for sale....................                  --         (102,990)
     Proceeds from maturities of investments - available for sale....                  --           10,966
                                                                           ---------------    --------------
              Net cash used in investing activities..................             (42,385)         (51,446)

Financing activities:
     Principal payments under capital lease and other long-term
      obligations....................................................              (3,268)          (9,208)
     Proceeds from sale of stock and exercise of warrants............                 688               --
     Proceeds from stock options exercised...........................               1,576            5,407
     Proceeds from employee stock purchase plan......................               3,146            2,271
                                                                           ---------------    --------------
              Net cash provided by (used in) financing activities....               2,142           (1,530)
                                                                           ---------------    --------------
Net increase (decrease) in cash and cash equivalents.................                (196)          62,940
Cash and cash equivalents:
     Beginning of period.............................................             124,122          115,009
                                                                           ---------------    --------------
     End of period...................................................          $  123,926        $ 177,949
                                                                           ===============    ==============
</TABLE>


       See Notes to Unaudited Condensed Consolidated Financial Statements.


                                       5
<PAGE>


                     CHECKFREE CORPORATION AND SUBSIDIARIES
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
           FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2002 AND 2003

         1.       BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
                  POLICIES

                  UNAUDITED INTERIM FINANCIAL INFORMATION

                  The accompanying unaudited condensed consolidated financial
statements and notes thereto have been prepared in accordance with the rules and
regulations of the Securities and Exchange Commission for Form 10-Q and include
all of the information and disclosures required by generally accepted accounting
principles for interim financial reporting. The results of operations for the
nine months ended March 31, 2002 and 2003 are not necessarily indicative of the
results for the full year.

                  These financial statements should be read in conjunction with
the financial statements, accounting policies and notes to financial statements
thereto included in the Company's Annual Report filed with the Securities and
Exchange Commission on Form 10-K. In the opinion of management, the accompanying
unaudited condensed consolidated financial statements reflect all adjustments
(consisting only of normal recurring adjustments) which are necessary for a fair
representation of financial results for the interim periods presented.

                  RECLASSIFICATIONS

                  Certain reclassifications have been made to the prior year's
financial information to conform to the March 31, 2003 presentation.

                  INVESTMENTS

                  During the quarter ended September 30, 2002, the Company began
classifying new purchases of investment securities as available-for-sale to
allow for more flexibility in cash management. Available-for-sale securities are
carried at fair value and changes in fair value are recorded as unrealized gains
or losses in accumulated other comprehensive income, a component of
stockholders' equity. As of March 31, 2003, investments available-for-sale were
$92,024,000 and $92,502,000 at amortized cost and fair value, respectively.
Investments available-for-sale represent approximately 49% of the Company's
total investment portfolio.

                  RECENT ACCOUNTING PRONOUNCEMENTS

                  In August 2001, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards ("SFAS") 143,
"Accounting for Asset Retirement Obligations." SFAS 143 addresses financial
accounting and reporting for obligations associated with the retirement of
tangible long-lived assets and the associated retirement costs. The Company
adopted SFAS 143 as of July 1, 2002. The adoption of this statement had no
impact on the Company's results of operations or financial position for the nine
months ended March 31, 2003.

                  On July 1, 2002, the Company adopted SFAS 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets." SFAS 144 superseded SFAS 121,
"Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of" and the accounting and reporting provisions of Accounting
Principles Board ("APB") Opinion 30, "Reporting Results of Operations -
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions" for the disposal of
a segment of a business. SFAS 144 addresses financial accounting and reporting
for the impairment or disposal of long-lived assets. The adoption of this
statement had no impact on the Company's results of operations or financial
position for the nine months ended March 31, 2003.

                  In April 2002, the FASB issued SFAS 145, "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." This statement eliminates the current requirement that gains and
losses on extinguishment of debt must be classified as extraordinary items in
the income statement. Instead, the statement requires that gains and losses on
extinguishment of debt be evaluated against the


                                       6
<PAGE>

criteria in APB Opinion 30, "Reporting the Results of Operations-- Reporting the
Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions" to determine whether or not it
should be classified as an extraordinary item. In addition, the statement
contains other corrections to authoritative accounting literature in SFAS 4, 44
and 64. The changes in SFAS 145 related to debt extinguishment are effective for
the Company's 2003 fiscal year and the other changes were effective beginning
with transactions after May 15, 2002. In August 2002, the Company announced that
its board of directors had authorized a repurchase program under which the
Company may purchase up to $40 million of shares of its common stock and
convertible notes. Should the Company purchase any of its convertible notes and
realize a gain or loss on the transaction, SFAS 145 will require the Company to
evaluate the transaction against the criteria in APB Opinion 30 to determine if
the gain or loss should be classified as an extraordinary item. If
classification as an extraordinary item is not appropriate, the gain or loss
would be included as part of income before income taxes.

                  In June 2002, the FASB issued SFAS 146, "Accounting for Costs
Associated with Exit or Disposal Activities," which addresses accounting for
reorganization and similar costs. SFAS 146 supersedes previous accounting
guidance, principally Emerging Issues Task Force ("EITF") 94-03, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (Including Certain Costs Incurred in a Restructuring)." SFAS 146
requires that the liability for costs associated with an exit or disposal
activity be recognized when the liability is incurred. Under EITF 94-03, a
liability for an exit cost was recognized at the date of a company's commitment
to an exit plan. SFAS 146 also establishes that the liability should initially
be measured and recorded at fair value. Accordingly, SFAS 146 may affect the
timing of recognizing any future reorganization costs as well as the amount
recognized. The provisions of SFAS 146 are effective for reorganization
activities initiated after December 31, 2002.

                  In November 2002, the EITF reached a consensus on Issue 00-21,
"Multiple Deliverable Revenue Arrangements." EITF 00-21 addresses certain
aspects of the accounting by a vendor for arrangements under which it will
perform multiple revenue-generating activities. It also addresses when and how
an arrangement involving multiple deliverables should be divided into separate
units of accounting. The guidance in EITF 00-21 is effective for revenue
arrangements entered into in fiscal periods beginning after June 15, 2003, with
early application permitted. Companies may elect to report the change in
accounting as a cumulative effect of a change in accounting principle in
accordance with APB Opinion 20, "Accounting Changes" and SFAS 3, "Reporting
Accounting Changes in Interim Financial Statements (an amendment of APB Opinion
No. 28)." The Company is in the process of evaluating the effects of EITF 00-21.

                  In November 2002, FASB Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others," ("FIN 45") was issued. This
interpretation elaborates on the disclosures to be made by a guarantor in its
interim and annual financial statements about its obligations under certain
guarantees that it has issued. It also clarifies that a guarantor is required to
recognize, at the inception of a guarantee, a liability for the fair value of
the obligation undertaken in issuing the guarantee. The disclosure requirements
of FIN 45 were effective for financial statements of interim or annual periods
ending after December 15, 2002. The Company had no significant guarantees it was
required to disclose under FIN 45. The initial recognition and initial
measurement provisions of FIN 45 are applicable on a prospective basis to
guarantees issued or modified after December 31, 2002.

                  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 value based method of accounting for
stock-based employee compensation. SFAS 148 requires prominent disclosure about
the effects on reported net income of an entity's accounting policy decisions
with respect to stock-based employee compensation and amends APB Opinion 28,
"Interim Financial Reporting," to require disclosure about those effects in
interim financial information. The Company has provided the interim disclosure
provisions for this Form 10-Q below. The Company has continued to account for
stock-based compensation under the provisions of APB Opinion 25, "Accounting for
Stock Issued to Employees," using the intrinsic value method. Accordingly, the
adoption of SFAS 148 had no impact on the Company's results of operations or
financial position for the nine months ended March 31, 2003.


                                       7
<PAGE>


                  The Company applies APB Opinion 25, "Accounting for Stock
Issued to Employees" and related Interpretations in accounting for its stock
option plans and employee stock purchase plan. Had compensation cost for the
Company's stock-based compensation plans been determined based on the fair value
at the grant dates for awards under those plans in accordance with the
provisions of SFAS 123, "Accounting for Stock-Based Compensation," the Company's
net loss and net loss per share would have been as follows (in thousands, except
per share data):

<TABLE>
<CAPTION>
                                                             THREE MONTHS ENDED                NINE MONTHS ENDED
                                                                 MARCH 31,                         MARCH 31,
                                                      ------------------------------    ------------------------------
                                                          2002              2003            2002              2003
                                                      -------------     ------------    -------------     ------------

<S>                                                   <C>              <C>               <C>            <C>
    Net loss, as reported..........................       $ (77,459)        $ (7,830)      $ (381,539)       $ (35,213)
    Stock-based compensation included in net loss..              15             (205)              45             (175)
    Stock-based compensation under SFAS 123........          (9,299)          (6,044)         (26,727)         (21,398)
                                                      -------------     ------------    -------------     ------------
              Pro-forma net loss...................       $ (86,743)        $(14,079)      $ (408,221)       $ (56,786)
                                                      =============     ============    =============     ============
     Pro-forma net loss per share:
                                                      -------------     ------------    -------------     ------------
              Basic and diluted...................        $   (0.99)        $  (0.16)      $    (4.67)       $   (0.64)
                                                      =============     ============    =============     ============
</TABLE>


                  In April 2003, the FASB issued SFAS 149, "Amendment of
Statement 133 on Derivative Instruments and Hedging Activities," which amends
and clarifies accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities
under Statement 133, "Accounting for Derivative Instruments and Hedging
Activities." SFAS 149 is effective for contracts entered into or modified after
June 30, 2003. The Company is in the process of evaluating any effects of this
new statement.

2.       STRATEGIC AGREEMENT

                  As a result of the strategic agreement signed with Bank of
America in October 2000, Bank of America owned approximately 11.4% and 9.5% of
the Company as of June 30, 2002 and March 31, 2003, respectively, and is
considered a related party. The following amounts related to Bank of America are
included in the Company's consolidated financial statements for the periods
indicated (in thousands):

<TABLE>
<CAPTION>
                                                                                      JUNE 30,      MARCH 31,
                                                                                        2002          2003
                                                                                     ----------    -----------
<S>                                                                                 <C>            <C>
Current assets:
        Accounts receivable, net ..................................................   $22,632        $18,619
                                                                                      -------        -------
               Total current assets ...............................................   $22,632        $18,619
                                                                                      =======        =======
Current liabilities:
        Accrued liabilities .......................................................   $   808        $ 3,594
        Deferred revenues .........................................................       824            870
                                                                                      -------        -------
               Total current liabilities ..........................................   $ 1,632        $ 4,464
                                                                                      =======        =======

</TABLE>





<TABLE>
<CAPTION>
                                                                                 THREE MONTHS ENDED   NINE MONTHS ENDED
                                                                                       MARCH 31,          MARCH 31,
                                                                                  -----------------   -----------------
                                                                                    2002      2003      2002      2003
                                                                                  -------   -------   -------   -------
<S>                                                                              <C>       <C>        <C>      <C>
Revenues from Bank of America:
     Processing and servicing .................................................   $14,960   $23,535   $41,530   $62,556
     License ..................................................................       168       361       168       553
     Maintenance fees .........................................................       224       269       461       441
     Other ....................................................................       105     2,326       135     3,975
                                                                                  -------   -------   -------   -------
               Total revenues .................................................   $15,457   $26,491   $42,294   $67,525
                                                                                  =======   =======   =======   =======
</TABLE>


                                       8
<PAGE>

<TABLE>
<CAPTION>
                                                                                 THREE MONTHS ENDED   NINE MONTHS ENDED
                                                                                       MARCH 31,          MARCH 31,
                                                                                  -----------------   -----------------
                                                                                    2002      2003      2002      2003
                                                                                  -------   -------   -------   -------
<S>                                                                              <C>       <C>        <C>      <C>
Expenses incurred to Bank of America:

      Cost of processing, servicing and support ...............................   $ 7,473   $  --     $19,392   $     4
                                                                                  -------   -------   -------   -------
               Total expenses .................................................   $ 7,473   $  --     $19,392   $     4
                                                                                  =======   =======   =======   =======
</TABLE>


                  Revenues and accounts receivable relate to all segments of the
Company, but primarily to electronic billing and payment services provided to
Bank of America. Cost of processing expenses relate to reimbursements to Bank of
America in connection with a transition services agreement in place while the
Company completed the conversion of Bank of America customers to its processing
platform. Please refer to Management's Discussion and Analysis of Financial
Condition and Results of Operations included in this Form 10-Q for additional
information regarding the Company's transactions with Bank of America.

3.       GOODWILL AND OTHER INTANGIBLE ASSETS

                  On July 1, 2002, the Company adopted SFAS 142, "Goodwill and
Other Intangible Assets." SFAS 142 changes the accounting for goodwill and other
intangible assets. Goodwill is no longer subject to amortization over its
estimated useful life. Rather, goodwill is subject to at least an annual
assessment for impairment by applying a fair-value-based test.

