<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 December 31, 2002
                                       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: 88,883,332 shares of
Common Stock, $.01 par value, were outstanding at February 7, 2003.
<PAGE>
                                    FORM 10-Q

                              CHECKFREE CORPORATION

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                               PAGE NO.
                                                                                               --------
<S>                                                                                            <C>
PART I.  FINANCIAL INFORMATION

      Item 1.  Financial Statements.

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

                   Unaudited Condensed Consolidated Statements of Operations                      4
                      For the Three and Six Months Ended
                      December 31, 2001 and 2002

                   Unaudited Condensed Consolidated Statements of Cash Flows                      5
                      For the Six Months Ended
                      December 31, 2001 and 2002

                   Notes to Interim Condensed Consolidated Unaudited                              6
                      Financial Statements For the Three and Six Months Ended
                      December 31, 2001 and 2002

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

      Item 3.  Quantitative and Qualitative Disclosures About Market Risk.                       30

      Item 4.  Controls and Procedures.                                                          30

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.                              31

      Item 5.  Other Information.                                                               N/A

      Item 6.  Exhibits and Reports on Form 8-K.                                                 31

      Signatures.                                                                                32

      Certifications of CEO and CFO under Section 302 of the Sarbanes-Oxley Act of 2002.         33
</TABLE>


                                      2
<PAGE>
                         PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                     CHECKFREE CORPORATION AND SUBSIDIARIES
                 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                    JUNE 30,         DECEMBER 31,
                                                                                      2002              2002
                                                                                 -------------      -------------
                                                                                 (IN THOUSANDS, EXCEPT SHARE DATA)
<S>                                                                              <C>                <C>
                                     ASSETS
Current assets:
    Cash and cash equivalents................................................      $   115,009      $   148,772
    Investments..............................................................           90,958           62,030
    Restricted investments...................................................               --            3,000
    Accounts receivable, net.................................................           88,030           80,693
    Prepaid expenses and other assets........................................            8,355           10,208
    Deferred income taxes....................................................           11,816            8,203
                                                                                   -----------      -----------
        Total current assets.................................................          314,168          312,906
Property and equipment, net..................................................           95,625          105,611
Other assets:
    Capitalized software, net................................................           71,845           46,680
    Goodwill, net............................................................          530,758          529,214
    Strategic agreements, net................................................          519,275          457,304
    Other intangible assets, net.............................................           24,609           15,362
    Investments..............................................................           69,788          113,921
    Restricted investments...................................................            3,000               --
    Other noncurrent assets..................................................            8,409            7,670
                                                                                   -----------      -----------
        Total other assets...................................................        1,227,684        1,170,151
                                                                                   -----------      -----------
            Total............................................................      $ 1,637,477      $ 1,588,668
                                                                                   ===========      ===========

                        LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Accounts payable.........................................................      $    10,049      $     7,929
    Accrued liabilities......................................................           54,914           47,769
    Current portion of long-term obligations.................................            5,054            7,747
    Deferred revenue.........................................................           42,410           41,409
                                                                                   -----------      -----------
        Total current liabilities............................................          112,427          104,854
Accrued rent and other.......................................................            3,019            3,530
Deferred income taxes........................................................           39,993           15,591
Long-term obligations - less current portion.................................            3,877            7,546
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 94,281,109 shares, respectively;
        outstanding 88,085,894 and 88,737,285 shares, respectively...........              881              887
    Additional paid-in capital...............................................        2,435,310        2,441,330
    Accumulated deficit......................................................       (1,130,405)      (1,157,788)
    Unearned compensation....................................................             (125)             (95)
    Accumulated other comprehensive income...................................               --              313
                                                                                   -----------      -----------
        Total stockholders' equity...........................................        1,305,661        1,284,647
                                                                                   -----------      -----------
            Total............................................................      $ 1,637,477      $ 1,588,668
                                                                                   ===========      ===========
</TABLE>

   See Notes to Interim Unaudited Condensed Consolidated Financial Statements.


                                      3
<PAGE>
                     CHECKFREE CORPORATION AND SUBSIDIARIES
            UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED                   SIX MONTHS ENDED
                                                                 DECEMBER 31,                        DECEMBER 31,
                                                      --------------------------------     -------------------------------
                                                           2001              2002               2001              2002
                                                      --------------    --------------     --------------    -------------
                                                                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                   <C>               <C>                <C>               <C>
Revenues:
   Processing and servicing........................      $  103,530       $  116,008        $  204,453         $  230,499
   License fees....................................           7,744            6,735            11,805             10,944
   Maintenance fees................................           6,070            6,317            12,209             12,503
   Other...........................................           3,994            6,445             9,546             11,794
                                                         ----------       ----------        ----------         ----------
      Total revenues...............................         121,338          135,505           238,013            265,740
                                                         ----------       ----------        ----------         ----------