                  Upon adoption of SFAS 142, the Company transferred $1,350,000
of unamortized workforce in place intangible assets, net of the associated
deferred income taxes, into goodwill, discontinued the amortization of goodwill
and was required to perform a transitional impairment test. This impairment test
required the Company to (1) identify its reporting units, (2) determine the
carrying value of each reporting unit by assigning assets and liabilities,
including existing goodwill and intangible assets, to those reporting units, and
(3) determine the fair value of each reporting unit. If the carrying value of
any reporting unit exceeded its fair value, then additional testing was required
to determine if the goodwill carried on the balance sheet was impaired. After
completing step one of the transitional impairment test, the Company determined
that goodwill associated with its i-Solutions reporting unit, a unit within the
Company's Software segment, was potentially impaired.

                  The amount of goodwill impairment was then determined through
an analysis similar to that of a purchase price allocation, where the fair value
of the individual tangible and intangible assets (excluding goodwill) and
liabilities of the i-Solutions reporting unit was compared to the fair value of
the reporting unit, with the residual amount being the fair value assigned to
goodwill. The fair value of the i-Solutions reporting unit was estimated using a
combination of the cost, market and income approaches. Specifically, the
discounted cash flow and market multiples methodologies were utilized to
determine the fair value of the reporting unit by estimating the present value
of the future cash flows of the reporting unit along with reviewing revenue and
earnings multiples for comparable publicly traded companies and applying these
to the reporting unit's projected cash flows. Fair value of each of the assigned
assets and liabilities was determined using either a cost, market or income
approach, as appropriate, for each individual asset or liability. The resulting
impairment charge of $2,894,000 was recorded in the three months ended September
30, 2002, and is reflected as a cumulative effect of a change in accounting
principle in the Condensed Consolidated Statement of Operations for the nine
months ended March 31, 2003.


                                       9
<PAGE>
                  The following table adjusts net loss and net loss per share
for the impact of the implementation of SFAS 142 as follows (in thousands,
except per share data):

<TABLE>
<CAPTION>
                                                                 THREE MONTHS ENDED           NINE MONTHS ENDED
                                                                      MARCH 31,                    MARCH 31,
                                                             --------------------------    ------------------------
                                                                 2002           2003           2002          2003
                                                             ------------    ----------    -----------    ---------

<S>                                                          <C>             <C>           <C>            <C>
Loss before cumulative effect of accounting change ......... $    (77,459)   $   (7,830)   $  (381,539)   $ (32,319)
Cumulative effect of accounting change .....................         --            --             --         (2,894)
                                                             ------------    ----------    -----------    ---------
Net loss ...................................................      (77,459)       (7,830)      (381,539)     (35,213)
Add back:  goodwill amortization, net of tax ...............       41,742          --          141,360          --
                                                             ------------    ----------    -----------    ---------
Adjusted net loss .......................................... $    (35,717)   $   (7,830)   $  (240,179)   $ (35,213)
                                                             ============    ==========    ===========    =========

Basic and diluted net loss per share:
     Basic and diluted net loss per common share before
         cumulative effect of accounting
         change ............................................ $      (0.89)   $   (0.09)     $    (4.37)   $   (0.36)
     Cumulative effect of accounting change ................         --            --             --          (0.03)
                                                             ------------    ----------    -----------    ---------
     Net loss per common share .............................        (0.89)        (0.09)         (4.37)       (0.40)
     Goodwill amortization, net of tax .....................         0.48          --             1.62          --
                                                             ------------    ----------    -----------    ---------
     Adjusted basic and diluted net loss per share ......... $      (0.41)   $    (0.09)    $    (2.75)   $   (0.40)
                                                             ============    ==========    ===========    =========
</TABLE>


         The components of the Company's various amortizing intangible assets
are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                          JUNE 30,      MARCH 31,
                                                                                            2002           2003
                                                                                          --------       --------
<S>                                                                                       <C>            <C>
Capitalized software:
       Product technology from acquisitions and strategic agreement ...................   $166,578       $166,578
       Internal development costs .....................................................     24,946         28,014
                                                                                          --------       --------
                Total .................................................................    191,524        194,592
                Less:  accumulated amortization .......................................    119,679        159,331
                                                                                          --------       --------
                Capitalized software, net .............................................   $ 71,845       $ 35,261
                                                                                          ========       ========

Strategic agreements:
       Strategic agreements ...........................................................   $744,424       $744,424
       Less:  accumulated amortization ................................................    225,149        318,106
                                                                                          --------       --------
                Strategic agreements, net .............................................   $519,275       $426,318
                                                                                          ========       ========

Other intangible assets:
       Workforce(1) ...................................................................   $ 11,944       $   --
       Tradenames .....................................................................     47,968         47,968
       Customer base ..................................................................     45,358         45,358
       Covenants not to compete .......................................................      1,200          1,200
                                                                                          --------       --------
                Total .................................................................    106,470         94,526
       Less:  accumulated amortization ................................................     81,861         82,672
                                                                                          --------       --------
                Other intangible assets, net ..........................................   $ 24,609       $ 11,854
                                                                                          ========       ========
</TABLE>

(1)      As of July 1, 2002, in accordance with SFAS 142, the Company
         reclassified its workforce intangibles, net of accumulated
         amortization, into goodwill.


                                       10
<PAGE>


Amortization of intangible assets totaled $47,664,000 and $143,408,000 for the
three months and nine months ended March 31, 2003, respectively. Amortization
expense for the year ended June 30, 2003, and the next four fiscal years is
estimated to be as follows (in thousands):

Fiscal Year Ending June 30,
     2003.....................................       $190,488
     2004.....................................        143,438
     2005.....................................        130,831
     2006.....................................         43,346
     2007.....................................         25,716

                  As of March 31, 2003, the Company's only non-amortizing
intangible asset is goodwill. The changes in the carrying value of goodwill by
segment for the nine months ended March 31, 2003, were as follows (in
thousands):

<TABLE>
<CAPTION>
                                                   ELECTRONIC                         INVESTMENT
                                                    COMMERCE          SOFTWARE         SERVICES           TOTAL
                                                  --------------    -------------    -------------    --------------
<S>                                                <C>              <C>              <C>              <C>
Balance as of June 30, 2002......................      $ 503,255         $ 16,116         $ 11,387         $ 530,758
Reclassification of workforce, net of tax........            483              867               --             1,350
Impairment loss from adoption of SFAS 142........            --            (2,894)              --            (2,894)
                                                  --------------    -------------    -------------    --------------
Balance as of March 31, 2003.....................      $ 503,738         $ 14,089         $ 11,387         $ 529,214
                                                  ==============    =============    =============    ==============
</TABLE>


         4.       INVESTMENTS

                  The Company has certain investments which are accounted for
under the cost method. These investments are periodically evaluated to determine
if any decline in value is other than temporary. In performing this evaluation,
the Company considers various factors including any decline in market price,
where available, the investee's financial condition, results of operations,
operating trends and other financial ratios. During the nine months ended March
31, 2003, the Company determined that the decline in value of certain of these
investments was other than temporary. In making that determination, the Company
considered the fact that the market value of certain investments had been below
the Company's basis for a period of time exceeding six months, as well as other
financial and operating trends of the respective companies. The resulting loss
of $3,228,000 is reflected in loss on investments in the accompanying Unaudited
Condensed Consolidated Statement of Operations.

         5.       COMMON STOCK

                  In the nine months ended March 31, 2003, the Company issued
stock for various employee benefit programs. The Company issued 402,102 shares
to fund its 401(k) match, the cost of which was accrued in the year ended June
30, 2002, and 256,423 shares of common stock in conjunction with its associate
stock purchase plan, which was funded through employee payroll deductions in the
immediately preceding six-month period.

                  In November 2002, the Company's stockholders approved the 2002
Stock Incentive Plan (the "2002 Plan"). Under the provisions of the 2002 Plan,
the Company may grant incentive or non-qualified stock options, stock
appreciation rights ("SARs"), restricted stock, performance units or performance
shares for not more than 6,000,000 shares of common stock to certain key
employees, officers and non-employee directors. The terms of the options, SARs,
restricted stock, performance units or performance shares granted under the 2002
Plan are determined by a committee of the Company's Board of Directors, however,
in the event of a change in control as defined in the 2002 Plan, they shall
become immediately exercisable. The 2002 Plan will replace the Company's 1995
Stock Option Plan (the "1995 Plan") going forward, except that the 1995 Plan
will continue to exist to the extent that options granted prior to the effective
date of the 2002 Plan continue to remain outstanding. Additionally, the
Company's stockholders approved an increase in the number of shares reserved and
available for sale under the 1997 Associate Stock Purchase Plan from 1,000,000
shares to 2,000,000 shares.


                                       11
<PAGE>


         6.       STOCK-RELATED TRANSACTIONS WITH THIRD PARTIES

                  In October 1999, the Company entered into an agreement with
one of its customers whereby the customer purchased 250,000 shares of the
Company's stock, has been issued warrants on 1,000,000 shares, and has the
ability to earn warrants on up to 2,000,000 additional shares. All warrants
contain a strike price of $39.25 and were exercisable on September 15, 2002,
contingent upon achievement of various annual revenue targets and maintaining
the continued existence of the agreement through that date. During the quarter
ended June 30, 2002, vesting of the warrants for one million shares became
probable. As such, the Company recorded a non-cash charge of $2,748,000 for the
fair value of the portion of the warrants earned through June 30, 2002. During
the quarter ended September 30, 2002, the Company recorded a non-cash increase
in revenue of $644,000, reflecting the portion of the warrants earned during the
quarter and the final fair value of the one million warrants that vested on
September 15, 2002. Fair value was determined based on a Black-Scholes option
pricing model valuation. Under the provisions of EITF 01-9, "Accounting for
Consideration by a Vendor to a Customer (Including a Reseller of the Vendor's
Products)," the non-cash charge of $2,748,000 was recorded as a reduction of
revenue, and the non-cash adjustment of $644,000 was recorded as an increase to
revenue.

         7.       EARNINGS PER SHARE

                  The following table reconciles the differences in income and
shares outstanding between basic and dilutive for the periods indicated (in
thousands except per share data):
<TABLE>
<CAPTION>
                                                           FOR THE THREE MONTHS ENDED
                        -------------------------------------------------------------------------------------------------
                                        MARCH 31, 2002                                     MARCH 31, 2003
                        -----------------------------------------------     ---------------------------------------------
                                                                 PER-                                             PER-
                              LOSS             SHARES           SHARE           LOSS             SHARES          SHARE
                           (NUMERATOR)      (DENOMINATOR)       AMOUNT       (NUMERATOR)     (DENOMINATOR)       AMOUNT
                         ---------------    --------------     --------     -------------    ---------------    ---------
<S>                          <C>             <C>               <C>            <C>                    <C>        <C>
Basic EPS..........          $ (77,459)            87,446      $(0.89)        $  (7,830)             88,949     $ (0.09)
                                                               ========                                         =========
Effect of dilutive
securities:

  Options and                                                                         --                 --
    warrants.......                  --                --
                          --------------    --------------                  -------------    ---------------
Diluted EPS........          $ (77,459)            87,446      $(0.89)        $  (7,830)             88,949     $ (0.09)
                          ==============    ==============     ========     =============    ===============    =========
</TABLE>


<TABLE>
<CAPTION>
                                                            FOR THE NINE MONTHS ENDED
                          -------------------------------------------------------------------------------------------------
                                         MARCH 31, 2002                                     MARCH 31, 2003
                          -----------------------------------------------     ---------------------------------------------
                                                                  PER-                                             PER-
                               LOSS             SHARES           SHARE           LOSS             SHARES          SHARE
                            (NUMERATOR)      (DENOMINATOR)       AMOUNT       (NUMERATOR)     (DENOMINATOR)       AMOUNT
                          ---------------    --------------     --------     -------------    ---------------    ---------
<S>                           <C>             <C>               <C>            <C>                    <C>        <C>
Basic EPS..........          $ (381,539)            87,250      $(4.37)       $  (35,213)             88,672     $ (0.40)
                                                                ========                                         =========
Effect of dilutive
securities:

  Options and                                                                          --                 --
    warrants.......                   --                --
                           --------------    --------------                  -------------    ---------------
Diluted EPS........          $ (381,539)            87,250      $(4.37)       $  (35,213)             88,672     $ (0.40)
                           ==============    ==============     ========     =============    ===============    =========
</TABLE>


                  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 the Company recognized net income
for the periods presented, an additional 2,262,000, 3,280,000, 3,973,000 and
1,923,000 of in-the-money options and warrants would have been included in the
diluted earnings per share calculation for the three and nine months ended March
31, 2002 and 2003, respectively. Using the treasury stock purchase method
prescribed by SFAS 128, this would have increased diluted shares outstanding by
464,000, 926,000, 1,082,000 and 342,000 for the three and nine months ended
March 31, 2002 and 2003, respectively.