Expenses:
   Cost of processing, servicing and support.......          67,693           60,124           135,855            118,891
   Research and development........................          15,366           13,274            30,090             25,509
   Sales and marketing.............................          15,271           13,745            30,276             26,951
   General and administrative......................          11,358            8,701            22,984             19,001
   Depreciation and amortization...................         114,829           57,098           234,032            113,976
   Impairment of intangible assets.................         155,072               --           155,072                 --
                                                         ----------       ----------        ----------         ----------
       Total expenses..............................         379,589          152,942           608,309            304,328
                                                         ----------       ----------        ----------         ----------
Loss from operations...............................        (258,251)         (17,437)         (370,296)           (38,588)
Interest, net......................................          (1,186)          (1,250)           (1,715)            (2,466)
Loss on investments................................              --           (1,931)               --             (1,931)
                                                         ----------       ----------        ----------         ----------
Loss before income taxes and cumulative effect of
     accounting change.............................        (259,437)         (20,618)         (372,011)           (42,985)
Income tax benefit.................................         (44,304)          (9,411)          (67,931)           (18,496)
                                                         ----------       ----------        ----------         ----------
Loss before cumulative effect of accounting
     change........................................        (215,133)         (11,207)         (304,080)           (24,489)
Cumulative effect of accounting change.............              --               --                --             (2,894)
                                                         ----------       ----------        ----------         ----------
Net loss...........................................      $ (215,133)      $  (11,207)       $ (304,080)        $  (27,383)
                                                         ==========       ==========        ==========         ==========

Basic and diluted loss per share:
   Basic and diluted net loss per common share
     before cumulative effect of accounting
     change........................................      $    (2.47)      $    (0.13)       $    (3.49)        $    (0.28)
   Cumulative effect of accounting change..........              --               --                --              (0.03)
                                                         ----------       ----------        ----------         ----------
   Net loss per common share.......................      $    (2.47)      $    (0.13)       $    (3.49)        $    (0.31)
                                                         ==========       ==========        ==========         ==========
   Equivalent number of shares.....................          87,217           88,694            87,153             88,536
                                                         ==========       ==========        ==========         ==========
</TABLE>

   See Notes to Interim Unaudited Condensed Consolidated Financial Statements.


                                      4
<PAGE>
                     CHECKFREE CORPORATION AND SUBSIDIARIES
            UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                 SIX MONTHS ENDED
                                                                                   DECEMBER 31,
                                                                        ---------------------------------
                                                                            2001                2002
                                                                        ------------       --------------
                                                                                  (IN THOUSANDS)
<S>                                                                     <C>                <C>
Operating activities:
   Net loss........................................................     $  (304,080)       $   (27,383)
   Adjustments to reconcile net loss to net cash provided by
    operating activities:
   Depreciation and amortization...................................         234,032            113,976
   Deferred income tax provision...................................         (67,931)           (18,496)
   Impairment of intangible assets.................................         155,072                 --
   Cumulative effect of accounting change..........................              --              2,894
   Impact of warrants..............................................              --               (644)
   Loss on investments.............................................              --              1,931
   Net loss on disposition of property and equipment...............              --                333
   Change in certain assets and liabilities:
      Accounts receivable..........................................           4,354              7,337
      Prepaid expenses and other...................................             776             (1,114)
      Accounts payable.............................................          (8,962)            (2,120)
      Accrued liabilities and other ...............................          (5,922)            (4,662)
      Deferred revenue.............................................            (893)            (1,001)
                                                                        -----------        -----------
          Net cash provided by operating activities................           6,446             71,051
Investing activities:
   Purchase of property and software...............................         (13,237)           (16,377)
   Proceeds from sale of property and software.....................              --                555
   Capitalization of software development costs....................          (2,587)            (1,381)
   Purchase of investments - held to maturity......................         (47,236)           (38,031)
   Proceeds from maturities of investments - held to maturity......          43,031             73,902
   Purchase of investments - available for sale....................              --            (56,099)
   Proceeds from maturities of investments - available for sale....              --              3,405
                                                                        -----------        -----------
          Net cash used in investing activities....................         (20,029)           (34,026)
Financing activities:
   Principal payments under capital lease and other long-term
    obligations....................................................          (2,408)            (6,405)
   Proceeds from stock options exercised...........................             291              1,573
   Proceeds from employee stock purchase plan......................           2,370              1,570
                                                                        -----------        -----------
          Net cash provided by (used in) financing activities......             253             (3,262)
                                                                        -----------        -----------
Net increase (decrease) in cash and cash equivalents...............         (13,330)            33,763
Cash and cash equivalents:
   Beginning of period.............................................         124,122            115,009
                                                                        -----------        -----------
   End of period...................................................     $   110,792        $   148,772
                                                                        ===========        ===========
</TABLE>

   See Notes to Interim Unaudited Condensed Consolidated Financial Statements.


                                      5
<PAGE>
                     CHECKFREE CORPORATION AND SUBSIDIARIES
     NOTES TO INTERIM CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
          FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2001 AND 2002

         1.       BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
                  POLICIES

                  UNAUDITED INTERIM FINANCIAL INFORMATION

                  The accompanying 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
six months ended December 31, 2001 and 2002, 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
condensed consolidated unaudited 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 December 31, 2002, presentation.

                  INVESTMENTS

                  During the quarter ended September 30, 2002, the Company began
classifying certain investment purchases as available-for-sale.
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 December 31,
2002, investments available-for-sale were $52,694,000 and $53,007,000 at
amortized cost and fair value, respectively. Investments available-for-sale
represent 29.6% 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 six
months ended December 31, 2002.

                  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 six months ended December 31, 2002.

                  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


                                      6
<PAGE>
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 are effective for financial statements of interim or annual periods
ending after December 15, 2002. 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. These disclosure requirements are effective for
the Company's third quarter of fiscal 2003.


                                      7
<PAGE>
         2.       STRATEGIC AGREEMENT

                  As a result of the strategic agreement signed with Bank of
America in October 2000, Bank of America owns approximately 11% of the Company
as of December 31, 2002, 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,          DECEMBER 31,
                                                                             2002                2002
                                                                        ---------------      --------------
<S>                                                                     <C>                  <C>
Current assets:
        Accounts receivable, net.................................       $        22,632      $       23,370
                                                                        ---------------      --------------
               Total current assets..............................       $        22,632      $       23,370
                                                                        ===============      ==============
Current liabilities:
        Accrued liabilities......................................       $           808      $        3,053
        Deferred revenues........................................                   824               1,792
                                                                        ---------------      --------------
               Total current liabilities.........................       $         1,632      $        4,845
                                                                        ===============      ==============
</TABLE>

<TABLE>
<CAPTION>
                                                           THREE MONTHS ENDED             SIX MONTHS ENDED
                                                              DECEMBER 31,                   DECEMBER 31,
                                                       --------------------------    --------------------------
                                                          2001           2002           2001            2002
                                                       -----------    -----------    -----------     ----------
<S>                                                    <C>            <C>            <C>             <C>
Revenues from Bank of America:
     Processing and servicing....................      $    13,910    $    20,727    $    26,570     $   39,021
     License.....................................                -            192              -            192
     Maintenance fees............................              153             89            237            172
     Other.......................................               15          1,650             30          1,650
                                                       -----------    -----------    -----------     ----------
               Total revenues....................      $    14,078    $    22,658    $    26,837     $   41,035
                                                       ===========    ===========    ===========     ==========

Expenses paid to Bank of America:
     Cost of processing, servicing and support...      $     3,295    $         -    $    11,919     $        4
                                                       -----------    -----------    -----------     ----------
               Total expenses....................      $     3,295    $         -    $    11,919     $        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 our 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


                                      8
<PAGE>
required to see 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 six
months ended December 31, 2002.

                  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                  SIX MONTHS ENDED
                                                                   DECEMBER 31,                       DECEMBER 31,
                                                          ------------------------------     ------------------------------
                                                              2001             2002              2001             2002
                                                          -------------    -------------     -------------    -------------
<S>                                                       <C>              <C>               <C>              <C>
Loss before cumulative effect of accounting change.....   $    (215,133)   $     (11,207)    $    (304,080)   $     (24,489)
Cumulative effect of accounting change.................               -                -                 -           (2,894)
                                                          -------------    -------------     -------------    -------------
Net loss...............................................        (215,133)         (11,207)         (304,080)         (27,383)
Add back:  goodwill amortization, net of tax...........          49,809                -            99,618                -
                                                          -------------    -------------     -------------    -------------
Adjusted net loss......................................   $    (165,324)   $     (11,207)    $    (204,462)   $     (27,383)
                                                          =============    =============     =============    =============

Basic and diluted net loss per share:
     Basic and diluted net loss per common share before
         cumulative effect of accounting change........   $       (2.47)   $       (0.13)    $       (3.49)   $       (0.28)
     Cumulative effect of accounting change............               -                -                 -            (0.03)
                                                          -------------    -------------     -------------    -------------
     Net loss per common share.........................           (2.47)           (0.13)            (3.49)           (0.31)
     Goodwill amortization, net of tax.................            0.57                -              1.14                -
                                                          -------------    -------------     -------------    -------------
     Adjusted basic and diluted net loss per share.....   $       (1.90)   $       (0.13)    $       (2.35)   $       (0.31)
                                                          =============    =============     =============    =============
</TABLE>

                                      9
<PAGE>
                  The components of the Company's various amortized intangible
assets are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                JUNE 30,           DECEMBER 31,
                                                                                  2002                2002
                                                                             --------------      ---------------
<S>                                                                          <C>                 <C>
Capitalized software:
       Product technology from acquisitions and strategic agreement......    $      166,578      $       166,578
       Internal development costs........................................            24,946               26,263
                                                                             --------------      ---------------
                Total....................................................           191,524              192,841
                Less:  accumulated amortization..........................           119,679              146,161
                                                                             --------------      ---------------
                Capitalized software, net................................    $       71,845      $        46,680
                                                                             ==============      ===============

Strategic agreements:
       Strategic agreements..............................................    $      744,424      $       744,424
       Less:  accumulated amortization...................................           225,149              287,120
                                                                             --------------      ---------------
                Strategic agreements, net................................    $      519,275      $       457,304
                                                                             ==============      ===============