                  The weighted average diluted common shares outstanding for the
three and nine months ended March 31, 2002 and 2003, also exclude the effect of
approximately 8,508,000, 6,695,000, 6,481,000 and 8,030,000 of out-of-the-money
options and warrants, respectively, and the 2,357,000 share effect for the
assumed conversion of the convertible subordinated notes, as their effect would
be anti-dilutive. In addition, the after-tax effect of


                                       12
<PAGE>

interest expense on the convertible subordinated notes of approximately
$1,592,000 for the three months ended March 31, 2002 and 2003, and $5,066,000
for the nine months ended March 31, 2002 and 2003, has not been added back to
the numerator, as its effect would be anti-dilutive.

         8.       REORGANIZATION CHARGES

                  During the year ended June 30, 2002, the Company announced it
would streamline operations in its Electronic Commerce division, refine its
strategy for the i-Solutions business unit of its Software division, and
discontinue certain product lines associated with its Investment Services
division. As a result of these actions, the Company closed or consolidated
operations in several locations and eliminated certain other positions in the
Company. The streamlining of its Electronic Commerce division operations
resulted from efficiencies gained from the consolidation of three legacy
transaction processing platforms to its Genesis platform and resulted in the
closing of its San Francisco, California location on April 30, 2002; its
Houston, Texas location on June 30, 2002; and its Austin, Texas location on
September 30, 2002. The refinement in strategy for the i-Solutions business
resulted in the closing of its Ann Arbor, Michigan and Singapore locations on
March 19, 2002. These actions resulted in the termination of 707 employees.

                  As a result of these actions, during the year ended June 30,
2002, the Company recorded reorganization charges and established a
reorganization reserve for certain charges related to the reorganization plan. A
summary related to the reorganization reserve for the nine months ended March
31, 2003, is as follows (in thousands):

<TABLE>
<CAPTION>
                                                               REORGANIZATION               REORGANIZATION
                                                                 RESERVE AT       CASH       RESERVE AT
                                                                JUNE 30, 2002    PAYMENTS   MARCH 31, 2003
                                                                -------------    --------   --------------
<S>                                                                <C>           <C>            <C>
Severance and other employee costs .............................   $ 4,701       $(4,665)       $    36
Office closure and business exit costs .........................     3,028        (2,143)           885
Other exit costs ...............................................        71           (61)            10
                                                                   -------       -------        -------
     Total .....................................................   $ 7,800       $(6,869)       $   931
                                                                   =======       =======        =======
</TABLE>

                  In conjunction with the reorganization activities described
above, the Company revised the estimated useful lives of Existing Product
Technology and Customer Base intangible assets related to the product lines that
are to be discontinued from its Mobius Group acquisition. This resulted in
additional amortization expense of $242,000 and $1,035,000 for the three and
nine months ended March 31, 2003, respectively, which represents an after-tax
impact of $145,000 and $621,000 for the same periods. There was no impact to
earnings per share for the three months ended March 31, 2003, and the impact to
earnings per share was $(0.01) for the nine months ended March 31, 2003.

         9.      SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                            NINE MONTHS ENDED
                                                                                                  MARCH 31,
                                                                                           --------------------
                                                                                              2002       2003
                                                                                           ---------   --------
<S>                                                                                        <C>         <C>
Interest paid ..................................................................           $   6,300   $  6,192
                                                                                           =========   ========
Income taxes paid ..............................................................           $      49   $  1,951
                                                                                           =========   ========
Supplemental disclosure of non-cash investing and financing activities:

     Capital  lease additions and purchase of other long-term assets............           $      --   $ 13,017
                                                                                           =========   ========
     Stock funding of 401(k) match ............................................            $   3,621   $  3,229
                                                                                           =========   ========
     Stock funding of Associate Stock Purchase Plan ............................           $   4,434   $  3,272
                                                                                           =========   ========
</TABLE>


                                       13
<PAGE>


         10.      COMPREHENSIVE LOSS

                  The Company began investing in available-for-sale securities
during the quarter ended September 30, 2002. Available-for-sale securities are
recorded at fair value and changes in fair value are recorded as unrealized
gains or losses and accumulated in other comprehensive income. As a result, the
Company is required to report the components of comprehensive loss which are as
follows (in thousands):

<TABLE>
<CAPTION>
                                                           THREE MONTHS ENDED                NINE MONTHS ENDED
                                                                 MARCH 31,                        MARCH 31,
                                                      -----------------------------     -----------------------------
                                                          2002             2003              2002            2003
                                                      -------------    ------------     -------------    ------------

<S>                                                   <C>              <C>              <C>              <C>
Net loss...........................................   $     (77,459)   $     (7,830)    $    (381,539)   $    (35,213)
Net unrealized gains (losses) on investment
    securities available-for-sale, net of tax......              --              (7)               --             306
                                                      -------------    ------------     -------------    ------------
Comprehensive loss.................................   $     (77,459)   $     (7,837)    $    (381,539)   $    (34,907)
                                                      =============    ============     =============    ============
</TABLE>


         11.      BUSINESS SEGMENTS

                  The Company operates in three business segments - Electronic
Commerce, Software and Investment Services. These reportable segments are
strategic business units that offer different products and services. The Company
evaluates performance based on revenues and operating income (loss) of the
respective segments. Segment operating income (loss) excludes
acquisition-related intangible asset amortization and certain one-time charges.
There are no inter-segment sales.

                  The following sets forth certain financial information
attributable to the Company's business segments for the three months and nine
months ended March 31, 2002 and 2003 (in thousands):


<TABLE>
<CAPTION>
                                                                        THREE MONTHS ENDED          NINE MONTHS ENDED
                                                                              MARCH 31,                 MARCH 31,
                                                                       ----------------------    ----------------------
                                                                          2002         2003         2002         2003
                                                                       ---------    ---------    ---------    ---------
<S>                                                                    <C>          <C>          <C>           <C>
Revenues:
     Electronic Commerce ............................................  $  89,773    $ 104,521    $ 260,240    $ 299,337
     Investment Services ............................................     20,014       20,439       59,111       60,907
     Software .......................................................     14,799       16,341       43,248       46,797
                                                                       ---------    ---------    ---------    ---------
              Total .................................................  $ 124,586    $ 141,301    $ 362,599    $ 407,041
                                                                       =========    =========    =========    =========

Segment operating income (loss):

      Electronic Commerce ...........................................  $   9,390    $  31,881    $  16,444    $  83,419
      Investment Services ...........................................      6,882        5,642       17,717       16,269
      Software ......................................................      2,539        5,116        3,229       12,139
      Corporate .....................................................     (7,984)      (8,344)     (27,359)     (24,450)
                                                                       ---------    ---------    ---------    ---------
              Total .................................................     10,827       34,295       10,031       87,377
Purchase accounting amortization ....................................    (90,293)     (45,990)    (304,721)    (138,304)
Impairment of intangible assets .....................................         --           --     (155,072)          --
Reorganization charge ...............................................    (15,871)          --      (15,871)          --
Impact of warrants ..................................................         --           --           --          644
Loss on investments .................................................         --       (1,297)          --       (3,228)
Interest, net .......................................................     (1,272)      (1,589)      (2,987)      (4,055)
                                                                       ---------    ---------    ---------    ---------
         Total loss before income taxes and cumulative
              effect of accounting change ...........................  $ (96,609)   $ (14,581)   $(468,620)   $ (57,566)
                                                                       =========    =========    =========    =========
</TABLE>


                                       14
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

OVERVIEW

         CheckFree was founded 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 in similar or complementary businesses.

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

         -        Electronic Commerce;

         -        Investment Services; and

         -        Software.

         Through our Electronic Commerce division, we enable consumers to
receive and pay bills electronically. For the year ended June 30, 2002, we
processed approximately 316 million electronic payments and delivered
approximately 9.8 million electronic bills. For the quarter ended March 31,
2003, we processed nearly 112 million electronic payments and delivered over 8.8
million electronic bills. As of March 31, 2003, there were over nine million
consumers initiating payments via CheckFree-supported technology. The number of
transactions we process each year continues to grow. Growth in the number of
transactions processed exceeded 36% for the year ended June 30, 2002, and 36%
for the quarter ended March 31, 2003, against the same periods in the prior
year. The Electronic Commerce division accounted for approximately 72% of our
fiscal 2002 revenue and approximately 74% of total revenue for the nine months
ended March 31, 2003.

         Our Electronic Commerce division's products allow consumers to:

         -        receive electronic bills through the Internet;

         -        pay any bill -- whether it arrives over the Internet or
                  through traditional mail -- to anyone;

         -        make payments not related to bills -- to anyone; and

         -        perform customary banking transactions, including balance
                  inquiries, transfers between accounts and on-line statement
                  reconciliations.

         The majority of consumers using our services access our system through
Consumer Service Providers (CSPs). CSPs are companies, such as banks, brokerage
firms, Internet portals and content sites, Internet-based banks, Internet
financial sites and personal financial management software providers, that use
our products to enable consumers to receive and/or pay bills electronically. We
have relationships with hundreds of CSPs. Some of our largest CSPs, as
determined by type of CSP and number of consumers using our products, are Bank
of America, Bank One, Charles Schwab & Co., Merrill Lynch & Co., SunTrust, U.S.
Postal Service, Wachovia, Wells Fargo and Yahoo!. This list of our CSPs is not
exhaustive and may not fully represent our customer base.

         We have developed our own open infrastructure, known as Genesis, to
process electronic bills and payments. The Genesis system is accessed by CSPs
using various Web-based applications. In March 2001, we introduced our latest
application for electronic billing and payments -- "WebPay for Consumers" (or
WebPay 3.2), which added to our core product the ability for consumers to
receive and pay e-bills over e-mail and to exchange money with each other using
e-mail "invitations" to receive money. WebPay 3.2 helps consumers automate the
complete process of viewing and paying bills -- they can receive bills online
and pay those bills online, too. WebPay 3.2 also allows the consumer to "Pay
Anyone" electronically -- from a child in college, to a lawn care or other
service provider, to a friend, using the Genesis system. We now have 842 CSPs
offering full electronic billing and payment as the number of sites where
consumers can both view and pay bills continues to increase.

         Through our Investment Services division, we provide a range of
outsourced portfolio management services to help more than 250 institutions
deliver portfolio management, performance measurement and reporting services to
their clients. As of March 31, 2003, our clients used the CheckFree APL
Portfolio Accounting System to manage about 1.2 million portfolios totaling more
than $500 billion in assets. The Investment Services division accounted for
approximately 16% of our fiscal 2002 revenue and approximately 15% of total
revenue for the nine-


                                       15
<PAGE>

month period ended March 31, 2003.

         Our institutional 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 separately managed accounts, money
management products, or traditional money managers, managing investments of
institutions and high net worth individuals.

         Our portfolio management systems are marketed under the product name
APL, and provide the following functions:

         -        account open and trading capabilities;

         -        graphical client reporting;

         -        performance measurement;

         -        decision support tools;

         -        account analytics;

         -        tax lot accounting;

         -        manager due diligence;

         -        multiple strategy portfolios;

         -        straight through processing;

         -        Depository Trust Corporation interfacing;

         -        billing functions; and

         -        system and data security.

         In addition to our APL and APL Wrap portfolio management products, our
Investment Services division also offers investment performance and reporting
products and services. Marketed under the names M-Search and M-Watch, these
products are a result of the acquisition of Mobius Group, Inc. in March 1999.

         Through our Software division, we deliver software, maintenance,
support and professional services to large financial service providers and other
companies across a range of industries. The Software division is comprised of
three units, each with its own distinct set of software products. The ACH
Solutions unit provides software and services that are used to process more than
two-thirds of the nation's eight billion Automated Clearing House (ACH)
payments. The CheckFree Financial and Compliance Solutions (CFACS) unit enables
organizations to handle their reconciliation and compliance requirements. The
i-Solutions unit provides software and services that enable end-to-end e-billing
and e-statement creation, delivery and payment. The Software division accounted
for approximately 12% of our fiscal 2002 revenue and 11% of total revenue for
the nine months ended March 31, 2003.


                                       16
<PAGE>

RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
                                                                           THREE MONTHS ENDED  NINE MONTHS ENDED
                                                                                MARCH 31,          MARCH 31,
                                                                            ----------------   ----------------
                                                                             2002      2003     2002      2003
                                                                            -------   ------   ------    ------

<S>                                                                           <C>      <C>      <C>       <C>
Total Revenues: ........................................................      100.0%   100.0%   100.0%    100.0%

Expenses:
   Cost of processing, servicing and support ...........................       53.8%    41.8%    55.9%     43.7%
   Research and development ............................................       10.8%     9.6%    12.0%      9.6%
   Sales and marketing .................................................       10.6%     9.7%    12.0%     10.0%
   General and administrative ..........................................        7.7%     6.8%     9.0%      7.0%
   Depreciation and amortization .......................................       80.9%    40.3%    92.4%     42.0%
   Impairment of intangible assets .....................................       --       --       42.8%     --
   Reorganization Charge ...............................................       12.7%    --        4.4%     --
                                                                           --------   ------   ------    ------
          Total expenses ...............................................      176.5%   108.3%   228.4%    112.4%
                                                                           --------   ------   ------    ------

Loss from operations ...................................................     -76.5%    -8.3%   -128.4%   -12.4%

Interest, net ..........................................................      -1.0%    -1.1%    -0.8%     -1.0%
Loss on investments ....................................................       --      -0.9%     --       -0.8%
                                                                           --------   ------   ------    ------

Loss before income taxes and cumulative
   effect of accounting change .........................................     -77.5%   -10.3%   -129.2%   -14.1%

Income tax benefit .....................................................     -15.4%    -4.8%   -24.0%     -6.2%
                                                                           --------   ------   ------    ------
Loss before cumulative effect of accounting
    change .............................................................     -62.2%    -5.5%   -105.2%    -7.9%
Cumulative effect of accounting change .................................       --       --       --       -0.7%
                                                                           --------   ------   ------    ------
Net loss ...............................................................     -62.2%    -5.5%   -105.2%    -8.6%
                                                                           ========   ======   ======    ======
</TABLE>


         Revenues. Total revenue increased by $16.7 million, or 13%, from $124.6
million for the three months ended March 31, 2002, to $141.3 million for the
three months ended March 31, 2003, and by $44.4 million, or 12%, from $362.6
million for the nine months ended March 31, 2002, to $407.0 million for the nine
months ended March 31, 2003. Quarter over quarter revenue growth is driven by
16% growth in our Electronic Commerce business, 10% growth in our Software
business and 2% growth in our Investment Services business. Year over year
revenue growth is driven by 15% growth in our Electronic Commerce business, 8%
growth in our Software business and 3% growth in our Investment Services
business.

         Growth in our Electronic Commerce business was driven primarily by an
increase in transactions processed from 82.0 million for the three months ended
March 31, 2002, to 111.9 million for the three months ended March 31, 2003, and
from 227.8 million for the nine months ended March 31, 2002, to 313.6 million
for the nine months ended March 31, 2003. Please refer to the SEGMENT
INFORMATION section of this report, Electronic Commerce division, for analysis
of changes in the mix of business inherent in our transaction growth.
Additionally, revenue related to minimum guarantees from Microsoft and First
Data Corporation have increased by $2.3 million on a quarter over quarter basis,
and by $6.8 million on a year over year basis. Growth in Electronic Commerce
revenue has been dampened somewhat by a decrease in interest rates, which has
negatively impacted our interest sensitive offerings, such as our account
balance transfer product, and further by certain of our larger customers
transferring payment volume to an in-house solution over the past two quarters.

         Growth in our Investment Services and Software businesses has been
dampened by poor economic conditions. Portfolios managed within Investment
Services have remained relatively flat over the past several quarters, as
investors reducing stock holdings have offset new portfolio growth. Our pricing
in Investment Services


                                       17
<PAGE>


is primarily based on portfolios managed, and as a result, we have experienced
less than historical revenue growth in this business. We expect this trend to
continue until stock market performance improves. We have also experienced
modest growth in our Software businesses, as the recession continues and
customers take longer than normal to evaluate discretionary investment-spending
alternatives such as third party software product offerings. In the quarter
ended December 31, 2002, we sold more software licenses than we expected and we
began work on a large software services contract that extended through the March
31, 2003 quarter. The combination of these events provided a near term boost to
Software revenue; however, until the economy begins to rebound, we expect to
experience modest growth in our Software business as well.

         Our processing and servicing revenue increased by $13.3 million, or
12%, from $108.6 million for the three months ended March 31, 2002, to $121.9
million for the three months ended March 31, 2003, and by $39.3 million, or 13%,
from $313.1 million for the nine months ended March 31, 2002, to $352.4 million
for the nine months ended March 31, 2003. We earn processing and servicing
revenue in both our Electronic Commerce and our Investment Services businesses.
As previously mentioned, portfolios managed have remained basically flat over
the past several quarters and as a result, we have seen only modest growth in
processing and servicing revenue from our Investment Services business. Growth
in processing and servicing revenue has therefore come primarily from the
aforementioned growth in transactions processed within our Electronic Commerce
business. Additionally, we delivered over 8.8 million electronic bills in the
quarter ended March 31, 2003, as compared to 3.1 million in the same period last
year. As part of our acquisition of TransPoint in September 2000, we entered
into agreements with Microsoft and First Data Corporation, both of which include
monthly minimum revenue guarantees that increase annually over the five-year
term of the agreements. We are operating below the minimum levels in both
agreements and, as a result of the increased minimum levels, revenue from
Microsoft and First Data Corporation grew by $2.3 million from the three months
ended March 31, 2002, to the three months ended March 31, 2003, and by $6.8
million from the nine months ended March 31, 2002, to the nine months ended
March 31, 2003. Reductions in interest yields from this time last year have had
a dampening effect on our interest sensitive products such as our account
balance transfer offering, which has offset further growth in Electronic
Commerce processing and servicing revenue. Furthermore, our largest customer
reached a pricing milestone late in the quarter ended December 31, 2002, which
reduced our revenue per subscriber for that customer by approximately 15%, and
we expect a similar reduction when the same customer reaches another pricing
milestone in the quarter ended June 30, 2003. We reflected the full impact of
the first pricing change in the quarter ended March 31, 2003, and will see the
impact from the second change in the quarter ended June 30, 2003.

         At the end of our 2002 fiscal year, we introduced a series of
transaction-based metrics that are designed to help investors better understand
trends in our revenue base. We offer two basic levels of electronic billing and
payment services to our customers. Customers that use our Full Service offering
outsource all, or a portion of, their electronic billing and payment process to
us. For instance, a Full Service customer might not use a CheckFree hosted user
interface, but still use our full array of services, including payment
processing, payment warehouse, claims processing, e-Bill, on-line proof of
payment, customer care, and other aspects of our service. Also, while a Full
Service customer may build 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. Customers that utilize our Payment Services offering receive a
limited subset of our electronic billing and payment services. Additionally,
within the Payment Services offering, we offer services to billers for
electronic bill delivery and hosting services, as well as other payments
services such as account balance transfer.

         A third category of revenue we simply refer to as Other Electronic
Commerce. Other Electronic Commerce includes our Health and Fitness business and
other ancillary revenue sources, such as CSP and biller implementation and
consulting services.

         As we have previously reported, three of our larger customers, all of
whom were original principals of a consortium known as Spectrum, have announced
intentions of creating or using an in-house payment warehouse for routing bill
payment transactions, and each are in various stages of this transition process.
For payment processing services, each of the three principal banks participating
in the Spectrum consortium signed a multi-year transaction processing agreement
in August 2000 with Metavante, a payment processing division of Marshall and
Ilsley Corporation (M&I), which included guaranteed minimum transaction levels
during the contract period. As a result, each of these banks is working on
diverting payment transactions from CheckFree in order to meet these minimum


                                       18
<PAGE>

requirements. J.P. Morgan Chase ("Chase"), which has historically maintained an
in-house payment warehouse as a Payment Services customer of CheckFree, moved
all of its internet-based bill payment transactions, except for those processed
through personal financial management (PFM) programs such as Intuit's Quicken or
Microsoft Money, to Metavante during the quarter ended December 31, 2002. Wells
Fargo has begun directing new electronic bill payment customers onto its
in-house system and began routing some payments from existing customers to
Metavante during the quarter ended March 31, 2003. Wachovia recently initiated
its in-house payment warehouse and has begun migrating legacy Wachovia bill pay
customers, on a state-by-state basis, onto its in-house system. We plan to work
with both Wells Fargo and Wachovia to integrate their in-house payment systems
with CheckFree. Wells Fargo announced in April 2003 that, together, we have
enabled their in-house system with e-Bill capability. For reference purposes,
Wells Fargo currently operates as a Payment Services customer while Wachovia
operates as a Full Service customer.

         We understand that a fourth bank customer, Bank One, intends to move
its electronic payment processing to an in-house payment warehouse as well. Bank
One has started processing its own "on us" payments at this time and we expect
to see transaction volumes trail off over time as they fully enable their system
and take payment processing in-house. An "on us" payment involves a bank
customer that pays a same-bank credit card, mortgage loan, auto loan, or other
similar payment without using a third party payment processor.

         We believe that the complexity and costs of building, supporting, and
hosting an in-house payment warehouse and user interface are substantial, and
execution is likely limited to a few large banks. Regardless, we expect to
compete for payment transaction volume from banks that ultimately choose an
in-house payment routing alternative.

         Our license fee revenue decreased by $1.4 million, or 20%, from $7.1
million for the three months ended March 31, 2002, to $5.7 million for the three
months ended March 31, 2003, and by $2.3 million, or 12%, from $18.9 million for
the nine months ended March 31, 2002, to $16.6 million for the nine months ended
March 31, 2003. License revenue is derived by our Software business. The
recessionary economy continues to cause potential customers to extend their
evaluation time on discretionary spending for items such as software products
which has resulted in slower than normal software license sales. We expect this
trend to continue until the economy begins to rebound.

         Our maintenance fee revenue increased by $1.0 million, or 17%, from
$5.6 million for the three months ended March 31, 2002, to $6.6 million for the
three months ended March 31, 2003, and by $1.3 million, or 7%, from $17.8
million for the nine months ended March 31, 2002, to $19.1 million for the nine
months ended March 31, 2003. Maintenance revenue, which represents annually
renewable product support for our software customers, is isolated to our
Software business, and tends to grow with incremental license sales. When
combining decreases in new license sales, customer retention rates of at least
80% across all of our Software business units and moderate price increases on a
year over year basis, the result is a modestly growing maintenance base.
Although we defer revenue recognition on maintenance billings until cash is
collected, which can cause quarter-to-quarter fluctuations in maintenance
revenue, until license sales regain historical growth rates, we expect to
continue to see moderate growth in maintenance in the near term.

         Our other revenue increased by $3.8 million, or 116%, from $3.3 million
for the three months ended March 31, 2002, to $7.1 million for the three months
ended March 31, 2003, and by $6.1 million, or 47%, from $12.8 million for the
nine months ended March 31, 2002, to $18.9 million for the nine months ended
March 31, 2003. Other revenue consists primarily of consulting and
implementation fees across all three of our business segments. The primary
driver of growth in this area is a consulting services project we are engaged in
with a large bank customer within our ACH software business unit. This project
is expected to continue throughout the remainder of fiscal 2003.

         Cost of Processing, Servicing and Support. Our cost of processing,
servicing and support was $67.0 million, or 53.8% of total revenue, for the
three months ended March 31, 2002, and was $59.1 million, or 41.8% of total
revenue, for the three months ended March 31, 2003. Cost of processing,
servicing and support was $202.8 million, or 55.9% of total revenue, for the
nine months ended March 31, 2002, and was $178.0 million, or 43.7% of total
revenue, for the nine months ended March 31, 2003. Cost of processing, servicing
and support as a percentage of processing and servicing only revenue (total
revenue less license fees) was 57.0% for the three months ended


                                       19
<PAGE>

March 31, 2002 versus 43.6% for the three months ended March 31, 2003, and was
59.0% for the nine months ended March 31, 2002 versus 45.6% for the nine months
ended March 31, 2003. The largest single factor resulting in the decline in
processing and servicing costs, in light of growth in processing and servicing
revenue, was platform consolidation in our Electronic Commerce business. For
most of fiscal 2002, we were maintaining three redundant payment-processing
platforms. Through December 2001, we were converting Bank of America subscribers
from the legacy Bank of America processing platform we purchased in October 2000
and, through March 2002, we maintained the redundant system to close out
remaining customer care inquiries and claims, at which time we retired the
redundant processing platform. Throughout this period, we paid Bank of America
to run and maintain the platform for us. Once we retired the Bank of America
system, we were able to close our customer care facility in San Francisco on
April 30, 2002, and our Houston customer care facility in the month ended June
30, 2002. Additionally, as we migrated all but a few CSPs off of our legacy
Austin processing platform onto Genesis by the end of June 2002, we closed our
Austin office as well. The combination of platform consolidation and office
closings eliminated approximately $6.0 million of redundant quarterly processing
and servicing costs in the Electronic Commerce business. Additionally, our
electronic payment rate has improved from approximately 70% for the three months
ended March 31, 2002, to over 74% for the three months ended March 31, 2003.
Electronic payments carry a significantly lower variable cost per unit than do
paper-based payments and are far less likely to result in a costly customer care
claim. We continue to invest in additional efficiency and quality improvements
within our customer care processes and our information technology infrastructure
to drive improvements in our total cost per transaction. During the quarter
ended December 31, 2002, we hired additional customer care resources in
expectation of seasonally high call volumes that have historically taken place
after the holiday season. This year, however, we did not experience such higher
call volumes. As a result, we had a modest spike in processing costs in the
December 31, 2002 quarter that we managed to a lower cost during this quarter,
in spite of transaction growth. We expect our efforts toward greater efficiency
and quality to continue to result in further improvement in cost per transaction
in future periods.