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               79,164
                                                                             --------------      ---------------
                Other intangible assets, net.............................    $       24,609      $        15,362
                                                                             ==============      ===============

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


                  Amortization of intangible assets totaled $47,881,000 and
$95,744,000 for the three months and six months ended December 31, 2002,
respectively. Amortization expense for the year ended June 30, 2003, and the
next four fiscal years is estimated to be as follows (in thousands):

<TABLE>
<CAPTION>
                  Fiscal Year Ending June 30,
                  <S>                                              <C>
                  2003.....................................        $  183,824
                  2004.....................................           138,683
                  2005.....................................           128,037
                  2006.....................................            42,941
                  2007.....................................            25,716
</TABLE>

                  As of December 31, 2002, the Company's only non-amortizing
intangible asset is goodwill. The changes in the carrying value of goodwill by
segment for the six months ended December 31, 2002, 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 December 31, 2002................    $    503,738      $    14,089      $    11,387     $  529,214
                                                   ============      ===========      ===========     ==========
</TABLE>


                                      10
<PAGE>
         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 quarter ended December
31, 2002, the Company determined that the decline in value of its investment in
Billserv, Inc. was other than temporary. In making that determination, the
Company considered the fact that the market value of this investment had been
below the Company's basis for a period of time exceeding six months, as well as
other financial and operating trends of Billserv, Inc. The resulting loss of
$1,931,000 is reflected in loss on investments in the accompanying Condensed
Consolidated Statement of Operations.

         5.       COMMON STOCK

                  In the six months ended December 31, 2002, 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 128,390 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.

         6.       STOCK-RELATED TRANSACTIONS WITH THIRD PARTIES

                  In October 1999, the Company entered into an agreement with
one of its customers. Under the terms of the agreement, the customer purchased
250,000 shares of the Company's stock, has been issued warrants on one million
shares, and has the ability to earn warrants on up to two million 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 increase of $644,000 was recorded as an
increase to revenue.


                                      11
<PAGE>
         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
                       -------------------------------------------------------------------------------------------
                                      DECEMBER 31, 2001                               DECEMBER 31, 2002
                       -----------------------------------------------    ----------------------------------------
<S>                    <C>               <C>              <C>            <C>              <C>              <C>
                                                             PER-                                           PER-
                           LOSS             SHARES          SHARE           LOSS             SHARES        SHARE
                       (NUMERATOR)       (DENOMINATOR)     AMOUNT        (NUMERATOR)      (DENOMINATOR)    AMOUNT
                       -----------       ------------     --------       ----------       ------------     -------
Basic EPS..........    $  (215,133)         87,217        $  (2.47)      $  (11,207)         88,694        $ (0.13)
                                                          ========                                         =======
Effect of dilutive
securities:
  Options and
warrants...........             --              --                               --              --
                       -----------       ---------                       ----------       ---------
Diluted EPS........    $  (215,133)         87,217        $  (2.47)      $  (11,207)         88,694        $ (0.13)
                       ===========       =========        ========       ==========       =========        =======
</TABLE>

<TABLE>
<CAPTION>
                                                          FOR THE SIX MONTHS ENDED
                       -------------------------------------------------------------------------------------------
                                 DECEMBER 31, 2001                                  DECEMBER 31, 2002
                       ----------------------------------------------     ----------------------------------------
<S>                    <C>               <C>              <C>            <C>              <C>              <C>
                                                           PER-                                             PER-
                          LOSS              SHARES         SHARE            LOSS             SHARES        SHARE
                       (NUMERATOR)       (DENOMINATOR)    AMOUNT         (NUMERATOR)      (DENOMINATOR)    AMOUNT
                       -----------       ------------     --------       ----------       ------------     -------
Basic EPS..........    $  (304,080)         87,153        $  (3.49)      $  (27,383)          88,536       $ (0.31)
                                                          ========                                         =======
Effect of dilutive
securities:
  Options and
warrants...........             --              --                             --                 --
                       -----------       ---------                       ----------       ----------
Diluted EPS........    $  (304,080)         87,153        $  (3.49)      $  (27,383)          88,536       $ (0.31)
                       ===========       =========        ========       ==========       ==========       =======
</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 2,954,000, 2,834,000, 1,848,000 and
1,142,000 of in-the-money options and warrants would have been included in the
diluted earnings per share calculation for the three and six months ended
December 31, 2001 and 2002, respectively. Using the treasury stock purchase
method prescribed by SFAS 128, this would have increased diluted shares
outstanding by 889,000, 1,218,000, 195,000 and 306,000 for the three and six
months ended December 31, 2001 and 2002, respectively.

                  The weighted average diluted common shares outstanding for the
three and six months ended December 31, 2001 and 2002, also exclude the effect
of approximately 6,851,000, 6,803,000, 8,643,000 and 8,968,000 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
interest expense on the convertible subordinated notes of approximately
$1,818,000 for the three months ended December 31, 2001 and 2002, and $3,637,000
for the six months ended December 31, 2001 and 2002, 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.


                                      12
<PAGE>
                  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 six months ended December
31, 2002, is as follows (in thousands):

<TABLE>
<CAPTION>
                                                   REORGANIZATION                      REORGANIZATION
                                                     RESERVE AT         CASH             RESERVE AT
                                                   JUNE 30, 2002      PAYMENTS       DECEMBER 31, 2002
                                                   --------------     ---------      -----------------
<S>                                                <C>                <C>            <C>
Severance and other employee costs......           $        4,701     $  (4,247)     $             454
Office closure and business exit costs..                    3,028        (1,785)                 1,243
Other exit costs........................                       71           (31)                    40
                                                   --------------     ---------      -----------------
     Total..............................           $        7,800     $  (6,063)     $           1,737
                                                   ==============     =========      =================
</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 $397,000 and $793,000 for the three and six
months ended December 31, 2002, respectively, which represents an after-tax
impact of $238,000 and $476,000 for the same periods. There was no impact to
earnings per share for the three months ended December 31, 2002, and the impact
to earnings per share was $(0.01) for the six months ended December 31, 2002.

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

<TABLE>
<CAPTION>
                                                                                   SIX MONTHS ENDED
                                                                                       DECEMBER 31,
                                                                                -----------------------
                                                                                   2001           2002
                                                                                ---------      --------
<S>                                                                             <C>            <C>
Interest paid ................................................................  $   6,159      $  6,022
                                                                                =========      ========
Income taxes paid.............................................................  $      47      $  1,323
                                                                                =========      ========
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............................................  $   3,585      $  3,229
                                                                                =========      ========
     Stock funding of Associate Stock Purchase Plan...........................  $   2,357      $  1,707
                                                                                =========      ========
</TABLE>

         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               SIX MONTHS ENDED
                                                              DECEMBER 31,                   DECEMBER 31,
                                                      ---------------------------      ------------------------
                                                          2001           2002             2001            2002
                                                      ----------     ----------        ----------      --------
<S>                                                   <C>            <C>               <C>             <C>
Net loss.....................................         $ (215,133)    $  (11,207)       $ (304,080)     $(27,383)
Net unrealized gains on investment securities
    available-for-sale.......................                 --            232                --           313
                                                      ----------     ----------        ----------      --------
Comprehensive loss...........................         $ (215,133)    $  (10,975)       $ (304,080)     $(27,070)
                                                      ==========     ==========        ==========      ========
</TABLE>


                                      13
<PAGE>
         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 six months ended December 31, 2001 and 2002 (in thousands):

<TABLE>
<CAPTION>
                                                             THREE MONTHS ENDED               SIX MONTHS ENDED
                                                                DECEMBER 31,                    DECEMBER 31,
                                                         --------------------------     ---------------------------
                                                             2001          2002             2001             2002
                                                         -----------     ----------     -----------      ----------
<S>                                                      <C>             <C>            <C>              <C>
Revenues:
     Electronic Commerce .............................   $    85,639     $   98,173     $   170,467      $  194,816
     Investment Services .............................        19,725         19,945          39,097          40,468
     Software ........................................        15,974         17,387          28,449          30,456
                                                         -----------     ----------     -----------      ----------
        Total.........................................   $   121,338     $  135,505     $   238,013      $  265,740
                                                         ===========     ==========     ===========      ==========
Segment operating income (loss):
     Electronic Commerce .............................   $     4,181     $   25,086     $     7,054      $   51,538
     Investment Services..............................         5,466          5,783          10,835          10,627
     Software.........................................         2,005          5,934             690           7,023
     Corporate .......................................        (9,973)        (8,083)        (19,375)        (16,106)
                                                         -----------     ----------     -----------      ----------
        Total ........................................         1,679         28,720            (796)         53,082
Purchase accounting amortization......................      (104,858)       (46,157)       (214,428)        (92,314)
Impairment of intangible assets.......................      (155,072)            --        (155,072)             --
Impact of warrants....................................            --             --              --             644
Loss on investments...................................                       (1,931)                         (1,931)
Interest, net.........................................        (1,186)        (1,250)         (1,715)         (2,466)
                                                         -----------     ----------     -----------      ----------
        Total loss before income taxes
             and cumulative effect of
             accounting change........................   $  (259,437)    $  (20,618)    $  (372,011)     $  (42,985)
                                                         ===========     ==========     ===========      ==========
</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 transactions and delivered
approximately 9.8 million electronic bills. For the quarter ended December 31,
2002, we processed approximately 105 million electronic payments and delivered
over 6.7 million electronic bills. As of December 31, 2002, there were about
eight 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 37% for the quarter ended December 31, 2002 against the same periods in the
prior year. The Electronic Commerce division accounted for approximately 72% of
our fiscal 2002 revenue.

         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 784 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 December 31, 2002, 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.


                                      15
<PAGE>
         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 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.