         Research and Development. Our research and development costs were $13.5
million, or 10.8% of total revenue, for the three months ended March 31, 2002,
and $13.6 million, or 9.6% of total revenue, for the three months ended March
31, 2003. Research and development costs were $43.6 million, or 12.0% of total
revenue, for the nine months ended March 31, 2002, and $39.1 million, or 9.6% of
total revenue, for the nine months ended March 31, 2003. On March 19, 2002, we
announced a company reorganization that resulted in a reduction in workforce
that impacted all areas of the company, including research and development.
Although the absolute dollar value of research and development may vary somewhat
from quarter to quarter, the reduction in workforce resulted in savings on a
year over year basis. We continue to invest significantly in product enhancement
and quality improvement programs in all three of our businesses.

         Sales and Marketing. Our sales and marketing costs were $13.1 million,
or 10.6% of total revenue, for the three months ended March 31, 2002, and were
$13.6 million, or 9.7% of total revenue, for the three months ended March 31,
2003. Our sales and marketing costs were $43.4 million, or 12.0% of total
revenue, for the nine months ended March 31, 2002, and were $40.6 million, or
10.0% of total revenue, for the nine months ended March 31, 2003. During the
current fiscal year we introduced new relationship management and account
management positions in our Investment Services business, which is the primary
factor in the increase in sales and marketing costs on quarter over quarter
basis. The previously mentioned reorganization announced on March 19, 2002,
however, impacted sales and marketing resources as well, and resulted in a year
over year reduction in costs in this area. We closed our i-Solutions office in
Ann Arbor as part of the restructuring. While other business units were impacted
by the reorganization, this was the primary factor in lower year over year sales
and marketing costs.

         General and Administrative. Our general and administrative costs were
$9.7 million, or 7.7% of total revenue, for the three months ended March 31,
2002, and were $9.7 million, or 6.8% of total revenue, for the three months
ended March 31, 2003. Our general and administrative costs were $32.6 million,
or 9.0% of total revenue, for the nine months ended March 31, 2002, and were
$28.7 million, or 7.0% of total revenue, for the nine months ended March 31,
2003. We continue to carefully manage our corporate expenses, resulting in
expected leverage in overhead costs.

         Depreciation and Amortization. Depreciation and amortization costs
decreased from $100.8 million for the three months ended March 31, 2002, to
$57.0 million for the three months ended March 31, 2003. Depreciation and
amortization costs decreased from $334.9 million for the nine months ended March
31, 2002 to $171.0 million for


                                       20
<PAGE>

the nine months ended March 31, 2003. In July 2002, we adopted Statement of
Financial Accounting Standards ("SFAS") 142, "Goodwill and Other Intangible
Assets." Upon adoption, goodwill is no longer subject to amortization over its
estimated useful life. Instead, goodwill is subject to at least an annual
assessment for possible impairment. We will continue to amortize all other
intangible assets, such as acquired technology, strategic agreements, trade
names, and the like, over their respective useful lives. As a result of the
change, amortization from acquisition related intangible assets has decreased
from $90.3 million for the three months ended March 31, 2002, to $46.0 million
for the three months ended March 31, 2003, and from $304.7 million for the nine
months ended March 31, 2002, to $138.3 million for the nine months ended March
31, 2003. Underlying depreciation and amortization from operating fixed assets
and internally developed product costs has increased from $10.5 million for the
three months ended March 31, 2002, to $11.0 million for the three months ended
March 31, 2003, and from $30.1 million for the nine months ended March 31, 2002,
to $32.7 million for the nine months ended March 31, 2003. The increase in
non-acquisition related depreciation and amortization is the result of continued
investment in new product innovations and fixed assets necessary to support the
continued growth of the company.

         Impairment of Intangible Assets. In the quarter ended December 31,
2001, we recorded charges totaling $155.1 million for the impairment of
intangible assets. This was the combined result of a charge of $107.4 million
for the impairment of goodwill associated with our acquisition of BlueGill
Technologies in April 2000 (currently referred to as CheckFree i-Solutions), and
of $47.7 million for the retirement of certain technology assets we acquired
from TransPoint in September 2000.

         Upon successful integration of BlueGill Technologies into the
operations of our Software business, during fiscal 2001, we established a
revenue budget for fiscal 2002 that anticipated continued rapid growth in
software license sales. We experienced a drop in demand for electronic billing
software during the quarter ended September 30, 2001; however, we did not
believe this would impact our longer-term expectations for this product line
and, therefore, in our estimation, there was no impairment at that time. When
software sales declined again in the quarter ended December 31, 2001, we
reevaluated our long-term expectations and viewed this as a triggering event
that required evaluation of possible impairment per the guidelines of SFAS 121,
"Accounting for the Impairment of Long-Lived Assets to be Disposed of." Our
tests relative to the total tangible and intangible assets related to the
i-Solutions product line revealed that the assets were in fact impaired. This
resulted in a charge of $107.4 million to write down the value of goodwill
related to the acquisition of BlueGill.

         As part of the acquisition of TransPoint in September 2000, we were
contractually required to maintain the TransPoint operating technology for up to
three years for any customer that wished to remain on the system. When valuing
the TransPoint assets, we established an intangible asset for current technology
and assigned it a three-year life. By December 31, 2001, we had migrated all of
the subscribers, billers and CSPs to our Genesis platform and the last of our
international partners gave notice of their intention to cancel their
maintenance agreement with us during the December 2001 quarter. Additionally, we
had recently concluded that components of the TransPoint technology were not
compatible with current or future planned initiatives. We viewed these as
triggering events that required the evaluation of possible impairment per SFAS
121. Our overall testing indicated that there was no impairment of the
TransPoint assets in general; however, we then evaluated SFAS 121 requirements
related to the retirement of assets and identified two technologies for which we
had no future use. We retired these two technologies, resulting in a charge of
$47.7 million in the quarter ended December 31, 2001.

         Reorganization Charge. In January 2002, we announced our plans to close
our customer care facility in San Francisco, effective April 30, 2002, which
resulted in the termination of employees at that facility. At that time we also
announced our intent to eliminate certain of our financial planning products
within our Investment Services division, which also resulted in a small
reduction of employees in our Raleigh, North Carolina office. On March 19, 2002,
we further announced the closing of our Houston and Austin, Texas offices, our
Ann Arbor, Michigan office and our Singapore office, combined with a net
reduction in force totaling 450 employees. As a result of those actions, we
incurred a charge of $15.9 million consisting primarily of severance and related
employee benefits and lease termination fees. We accounted for these actions in
accordance with Emerging Task Force (EITF) 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity."
Through March 31, 2003, we have not incurred a material change in actual costs
from our initial estimates.

         Interest. Net interest decreased from net interest expense of $1.3
million for the three months ended March 31, 2002, to net interest expense of
$1.6 million for the three months ended March 31, 2003. Net interest decreased


                                       21
<PAGE>

from net interest expense of $3.0 million for the nine months ended March 31,
2002, to net interest expense of $4.1 million for the nine months ended March
31, 2003. Net interest is composed of interest income, offset by interest
expense.

         Interest income decreased from $1.9 million for the three months ended
March 31, 2002, to $1.6 for the three months ended March 31, 2003, and decreased
from $6.6 million for the nine months ended March 31, 2002, to $5.7 million for
the nine months ended March 31, 2003. A significant increase in average invested
balances has been more than offset by a 90 basis point decrease in average
yields on a quarter over quarter and year over year bases.

         Interest expense increased slightly from $3.1 million for the three
months ended March 31, 2002, to $3.2 million for the three months ended March
31, 2003, and from $9.6 million for the nine months ended March 31, 2002, to
$9.8 million for the nine months ended March 31, 2003. The increase in interest
expense is due primarily to an increase in long-term lease obligations since
last year. Anchored by the fixed rate of 6.5% on our $172 million of outstanding
convertible debt, average interest rates have remained stable for us over these
periods.

         Loss on Investments. Due primarily to a decline in the market value of
one of our investments in a private imaging company, which has been below our
book value for over six months, we judged this to be an "other than temporary"
decline in the market value and, accordingly, in the quarter ended March 31,
2003, we recorded a charge of $1.3 million to reflect the loss. Due to a decline
in the market value of our investment in Billserv Inc., which had been below our
book basis for over six months at the time, we also judged this to be an "other
than temporary" decline in the investment and in the quarter ended December 31,
2002, we recorded a charge of $1.9 million to reflect the loss.

         Income Taxes. We recorded an income tax benefit of $19.2 million, with
an effective rate of 19.8%, for the three months ended March 31, 2002, and an
income tax benefit of $6.8 million, with an effective rate of 46.3% for the
three months ended March 31, 2003. We recorded an income tax benefit of $87.1
million, with an effective rate of 18.6%, for the nine months ended March 31,
2002, and an income tax benefit of $25.2 million, with an effective rate of
43.9%, for the nine months ended March 31, 2003. Our prior year results included
the impact of non-deductible goodwill amortization expense. With our adoption of
SFAS 142 in July 2002, we stopped amortizing goodwill. Our resulting tax rate in
fiscal 2003 is now more in line with a blended statutory rate of about 40%, with
the exception of estimated research and experimental tax credits that we have
recorded in the current year.

         Cumulative Effect of Accounting Change. On July 1, 2002, we adopted
SFAS 142, "Goodwill and Other Intangible Assets." SFAS 142 changes the
accounting for goodwill and other intangible assets. Goodwill is no longer
subject to amortization over its estimated useful life. Rather, goodwill is
subject to at least an annual assessment for impairment by applying a
fair-value-based test.

         In accordance with SFAS 142, we were required to perform a transitional
impairment test. The test was performed as of July 1, 2002. This impairment test
required us to (1) identify our reporting units, (2) determine the carrying
value of each reporting unit by assigning assets and liabilities, including
existing goodwill and intangible assets, to those reporting units, and (3)
determine the fair value of each reporting unit. If the carrying value of any
reporting unit exceeded its fair value, then the amount of any goodwill
impairment was determined through fair value analysis of each of the assigned
assets (excluding goodwill) and liabilities.

         As a result of the transitional impairment test, we determined that
goodwill associated with our i-Solutions reporting unit was impaired. We
recorded an impairment charge of $2.9 million and reflected it as a cumulative
effect of a change in accounting principle in the Unaudited Condensed
Consolidated Statement of Operations during the three- month period ended
September 30, 2002. Refer to Note 3. "Goodwill and Other Intangible Assets" in
the Notes to Unaudited Condensed Consolidated Unaudited Financial Statements For
the Three and Nine Months Ended March 31, 2002 and 2003, for further discussion
regarding the current year and expected future impact of this change on our
depreciation and amortization expense.


                                       22
<PAGE>


SEGMENT INFORMATION

         The following table sets forth revenue and operating income (loss) by
industry segment for the periods noted (in thousands):

<TABLE>
<CAPTION>
                                                      THREE MONTHS ENDED                  NINE MONTHS ENDED
                                                           MARCH 31,                          MARCH 31,
                                                  ----------------------------       ----------------------------
                                                     2002            2003               2002            2003
                                                  ------------    ------------       ------------    ------------
                                                                          (IN THOUSANDS)
<S>                                               <C>             <C>                <C>             <C>
REVENUE:
Electronic Commerce......................         $    89,773     $  104,521         $  260,240      $  299,337
Investment Services......................              20,014         20,439             59,111          60,907
Software.................................              14,799         16,341             43,248          46,797
                                                  ------------    ------------       ------------    ------------
       Total revenue.....................         $   124,586     $  141,301         $  362,599      $  407,041
                                                  ============    ============       ============    ============

OPERATING INCOME (LOSS):
Electronic Commerce......................         $    9,390      $   31,881         $   16,444      $   83,419
Investment Services......................              6,882           5,642             17,717          16,269
Software.................................              2,539           5,116              3,229          12,139
Corporate................................             (7,984)         (8,344)           (27,359)        (24,450)
Purchase accounting amortization.........            (90,293)        (45,990)          (304,721)       (138,304)
Impairment of intangible assets .........                --              --            (155,072)           --
Reorganization charge....................            (15,871)            --             (15,871)           --
Impact of warrants.......................                --              --                 --              644
                                                  ------------    ------------       ------------    ------------
       Total operating loss..............         $  (95,337)     $  (11,695)        $ (465,633)     $  (50,283)
                                                  ============    ============       ============    ============
</TABLE>


     ELECTRONIC COMMERCE. Revenue in our Electronic Commerce business increased
by $14.7 million, or 16%, from $89.8 million for the three months ended March
31, 2002, to $104.5 million for the three months ended March 31, 2003. Revenue
increased by $39.1 million, or 15%, from $260.2 million for the nine months
ended March 31, 2002, to $299.3 million for the nine months ended March 31,
2003. The increase in revenue over both periods of time is driven primarily by
an increase in transaction volume.