                                      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            SIX MONTHS ENDED
                                                            DECEMBER 31,                 DECEMBER 31,
                                                      -------------------------     ----------------------
                                                         2001            2002         2001          2002
                                                      --------        --------     ---------      --------
<S>                                                   <C>             <C>          <C>            <C>
Total Revenues:.................................         100.0%          100.0%        100.0%        100.0%

Expenses:
   Cost of processing, servicing and support....          55.8%           44.4%         57.1%         44.7%
   Research and development.....................          12.7%            9.8%         12.6%          9.6%
   Sales and marketing .........................          12.6%           10.1%         12.7%         10.1%
   General and administrative...................           9.4%            6.4%          9.7%          7.2%
   Depreciation and amortization................          94.6%           42.1%         98.3%         42.9%
   Impairment of intangible assets..............         127.8%             --          65.2%           --
                                                      --------        --------     ---------      --------
          Total expenses........................         312.8%          112.9%        255.6%        114.5%
                                                      --------        --------     ---------      --------
Loss from operations............................        -212.8%          -12.9%       -155.6%        -14.5%

Interest, net...................................          -1.0%           -0.9%         -0.7%         -0.9%
Loss on investments.............................            --            -1.4%           --          -0.7%
                                                      --------        --------     ---------      --------

Loss before income taxes and cumulative
   effect of accounting change..................        -213.8%          -15.2%       -156.3%        -16.2%

Income tax benefit..............................         -36.5%           -6.9%        -28.5%         -7.0%
                                                      --------        --------     ---------      --------
Loss before cumulative effect of accounting
    change......................................        -177.3%           -8.3%       -127.8%          9.2%
Cumulative effect of accounting change..........            --              --            --          -1.1%
                                                      --------        --------     ---------      --------
Net loss........................................        -177.3%           -8.3%       -127.8%        -10.3%
                                                      ========        ========     =========      ========
</TABLE>

         Revenues. Total revenue increased by $14.2 million, or 12%, from $121.3
million for the three months ended December 31, 2001, to $135.5 million for the
three months ended December 31, 2002, and by $27.7 million, or 12%, from $238.0
million for the six months ended December 31, 2001, to $265.7 million for the
six months ended December 31, 2002. Quarter over quarter revenue growth is
driven by 15% growth in our Electronic Commerce business, nine percent growth in
our Software business and a one percent growth in our Investment Services
business. Year over year revenue growth is driven by 14% growth in our
Electronic Commerce business, seven percent growth in our Software business and
four percent growth in our Investment Services business. The growth in our
Electronic Commerce business was driven primarily by an increase in transactions
processed from 76.4 million for the three months ended December 31, 2001, to
105.0 million for the three months ended December 31, 2002, and from 145.9
million for the six months ended December 31, 2001, to 201.7 million for the six
months ended December 31, 2002. Please refer to the SEGMENT INFORMATION section
of this report, Electronic Commerce division, for further analysis of changes in
the mix of business inherent in our transaction growth. Additionally, minimum
revenue guarantees from Microsoft and First Data Corporation have increased by
$2.3 million on a quarter over quarter basis, and by $4.5 million on a year over
year basis. Growth in Electronic Commerce revenue has been dampened somewhat by
a drop in interest rates, which has negatively impacted our interest sensitive
offerings, such as our account balance transfer product, and further by one of
our larger customers transferring its payment business to an in-house solution
during the quarter ended December 31, 2002.

         Growth in our Investment Services and Software businesses has been
hampered by poor economic conditions. Portfolios managed within Investment
Services have remained relatively flat over the past six quarters, as investors
reducing stock holdings have offset new portfolio growth. Our pricing in
Investment Services 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 investor confidence is restored in the stock
market. We have


                                      17
<PAGE>
also experienced modest growth in our Software business as the recession
continues and customers take longer than normal to evaluate discretionary
investment-spending alternatives such as third party software product offerings.
Although lower than the prior year, 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 provided a near term boost to Software revenue.
Until the economy begins to rebound, we expect to continue to experience low
growth in our Software business as well.

         Our processing and servicing revenue increased by $12.5 million, or
12%, from $103.5 million for the three months ended December 31, 2001, to $116.0
million for the three months ended December 31, 2002, and by $26.0 million, or
13%, from $204.5 million for the six months ended December 31, 2001, to $230.5
million for the six months ended December 31, 2002. We earn processing and
servicing revenue in both our Electronic Commerce and our Investment Services
business. As previously mentioned, portfolios managed have remained basically
flat over the past six 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 6.7 million electronic bills in the
quarter ended December 31, 2002, as compared to 2.2 million bills delivered 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
under the minimum levels of 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 December 31, 2001, to the three months ended
December 31, 2002, and by $4.5 million from the six months ended December 31,
2001, to the six months ended December 31, 2002. Significant 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 will reduce our revenue per active
subscriber for that customer. The pricing change had a modest impact in the
December 2002 quarter, but we will see the full impact beginning in the quarter
ended March 31, 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 than previously reported subscriber-based metrics. We
offer two basic levels of electronic billing and payment services to our
customers. Customers that utilize our Full Service offering outsource their
electronic billing and payment process to us. 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 subset of our electronic billing and payment
services. An example of a Payment Services customer may be a bank that hosts its
own bill payment warehouse and builds its own user interface into that payment
warehouse, and then uses CheckFree to process its payments. Additionally, within
the Payment Services offering, we offer services to billers that compensate us
for electronic bill delivery and hosting services, as well as other payment
services like 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 reported previously, 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
electronic bill payment transactions, and each are in various stages within this
transition process. For payment processing services, each of the three principal
banks participating in the Spectrum consortium signed multi-year transaction
processing agreements with Metavante, a payment processing division of Marshall
and Ilsley Corporation (M&I) which included guaranteed minimum transactions
levels during the contract period. As a result, each must divert payment
transactions in order to meet the minimum requirements. J.P. Morgan 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
to Metavante during the December 2002 quarter. Wells Fargo has begun directing
new electronic bill payment customers onto its in-house system, and we
anticipate that some Wells Fargo transaction volume will be routed to Metavante
during the quarter ended March 31, 2003. Wachovia-First Union recently initiated
its in-house payment warehouse, and we believe it is directing new electronic
bill pay customers to this system. Additionally, the bank recently started to
migrate legacy Wachovia bill pay customers, on a state-by-state basis, onto the
in-house system. We plan to work with both Wells Fargo and Wachovia to integrate
their payment systems with CheckFree and to enable their in-house systems for
e-Bills. For reference purposes, Wells