     At the end of our 2002 fiscal year, we introduced a series of
transaction-based metrics designed to help investors better understand trends in
our revenue base. We offer two levels of electronic billing and payment services
to our customers. Customers that utilize our Full Service offering outsource
all, or a portion of, their electronic billing and payment process to us. For
instance, a Full Service customer might not use a CheckFree hosted user
interface, but still use our full array of services, including payment
processing, payment warehouse, claims processing, e-bill, on-line proof of
payment, customer care, and other aspects of our service. Also, while a Full
Service customer might build 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 combination of both. Customers that utilize our Payment Services offering
receive a limited subset of our electronic billing and payment services.
Additionally, within the Payment Services offering, we provide services to
billers for electronic bill delivery and hosting services, as well as other
payment services such as account balance transfer.

     A third category of revenue we simply refer to as Other Electronic
Commerce. Other Electronic Commerce includes our Health and Fitness business and
other ancillary revenue sources, such as CSP and biller implementation and
consulting services. The following table provides a historical trend of revenue,
underlying transaction metrics, and subscriber metrics where appropriate, for
the Electronic Commerce business:



                                       23
<PAGE>


<TABLE>
<CAPTION>
                                                                                          THREE MONTHS ENDED
                                                                       ------------------------------------------------------
                                                                       12/31/01  3/31/02  6/30/02  9/30/02  12/31/02  3/31/03
                                                                       --------  -------  -------  -------  --------  -------
                                                                                           (In millions)
<S>                                                                     <C>     <C>      <C>       <C>      <C>     <C>
FULL SERVICE RELATIONSHIPS
  Revenue .........................................................     $ 67.2   $ 71.1    $ 74.1   $ 71.6   $ 75.1   $ 81.5
  Active subscribers...............................................        2.7      2.9       3.1      3.2      3.5      3.9
  Transactions processed...........................................       60.9     65.5      69.0     67.2     74.9     80.3

PAYMENT SERVICE RELATIONSHIPS
  Revenue .........................................................     $ 10.2   $ 10.3    $ 10.7   $ 14.7   $ 13.9   $ 12.8
  Transactions processed...........................................       15.5     16.9      18.9     29.5     30.1     31.6

OTHER ELECTRONIC COMMERCE
  Revenue .........................................................     $  8.2   $  8.3    $  9.8   $  9.7   $  9.2   $ 10.3
  Non-cash warrant impact on revenue ..............................         --       --    $ (2.7)  $  0.6       --       --

TOTALS
  Electronic Commerce revenue......................................     $ 85.6   $ 89.7    $ 91.9   $ 96.6   $ 98.2   $104.6
  Transactions processed ..........................................       76.4     82.4      87.9     96.7    105.0    111.9
</TABLE>

     We experienced generally steady growth in Full Service revenue, active
subscribers, and transactions processed until the September 30, 2002 quarter.
During the quarter ended September 30, 2002, one of our larger customers, Wells
Fargo, converted from a Full Service relationship to a Payment Service
relationship. Approximately 300,000 active subscribers and their related
transactions switched categories. Although Payment Service transactions generate
less revenue per transaction, because we provide less service, the cost per
transaction is less as well. While the shift of a customer to Payment Service
from Full Service will reduce revenue, we do not expect such a shift to have a
significant impact on our operating margin over time. Although Bank of America
accounts for over one third of our active Full Service subscribers, growth in
active subscribers and transactions processed are the result of broad growth
throughout the channel. CSP customer pricing in this category can be based on
transactions processed, the number of subscribers, or a combination of both.
Additionally, in order to share the benefits associated with scale efficiencies,
pricing is tiered in nature, whereby a customer exceeding predetermined volumes
is eligible for a lower price on a going forward basis. In addition, the mix of
customers utilizing transaction versus subscriber based pricing will have an
impact on revenue per transaction. In the latter half of the quarter ended
December 31, 2002, Bank of America reached a pricing tier discount level, and we
expect them to reach a second pricing tier discount early in the quarter ended
June 30, 2003. Our pricing with Bank of America is based on active subscribers.
In addition, as previously described, we anticipate reductions in subscribers
and/or transactions from Full Service customers Wachovia and Bank One over the
remainder of this fiscal year and fiscal 2004, which will result in lower
revenue from these customers.

     We experienced moderate growth in revenue and transactions processed in the
Payment Service category until the quarter ended September 30, 2002. As
previously mentioned, Wells Fargo converted from a Full Service relationship to
a Payment Service relationship, which caused the significant increase in revenue
and transactions in this category. We had anticipated that Chase, another large
customer already included in the Payment Services category, would begin moving
transactions to a competitor in order to meet contractually guaranteed minimum
transaction levels with that competitor. This shift did not take place as
quickly as expected, but by December 31, 2002, Chase's non-PFM volume was moved
off our system. Additionally, as previously mentioned, we started to see the
anticipated drop in transactions processed from Wells Fargo in the quarter ended
March 31, 2003, as they also are required to meet guaranteed minimum transaction
levels with a competitor. We expect further reductions from Wells Fargo over the
remainder of the fiscal year and fiscal 2004, which will result in lower revenue
from that customer. We also report revenue and transactions from electronic
bills delivered in the Payment Services category. We delivered over 8.8 million
bills in the quarter ended March 31, 2003, an increase of 184% from the quarter
ended March 31, 2002, and an increase of 30% sequentially over the 6.7 million
bills delivered in the quarter ended December 31, 2002. Because the average
revenue we receive from a presented bill is much lower than the revenue from a
bill payment transaction, changes in the mix in transactions between bills
presented and bills paid will result in variability in the underlying revenue
per transaction in this category. Additionally, we report miscellaneous
payment-only transactions from complementary products such as our account
balance transfer business in this

                                       24
<PAGE>

category. Revenue in our balance transfer business is interest sensitive,
whereby we share inherent float from the product with our customers.
Fluctuations in prevailing interest rates will also have an impact on the
average revenue per transaction we will receive and, as a result, the drop in
interest rates over the past year has had a dampening effect on our revenue and
revenue per transaction during fiscal 2003.

     Our Other Electronic Commerce revenue includes our Health and Fitness
product, which grew modestly, and other non-transaction related services such as
implementation and consulting, which increased on a quarter over quarter basis.
During the quarter ended June 30, 2002, we recorded a non-cash charge of $2.7
million against Electronic Commerce revenue associated with the probable vesting
of warrants we issued to a third party. In the quarter ended September 30, 2002,
the warrants actually vested. On the date of vesting, however, the fair value of
our stock was lower than when we calculated the initial charge. As a result, a
true-up of the value of the warrants resulted in a credit to revenue of $0.6
million in the quarter ended September 30, 2002.

     Operating income in our Electronic Commerce business, net of purchase
accounting amortization, intangible asset impairment charges, and the impact of
warrants, has improved from $9.4 million for the three months ended March 31,
2002, to $31.9 million for the three months ended March 31, 2003, and from $16.4
million for the nine months ended March 31, 2002, to $83.4 million for the nine
months ended March 31, 2003. Our ratio of electronic payments to total payments
continues to improve, from approximately 70% as of March 31, 2002, to over 74%
as of March 31, 2003. Electronic payments carry a significantly lower variable
cost per unit than paper payments and are far less likely to result in a costly
customer care inquiry or claim. The full underlying impact of improved
efficiency and quality, however, is not fully explained by a change in
electronic rate. Throughout fiscal 2002, we supported two additional
payment-processing platforms over and above our Genesis platform. We paid Bank
of America to run the legacy Bank of America platform through March 2002, as we
migrated consumers onto our more efficient Genesis platform, and cleared
outstanding customer care claims initiated on the Bank of America platform. By
March 31, 2002, we eliminated this redundant payment platform and were able to
close our San Francisco customer care facility in April 2002 and our Houston
customer care facility by June 2002. In addition, we had been operating a legacy
Austin payment processing platform. When all but a few CSPs had migrated onto
Genesis by June 2002, we were able to close our Austin facility as well. In
March 2002, we announced a corporate- wide reorganization that resulted in a
reduction in workforce, over and above the associates impacted by office
closings and platform consolidation. In total, we have eliminated between $7.0
million and $8.0 million of quarterly costs starting in the quarter ended June
30, 2002. Finally, we continue to emphasize quality improvement, which we expect
to result in further reduction in cost per transaction as we leverage the fixed
costs already invested in our Electronic Commerce business. Our focus in
Electronic Commerce in fiscal 2003 continues to be toward improved profitability
through programs designed to:

         -        drive increased consumer adoption and activation among our
                  partners;

         -        improve product design and usability;

         -        improve overall customer satisfaction; and

         -        reduce variable costs per transaction.

         While there continues to be no guarantee as to the timing or extent of
accelerating adoption of electronic billing and payment services, we believe
that with our continued efforts toward improved product and service quality,
customer satisfaction and cost efficiency, we are better positioned to maintain
our market leadership position throughout an accelerated growth cycle, should it
occur.

         INVESTMENT SERVICES. Revenue in our Investment Services business
increased modestly by $0.4 million, or 2%, from $20.0 million for the three
months ended March 31, 2002, to $20.4 million for the three months ended March
31, 2003, and increased by $1.8 million, or 3%, from $59.1 million for the nine
months ended March 31, 2002, to $60.9 million for the nine months ended March
31, 2003. The total number of portfolios managed has remained relatively flat at
approximately 1.2 million quarter over quarter and year over year. Current
revenue growth has not matched historical performance as the depressed stock
market has had a direct impact on our ability to grow revenue in this business.
Our pricing is based primarily on portfolios managed versus assets under
management, and portfolio additions continue to be offset by investors reducing
stock holdings. Additionally, we have focused on leveraging our economies of
scale leadership to secure multi-year contract extensions with certain
customers. As a result, we anticipate experiencing similar revenue growth into
our fourth fiscal quarter and beyond, until stock market performance improves.


                                       25
<PAGE>


         Operating income in our Investment Services business, net of purchase
accounting amortization, has decreased by $1.2 million, or 18%, from $6.9
million for the three months ended March 31, 2002, to $5.6 million for the three
months ended March 31, 2003, and decreased by $1.4 million, or 8%, from $17.7
million for the nine months ended March 31, 2002, to $16.3 million for the nine
months ended March 31, 2003. The decline in operating income is due to
investment spending on new product offerings and quality improvement initiatives
in anticipation of a positive turn in the economy. Throughout fiscal 2003, key
initiatives in our Investment Services business include:

         -        new product offerings (e.g., Multiple Strategy Portfolios)
                  with a shortened time to market;

         -        additional web-based products with increased functionality and
                  ease of use;

         -        build out of relationship-based service offerings in our
                  operations; and

         -        initiation of a Sigma program designed to improve quality.

         SOFTWARE. Revenue in our Software business has increased by $1.5
million, or 10%, from $14.8 million for the three months ended March 31, 2002,
to $16.3 million for the three months ended March 31, 2003, and increased by
$3.5 million, or 8%, from $43.2 million for the nine months ended March 31,
2002, to $46.8 million for the nine months ended March 31, 2003. The downturn in
the economy throughout fiscal 2002 and continuing into 2003 has caused many
businesses to curtail discretionary expenditures, which has resulted in an
overall dampening of demand for licensed software solutions. While our newer
i-Solutions electronic statement and billing software has been impacted most,
short-term demand for our reconciliation and ACH processing licenses has been
impacted as well. However, during the quarter ended December 31, 2002, we began
work on a consulting services agreement with a large bank customer in our ACH
business unit that provided greater than normal consulting revenue over the past
two quarters. Resulting services revenue was the driving factor behind growth in
the Software segment. The services engagement will continue through the
remainder of fiscal 2003, but we believe that software license sales in general
will continue to be challenging until economic conditions improve.

         Operating income in our Software business, net of purchase accounting
amortization, has increased from $2.5 million for the three months ended March
31, 2002, to $5.1 million for the three months ended March 31, 2003, and
increased from $3.2 million for the nine months ended March 31, 2002, to $12.1
million for the nine months ended March 31, 2003. On March 19, 2002, we
announced a company-wide reorganization that resulted in a net reduction in
staff. As part of these actions, we announced the closing of our Ann Arbor
office. In addition to the recurring savings that resulted from these actions,
improvements in operating income are also the result of continued efforts to
closely manage discretionary expenses in light of economic conditions.

         CORPORATE. Our Corporate segment represents expenses for legal, human
resources, finance and other various unallocated overhead expenses. In
Corporate, we incurred operating expenses of $8.0 million, or 6% of total
revenue, for the three months ended March 31, 2002, and operating expenses of
$8.3 million, or 6% of total revenue, for the three months ended March 31, 2003.
We incurred operating expenses of $27.4 million, or 8% of total revenue, for the
nine months ended March 31, 2002, and $24.5 million, or 6% of total revenue, for
the nine months ended March 31, 2003. We continue to closely manage our
corporate expenses, resulting in expected leverage in overhead costs.