                                      18
<PAGE>
Fargo currently operates contractually as a Payment Services bank while Wachovia
operates as a Full Service bank.

         We understand that a fourth bank customer, Bank One, plans internally
processing "on us" payments as opposed to using CheckFree. An "on us"
transaction is a type of payment whereby a bank customer makes a bill payment to
a biller within its home bank. Bank One has also indicated its intention of
moving to an in-house payment warehouse.

         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. As an example, during the
quarter ended December 31, 2002, another in-house processing bank, Fifth Third,
executed a Full Service outsourcing agreement with CheckFree.

         Our license fee revenue decreased by $1.0 million, or 13%, from $7.7
million for the three months ended December 31, 2001, to $6.7 million for the
three months ended December 31, 2002, and decreased by $0.9 million, or seven
percent, from $11.8 million for the six months ended December 31, 2001, to $10.9
million for the six months ended December 31, 2002. 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 modestly by $0.2 million, or 4%,
from $6.1 million for the three months ended December 31, 2001, to $6.3 million
for the three months ended December 31, 2002, and by $0.3 million, or 2%, from
$12.2 million for the six months ended December 31, 2001, to $12.5 million for
the six months ended December 31, 2002. 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 moderate decreases in license sales, customer retention rates
exceeding 80% across all software business units and moderate price increases on
a year over year basis, the result is a slow growing maintenance base. Although
we defer revenue recognition on maintenance billings until cash is collected,
which can cause quarter-to-quarter fluctuations, until license sales regain
historical growth rates we expect to continue to see modest growth in
maintenance in the near term.

         Our other revenue increased by $2.4 million, or 61%, from $4.0 million
for the three months ended December 31, 2001, to $6.4 million for the three
months ended December 31, 2002, and by $2.3 million, or 24%, from $9.5 million
for the six months ended December 31, 2001, to $11.8 million for the six months
ended December 31, 2002. Other revenue consists mostly 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 $67.7 million, or 55.8% of total revenue, for the
three months ended December 31, 2001, and was $60.1 million, or 44.4% of total
revenue, for the three months ended December 31, 2002. Cost of processing,
servicing and support was $135.9 million, or 57.1% of total revenue, for the six
months ended December 31, 2001, and was $118.9 million, or 44.7% of total
revenue, for the six months ended December 31, 2002. Cost of processing,
servicing and support as a percentage of processing and servicing only revenue
(total revenue less license fees) was 59.6% for the three months ended December
31, 2001, versus 46.7% for the three months ended December 31, 2002, and was
60.1% for the six months ended December 31, 2001 versus 46.7% for the six months
ended December 31, 2002. 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 by
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


                                      19
<PAGE>
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 increased from over 68%
for the three months ended December 31, 2001, to over 73% for the three months
ended December 31, 2002. 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 focus investment on
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
modestly increased our investment in certain of these projects. We also hired
additional customer care resources in advance of seasonally high call rates that
typically take place right after the holiday season. These steps resulted in
higher processing costs in the quarter. We expect our efforts to result in
further improvements in cost per transaction in future periods.

         Research and Development. Our research and development costs were $15.4
million, or 12.7% of total revenue, for the three months ended December 31,
2001, and $13.3 million, or 9.8% of total revenue, for the three months ended
December 31, 2002. Our research and development costs were $30.1 million, or
12.6% of total revenue, for the six months ended December 31, 2001, and $25.5
million, or 9.6% of total revenue, for the six months ended December 31, 2002.
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 our quarterly costs decreased on an absolute
dollar basis, we continue to invest in product enhancement and quality
improvement programs in all three of our businesses.