         PURCHASE ACCOUNTING AMORTIZATION. The purchase accounting amortization
line represents amortization of intangible assets resulting from all of our
various acquisitions from 1996 forward. The total amount of purchase accounting
amortization has decreased from $90.3 million for the three months ended March
31, 2002, to $46.0 million for the three months ended March 31, 2003, and from
$304.7 million for the nine month period ended March 31, 2002, to $138.3 million
for the nine months ended March 31, 2003. In July 2002, we adopted SFAS 142,
"Goodwill and Other Intangible Assets." Upon adoption, goodwill is no longer
subject to amortization over its estimated useful life. Instead, goodwill is
subject to at least an annual assessment for possible impairment. All other
intangible assets, such as acquired technology, strategic agreements, trade
names, and the like, will continue to be amortized over their respective useful
lives. For comparative purposes, the following table breaks out the intangible
asset amortization by segment:

                                       26
<PAGE>
<TABLE>
<CAPTION>
                                                    THREE MONTHS ENDED                      NINE MONTHS ENDED
                                                         MARCH 31,                              MARCH 31,
                                            ------------------------------------    ----------------------------------
                                                 2002                2003               2002                2003
                                            ----------------    ----------------    --------------     ---------------
                                                                         (In thousands)

<S>                                         <C>                 <C>                 <C>                <C>
Electronic Commerce.....................    $        85,254     $        43,757     $    273,974       $      131,271
Investment Services.....................              1,576                 578            4,260                2,068
Software................................              3,463               1,655           26,487                4,965
                                            ----------------    ----------------    --------------     ---------------
    Total...............................    $        90,293     $        45,990     $    304,721       $      138,304
                                            ================    ================    ==============     ===============
</TABLE>

         IMPAIRMENT OF INTANGIBLE ASSETS. In the quarter ended December 31,
2001, we recorded charges totaling $155.1 million for the impairment of
intangible assets. This was the combined result of a charge of $107.4 million
for the impairment of goodwill associated with our acquisition of BlueGill
Technologies in April 2000 (currently referred to as CheckFree i-Solutions), and
of $47.7 million for the retirement of certain technology assets we acquired
from TransPoint in September 2000. Please refer to Impairment of Intangible
Assets in the Results of Operations section of this report for a detailed
explanation of these charges.

         REORGANIZATION CHARGE. In January 2002, we announced our plans to close
our customer care facility in San Francisco, California, effective April 30,
2002, which resulted in the termination of employees at that facility. At that
time we also announced our intent to eliminate certain of our financial planning
products within our Investment Services division, which also resulted in a small
reduction of employees in our Raleigh, North Carolina office. On March 19, 2002,
we further announced the closing of our Houston, Austin, Ann Arbor, and
Singapore offices, along with a net reduction in force totaling approximately
450 employees. As a result of these actions, we incurred a charge of $15.9
million consisting primarily of severance and related employee benefits and
lease termination fees. We accounted for these actions in accordance with
Emerging Issues Task Force (EITF) abstract number 94-3, "Liability Recognition
for Certain Employee Termination Benefits and Other Costs to Exit an Activity."
Since then, there has been no material change to the estimated total cost of
these actions.

         IMPACT OF WARRANTS. During the quarter ended June 30, 2002, we recorded
a non-cash charge of $2.7 million against revenue resulting from the probable
vesting of warrants issued to a third party. In the quarter ended September 30,
2002, the warrants actually vested. On the date of vesting, however, the fair
value of our stock was lower than at June 30, 2002, when we calculated the
initial charge. As a result, a true-up of the value of the warrants resulted in
a credit to revenue of $0.6 million in the quarter ended September 30, 2002. The
charge, and the true-up credit, were based on a Black-Scholes valuation of the
warrants and were accounted for as a net charge to revenue in accordance with
Emerging Issues Task Force ("EITF") 01-09, "Accounting for Consideration Given
by a Vendor to a Customer."

LIQUIDITY AND CAPITAL RESOURCES

         The following chart summarizes our Consolidated Statement of Cash Flows
for the three and nine months ended March 31, 2003:

<TABLE>
<CAPTION>
                                                                                  THREE MONTHS         NINE MONTHS
                                                                                      ENDED               ENDED
                                                                                 MARCH 31, 2003       MARCH 31, 2003
                                                                                 ----------------    -----------------
                                                                                            (In thousands)
<S>                                                                               <C>               <C>
Net cash provided by (used in):
   Operating activities.........................................................   $      44,865       $      115,916
   Investing activities.........................................................         (17,420)             (51,446)
   Financing activities.........................................................           1,732               (1,530)
                                                                                 ----------------    -----------------
Net increase in cash and cash equivalents.......................................   $      29,177       $       62,940
                                                                                 ================    =================
</TABLE>

                                       27
<PAGE>

         As of March 31, 2003, we have $231.3 million of cash, cash equivalents
and short-term investments on hand, and an additional $135.7 million in
long-term investments. Our balance sheet reflects a current ratio of 3.1 and
related working capital of $225.0 million. Our board of directors has approved
up to $40 million for the purpose of repurchasing shares of our common stock or
repurchases of our convertible debt between now and August 2003. At this time,
no such repurchases have taken place. We believe that existing cash, cash
equivalents and investments will be sufficient to meet our presently anticipated
requirements for the foreseeable future. To the extent that additional capital
resources are required, we have access to an untapped $30.0 million line of
credit.

         For the nine months ended March 31, 2003, we generated $115.9 million
of cash from operating activities. Of this amount, $44.9 million was generated
in the quarter ended March 31, 2003, another $47.0 million in the quarter ended
December 31, 2002, and the remaining $24.0 million in the quarter ended
September 30, 2002. During our September quarter, we typically use a significant
amount of cash for such things as payment of annual incentive compensation and
commissions related to seasonally high sales from the previous quarter. As a
result of efforts to improve our operating efficiency, we have been able to
generate an increasing amount of cash from operating activities over the past
several quarters.

         From an investing perspective, we have used $51.4 million of cash
during the nine months ended March 31, 2003. Of this amount, $28.1 million was
used for the net purchase of investments and another $20.8 million was used for
the purchase of property and equipment. The remaining $2.5 million is the net of
a $3.1 million use of cash for the capitalization of software development costs,
offset by $0.6 million in proceeds from the sale of fixed assets. We expect to
spend approximately $30 million on purchases of property and equipment for the
fiscal year ended June 30, 2003.

         From a financing perspective, we have used $1.5 million of cash during
the nine months ended March 31, 2003. Of this amount, $9.2 million was used for
principal payments under capital leases and other long-term obligations. We have
also received $7.7 million in combined proceeds from the exercise of employee
stock options and the purchase of stock under our employee stock purchase plan.

         While the timing of cash payments and collections can cause
fluctuations from quarter to quarter and capital expenditure requirements could
change, we expect to generate about $120.0 million of free cash flow for the
fiscal year ended June 30, 2003. We define free cash flow as cash flow from
operating activities less capital expenditures.

RECENT ACCOUNTING PRONOUNCEMENTS

         In August 2001, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") 143, "Accounting for
Asset Retirement Obligations." SFAS 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated retirement costs. We adopted SFAS 143 as of July 1,
2002. The adoption of this statement had no impact on our results of operations
or financial position for the nine months ended March 31, 2003.

         On July 1, 2002, we adopted SFAS 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." SFAS 144 superseded SFAS 121, "Accounting for
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" and
the accounting and reporting provisions of Accounting Principles Board ("APB")
Opinion 30, "Reporting Results of Operations - Reporting the Effects of Disposal
of a Segment of a Business and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions" for the disposal of a segment of a business. SFAS 144
addresses financial accounting and reporting for the impairment or disposal of
long-lived assets. The adoption of this statement had no impact on our results
of operations or financial position for the nine months ended March 31, 2003.

         In April 2002, the FASB issued SFAS 145, "Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." This statement eliminates the current requirement that gains and
losses on extinguishment of debt must be classified as extraordinary items in
the income statement. Instead, the statement requires that gains and losses on
extinguishment of debt be evaluated against the criteria in APB Opinion 30,
"Reporting the Results of Operations - Reporting the Effects of Disposal of a
Segment of a Business and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions" to determine

                                       28
<PAGE>


whether or not it should be classified as an extraordinary item. In addition,
the statement contains other corrections to authoritative accounting literature
in SFAS 4, 44 and 64. The changes in SFAS 145 related to debt extinguishment are
effective for our 2003 fiscal year and the other changes were effective
beginning with transactions after May 15, 2002. In August 2002, we announced
that our board of directors had authorized a repurchase program under which we
may purchase up to $40 million of shares of our common stock and convertible
notes. Should we purchase any of our convertible notes and realize a gain or
loss on the transaction, SFAS 145 will require us to evaluate the transaction
against the criteria in APB Opinion 30 to determine if the gain or loss should
be classified as an extraordinary item. If classification as an extraordinary
item is not appropriate, the gain or loss would be included as part of income
before income taxes. We have not purchased any of our convertible notes and
therefore adoption of this statement has had no impact on our results of
operations or financial position during the nine months ended March 31, 2003.

         In June 2002, the FASB issued SFAS 146, "Accounting for Costs
Associated with Exit or Disposal Activities," which addresses accounting for
reorganization and similar costs. SFAS 146 supersedes previous accounting
guidance, principally Emerging Issues Task Force ("EITF") 94-03, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (Including Certain Costs Incurred in a Restructuring)". SFAS 146
requires that the liability for costs associated with an exit or disposal
activity be recognized when the liability is incurred. Under EITF 94-03, a
liability for an exit cost was recognized at the date of a company's commitment
to an exit plan. SFAS 146 also establishes that the liability should initially
be measured and recorded at fair value. Accordingly, SFAS 146 may affect the
timing of recognizing any future reorganization costs as well as the amount
recognized. The provisions of SFAS 146 were effective for reorganization
activities initiated after December 31, 2002 and we have had no such activities
since that time.

         In November 2002, the EITF reached a consensus on Issue 00-21,
"Multiple Deliverable Revenue Arrangements." EITF 00-21 addresses certain
aspects of the accounting by a vendor for arrangements under which it will
perform multiple revenue-generating activities. It also addresses when and how
an arrangement involving multiple deliverables should be divided into separate
units of accounting. The guidance in EITF 00-21 is effective for revenue
arrangements entered into in fiscal periods beginning after June 15, 2003, with
early application permitted. Companies may elect to report the change in
accounting as a cumulative effect of a change in accounting principle in
accordance with APB Opinion 20, "Accounting Changes" and SFAS 3, "Reporting
Accounting Changes in Interim Financial Statements (an amendment of APB Opinion
No. 28)." We are in the process of evaluating the effects of EITF 00-21.

         In November 2002, the FASB issued FASB Interpretation No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others" ("FIN 45"). This interpretation
elaborates on the disclosures to be made by a guarantor in its interim and
annual financial statements about its obligations under certain guarantees that
it has issued. It also clarifies that a guarantor is required to recognize, at
the inception of a guarantee, a liability for the fair value of the obligation
undertaken in issuing the guarantee. The disclosure requirements of FIN 45 are
effective for financial statements of interim or annual periods ending after
December 15, 2002. We had no significant guarantees we were required to disclose
under FIN 45. The initial recognition and initial measurement provisions of FIN
45 are applicable on a prospective basis to guarantees issued or modified after
December 31, 2002.

         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 value based method of accounting for stock-based
employee compensation. SFAS 148 requires prominent disclosure about the effects
on reported net income of an entity's accounting policy decisions with respect
to stock-based employee compensation and amends APB Opinion 28, "Interim
Financial Reporting," to require disclosure about those effects in interim
financial information. We have included the required disclosure, including
comparisons to the same periods in the prior year, in the Notes to Unaudited
Condensed Consolidated Unaudited Financial Statements elsewhere in this report.

         In April 2003, the FASB issued SFAS 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities," which amends and clarifies
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities under Statement 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS 149 is
effective for contracts entered into or modified after


                                       29
<PAGE>

June 30, 2003. We are in the process of evaluating any effects of this new
statement.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

         The preparation of financial statements in conformity with accounting
principles generally accepted in the United States 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 condition and results of operations,
and that 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 June 30, 2002 annual report, we described the
policies and estimates relating to intangible assets, equity instruments issued
to customers and deferred income taxes as our critical accounting policies. As
of July 1, 2002, we adopted SFAS 142, "Goodwill and Other Intangible Assets."
Goodwill has always been considered an intangible asset and therefore our
critical accounting policy related to intangible assets has included goodwill.
However, as a result of SFAS 142, there are now unique accounting guidelines
related specifically to goodwill. Goodwill is no longer subject to amortization
over its estimated useful life. Rather it is now subject to at least an annual
assessment for impairment by applying a fair-value-based test. Due to the
complex judgments required by management in such an impairment evaluation, we
have added Accounting for Goodwill as a separate and distinct critical
accounting policy effective July 1, 2002. The addition of Accounting for
Goodwill as a critical accounting policy was discussed with the audit committee
of our board of directors by our senior financial management team.

         Accounting for Goodwill. Upon adoption of SFAS 142, we were required to
perform a transitional impairment test related to our goodwill balances. We
performed the test as of July 1, 2002. The impairment test required us to (1)
identify our various reporting units, (2) determine the carrying value of each
reporting unit by assigning assets and liabilities, including existing goodwill
and intangible assets, to those reporting units, and (3) determine the fair
value of each reporting unit. If we determined the carrying value of a reporting
unit exceeded its fair value, additional testing was required to see if the
goodwill carried on the balance sheet was impaired. The amount of any goodwill
impairment was determined through an analysis similar to that of a purchase
price allocation, where the fair value of each of the tangible and intangible
assets (excluding goodwill) and liabilities was compared to the fair value of
the reporting unit. The fair value of goodwill was estimated using the residual
method and compared to the carrying value of goodwill. The amount of the
goodwill impairment was equal to the carrying amount less the fair value of
goodwill. We determined two of our reporting units to correlate directly with
our Electronic Commerce and our Investment Services business segments. Although
our i-Solutions Software division has the same operating characteristics of our
other Software divisions, because it is a fairly new product and therefore not
as mature as our other Software units, we split our software segment into two
reporting units, i-Solutions Software and CFACS/ACH Software.

         We applied significant judgment in determining the fair value of each
of our reporting units as such an analysis includes projections of expected
future cash flow related specifically to the reporting unit. Our projections
included, but were not limited to, expectations of product sales and related
revenues, cost of sales, and other operating expenses supporting the reporting
unit five years into the future. Additionally, we estimated terminal values for
the reporting units, which represented the present value of future cash flow
beyond the five-year period. Finally, we assumed a discount rate that we
believed fairly represented the risk-free rate and a risk premium appropriate
for the reporting unit. Upon completion of this analysis, only one reporting
unit, i-Solutions Software, had a carrying value exceeding its fair value. This
indicated the possibility of goodwill impairment within the i-Solutions Software
reporting unit. For our Electronic Commerce, Investment Services, and ACH/CFACS
Software reporting units, we determined that a 10% fluctuation in our underlying
value drivers, either positive or negative, would not have indicated a possible
impairment in goodwill within the respective reporting unit that would have
resulted in additional transition testing.

         As a result of the possible impairment of the i-Solutions reporting
unit goodwill, we took the next step in the transitional impairment test and
assigned fair value to each of the individual assets and liabilities of the
reporting unit. We applied significant judgment in determining the fair value of
each identified intangible asset as such an analysis includes projections of
expected future cash flows related specifically to the intangible asset. The
fair value of the i-Solutions reporting unit was estimated using a combination
of the cost, market, and income approaches.

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<PAGE>

Specifically, the discounted cash flow and market multiples methodologies were
utilized to determine the fair value of the reporting unit by estimating the
present value of future cash flows of the reporting unit along with reviewing
revenue and earnings multiples for comparable publicly traded companies and
applying these to the reporting unit's projected cash flows. Fair value of each
of the assigned assets and liabilities was determined using either a cost,
market or income approach, as appropriate, for each individual asset or
liability. Upon completion of the analysis, we determined the goodwill
associated with the i-Solutions Software reporting unit to be impaired by $2.9
million and we recorded this charge as a cumulative effect of an accounting
change in the three-month period ended September 30, 2002. We performed a
sensitivity analysis and determined that a 10% decrease in the underlying
estimates driving the fair value of intangible assets would have increased the
impairment charge to approximately $4.2 million. An increase of 10% in the
underlying estimates driving the fair value of intangible assets would have
decreased the impairment charge to approximately $2.1 million.

         We plan on performing our annual evaluation of possible impairment of
goodwill balances during the quarter ending June 30, 2003.

INFLATION

         We believe the effects of inflation have not had a significant impact
on our results of operations.

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, 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 management's
intent, belief and expectations, such as statements concerning our future
profitability, and our operating and growth strategy. Investors are cautioned
that all forward-looking statements involve risks and uncertainties including,
without limitation, the factors set forth under the caption "Business - Business
Risks" in the Annual Report on Form 10-K for the year ended June 30, 2002, 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 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
representations by us or any other person that our objectives and plans will be
achieved. All forward-looking statements made in this Quarterly Report are based
on information presently available to our management. We assume no obligation to
update any forward-looking statements contained herein.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         With the acquisition of BlueGill in April 2000, we obtained operations
in Canada and we maintain an office in the United Kingdom. As a result, we have
assets and liabilities outside the United States that are subject to
fluctuations in foreign currency exchange rates. Due to the start up nature of
each of these operations, however, we currently utilize the U.S. dollar as the
functional currency for all international operations. As operations in Canada
and the United Kingdom begin to generate sufficient cash flow to provide for
their own cash flow requirements, we will convert to local currency as the
functional currency in each related operating unit as appropriate. Because we
utilize the U.S. dollar as the functional currency and due to the 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 and other similar instruments.

         While our international sales represented less than 2% of our revenue
for the nine months ended March 31, 2003, we market, sell and license our
products throughout the world. As a result, our future revenue could be


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<PAGE>

somewhat affected by weak economic conditions in foreign markets that could
reduce demand for our products.

         Our exposure to interest rate risk is limited to the yield we earn on
invested cash, cash equivalents and investments and interest based revenue
earned on products such as our account balance transfer business. Our
convertible debt carries a fixed rate, as do any outstanding capital lease
obligations. Our Investment Policy currently prohibits the use of derivatives
for trading or hedging purposes.

ITEM 4.  CONTROLS AND PROCEDURES

         Within the 90 days prior to the date of this report, we carried out an
evaluation, under the supervision and with the participation of our management,
including our Chief Executive Officer along with our Chief Financial Officer, of
the effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Exchange Act Rule 13a-14. Based upon this evaluation, our
Chief Executive Officer along with our Chief Financial Officer concluded that
our disclosure controls and procedures are effective in timely alerting them to
material information relating to us (including our consolidated subsidiaries)
required to be included in our periodic SEC reports. It should be noted that the
design of any system of controls is based in part upon certain assumptions about
the likelihood of future events, and there can be no assurance that any design
will succeed in achieving its stated goals under all potential future
conditions, regardless of how remote.

         Since the date of our evaluation to the filing date of this Quarterly
Report, there have been no significant changes in our internal controls or in
other factors that could significantly affect internal controls, including any
corrective actions with regard to significant deficiencies and material
weaknesses.



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<PAGE>
PART II.  OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

         (A)      EXHIBITS.

                   EXHIBIT                           EXHIBIT
                   NUMBER                          DESCRIPTION

                    99.1       *       Certification of CEO under Section 906 of
                                       the Sarbanes-Oxley Act of 2002.

                    99.2       *       Certification of CFO under Section 906 of
                                       the Sarbanes-Oxley Act of 2002.

         (B)      REPORTS ON FORM 8-K.

         We did not file any Current Reports on Form 8-K with the Securities and
Exchange Commission during the quarter ended March 31, 2003.







                                       33
<PAGE>


                                   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 15, 2003       By:     /s/ David E. Mangum
                                  ---------------------------------------------
                                  David E. Mangum, Executive Vice President
                                  and Chief Financial Officer* (Principal
                                  Financial Officer)




Date:  May 15, 2003       By:     /s/ Joseph P. McDonnell
                                  ---------------------------------------------
                                  Joseph P. McDonnell, Vice President,
                                  Controller, and Chief Accounting Officer
                                  (Principal Accounting Officer)


*        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.


                                       34
<PAGE>


                                  CERTIFICATION

I, Peter J. Kight, certify that:

         1.       I have reviewed this quarterly report on Form 10-Q of
                  CheckFree Corporation;

         2.       Based on my knowledge, this quarterly report does not contain
                  any untrue statement of a material fact or omit to state a
                  material fact necessary to make the statements made, in light
                  of the circumstances under which such statements were made,
                  not misleading with respect to the period covered by this
                  quarterly report;

         3.       Based on my knowledge, the financial statements, and other
                  financial information included in this quarterly report,
                  fairly present in all material respects the financial
                  condition, results of operations and cash flows of the
                  registrant as of, and for, the periods presented in this
                  quarterly report;

         4.       The registrant's other certifying officer and I are
                  responsible for establishing and maintaining disclosure
                  controls and procedures (as defined in Exchange Act Rules
                  13a-14 and 15d-14) for the registrant and we have:

                  a)       designed such disclosure controls and procedures to
                           ensure that material information relating to the
                           registrant, including its consolidated subsidiaries,
                           is made known to us by others within those entities,
                           particularly during the period in which this
                           quarterly report is being prepared;

                  b)       evaluated the effectiveness of the registrant's
                           disclosure controls and procedures as of a date
                           within 90 days prior to the filing date of this
                           quarterly report (the "Evaluation Date"); and

                  c)       presented in this quarterly report our conclusions
                           about the effectiveness of the disclosure controls
                           and procedures based on our evaluation as of the
                           Evaluation Date;

         5.       The registrant's other certifying officer and I have
                  disclosed, based on our most recent evaluation, to the
                  registrant's auditors and the audit committee of registrant's
                  board of directors (or persons performing the equivalent
                  function):

                  a)       all significant deficiencies in the design or
                           operation of internal controls which could adversely
                           affect the registrant's ability to record, process,
                           summarize and report financial data and have
                           identified for the registrant's auditors any material
                           weaknesses in internal controls; and

                  b)       any fraud, whether or not material, that involves
                           management or other employees who have a significant
                           role in the registrant's internal controls; and

         6.       The registrant's other certifying officer and I have indicated
                  in this quarterly report whether or not there were significant
                  changes in internal controls or in other factors that could
                  significantly affect internal controls subsequent to the date
                  of our most recent evaluation, including any corrective
                  actions with regard to significant deficiencies and material
                  weaknesses.

Date:  May 15, 2003

                     /s/ Peter J. Kight
                     -----------------------------------------------------
                     Peter J. Kight
                     Chairman and Chief Executive Officer


                                       35
<PAGE>


                                  CERTIFICATION

I, David E. Mangum, certify that:

         1.       I have reviewed this quarterly report on Form 10-Q of
                  CheckFree Corporation;

         2.       Based on my knowledge, this quarterly report does not contain
                  any untrue statement of a material fact or omit to state a
                  material fact necessary to make the statements made, in light
                  of the circumstances under which such statements were made,
                  not misleading with respect to the period covered by this
                  quarterly report;

         3.       Based on my knowledge, the financial statements, and other
                  financial information included in this quarterly report,
                  fairly present in all material respects the financial
                  condition, results of operations and cash flows of the
                  registrant as of, and for, the periods presented in this
                  quarterly report;

         4.       The registrant's other certifying officer and I are
                  responsible for establishing and maintaining disclosure
                  controls and procedures (as defined in Exchange Act Rules
                  13a-14 and 15d-14) for the registrant and we have:

                  a)       designed such disclosure controls and procedures to
                           ensure that material information relating to the
                           registrant, including its consolidated subsidiaries,
                           is made known to us by others within those entities,
                           particularly during the period in which this
                           quarterly report is being prepared;

                  b)       evaluated the effectiveness of the registrant's
                           disclosure controls and procedures as of a date
                           within 90 days prior to the filing date of this
                           quarterly report (the "Evaluation Date"); and

                  c)       presented in this quarterly report our conclusions
                           about the effectiveness of the disclosure controls
                           and procedures based on our evaluation as of the
                           Evaluation Date;

         5.       The registrant's other certifying officer and I have
                  disclosed, based on our most recent evaluation, to the
                  registrant's auditors and the audit committee of registrant's
                  board of directors (or persons performing the equivalent
                  function):

                  a)       all significant deficiencies in the design or
                           operation of internal controls which could adversely
                           affect the registrant's ability to record, process,
                           summarize and report financial data and have
                           identified for the registrant's auditors any material
                           weaknesses in internal controls; and

                  b)       any fraud, whether or not material, that involves
                           management or other employees who have a significant
                           role in the registrant's internal controls; and

         6.       The registrant's other certifying officer and I have indicated
                  in this quarterly report whether or not there were significant
                  changes in internal controls or in other factors that could
                  significantly affect internal controls subsequent to the date
                  of our most recent evaluation, including any corrective
                  actions with regard to significant deficiencies and material
                  weaknesses.

Date:  May 15, 2003

                    /s/ David E. Mangum
                   -----------------------------------------------------
                   David E. Mangum
                   Executive Vice President and Chief Financial Officer



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