         Sales and Marketing. Our sales and marketing costs were $15.3 million,
or 12.6% of total revenue, for the three months ended December 31, 2001, and
were $13.7 million, or 10.1% of total revenue, for the three months ended
December 31, 2002. Our sales and marketing costs were $30.3 million, or 12.7% of
total revenue for the six months ended December 31, 2001, and were $27.0
million, or 10.1% of total revenue for the six months ended December 31, 2002.
The previously mentioned reorganization 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 Ann Arbor office 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
$11.4 million, or 9.4% of total revenue, for the three months ended December 31,
2001, and were $8.7 million, or 6.4% of total revenue, for the three months
ended December 31, 2002. Our general and administrative costs were $23.0
million, or 9.7% of total revenue, for the six months ended December 31, 2001,
and were $19.0 million, or 7.2% of total revenue, for the six months ended
December 31, 2002. We continue to manage our corporate expenses through
attrition and discretionary cost reduction, resulting in expected leverage in
overhead costs.

         Depreciation and Amortization. Depreciation and amortization costs
decreased from $114.8 million for the three months ended December 31, 2001, to
$57.1 million for the three months ended December 31, 2002. Depreciation and
amortization costs decreased from $234.0 million for the six months ended
December 31, 2001 to $114.0 million for the six months ended December 31, 2002.
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
will be 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 $104.8 million for the
three months ended December 31, 2001, to $46.1 million for the three months
ended December 31, 2002, and from $214.4 million for the six months ended
December 31, 2001, to $92.3 million for the six months ended December 31, 2002.
Underlying depreciation and amortization from operating fixed assets and
internally developed product costs has increased from $10.0 million for the
three months ended December 31, 2001, to $10.9 million for the three months
ended December 31, 2002, and from $19.6 million for the six months ended
December 31, 2001, to $21.7 million for the six months ended December 31, 2002.
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.


                                      20
<PAGE>
         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 what 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.

         Interest. Our interest income remained flat at $2.0 million for both
the three months ended December 31, 2001, and the three months ended December
31, 2002. Interest income declined from $4.7 million for the six months ended
December 31, 2001 to $4.1 million for the six months ended December 31, 2002. In
spite of an increase in average cash and invested asset balances from December
31, 2001 to December 31, 2002, we earned flat interest income on a quarter over
quarter basis and incurred a reduction in interest income on a year over year
basis of $0.6 million as a result of significantly lower average yields.
Economic conditions have resulted in significantly lower interest rates on a
year over year basis, which has limited earnings on our invested assets.

         Our interest expense increased slightly, from $3.2 million for the
three months ended December 31, 2001, to $3.3 million for the three months ended
December 31, 2002, and from $6.4 million for the six months ended December 31,
2001, to $6.5 million for the six months ended December 31, 2002. We continue to
carry our 6 1/2% convertible bonds at a balance of $172.5 million throughout the
three and six month periods ending December 31, 2001 and 2002. As a result, our
overall average interest rate has remained fairly stable. Since last year, we
have financed certain fixed asset purchases through capital leases that have
resulted in an increase in our average outstanding debt and capital lease
obligations.

         Loss on Investments. Due to a decline in the market value of our
investment in Billserv Inc., which has been below our book basis for over six
months, we judged this to be an "other than temporary" decline in the investment
and, accordingly, in the quarter ended December 31, 2002, we recorded a charge
of $1.9 million to reflect the loss. As of December 31, 2002, the market value
of this investment is approximately $0.2 million.

         Income Taxes. We recorded an income tax benefit of $44.3 million, with
an effective rate of 17.1%, for the three months ended December 31, 2001, and an
income tax benefit of $9.4 million, with an effective rate of 45.6% for the
three months ended December 31, 2002. We recorded an income tax benefit of $67.9
million, with an effective rate of 18.3%, for the six months ended December 31,
2001, and an income tax benefit of $18.5 million, with an effective rate of
43.0%, for the six months ended December 31, 2002. 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
effective tax rate is now more in line with a blended statutory rate, with the


                                      21
<PAGE>
exception of a change in the estimated research and experimental tax credit that
we recorded in the quarter ended December 31, 2002.

         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 $2,894,000 and reflected it as a cumulative
effect of a change in accounting principle in the Condensed Consolidated
Statement of Operations during the three- month period ended September 30, 2002.

SEGMENT INFORMATION

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

<TABLE>
<CAPTION>
                                                      THREE MONTHS ENDED                  SIX MONTHS ENDED
                                                         DECEMBER 31,                        DECEMBER 31,
                                                  ----------------------------       ----------------------------
                                                     2001            2002               2001            2002
                                                  -----------     ------------       ------------    ------------
                                                                          (IN THOUSANDS)
<S>                                               <C>             <C>                <C>            <C>
OPERATING REVENUE:
Electronic Commerce......................         $    85,639     $    98,173        $  170,467     $  194,816
Investment Services......................              19,725          19,945            39,097         40,468
Software.................................              15,974          17,387            28,449         30,456
                                                  -----------     -----------        ----------     ----------
       Total Operating Revenue...........         $   121,338     $   135,505        $  238,013     $  265,740
                                                  ===========     ===========        ==========     ==========

OPERATING INCOME (LOSS):
Electronic Commerce......................         $     4,181     $    25,086        $    7,054     $   51,538
Investment Services......................               5,466           5,783            10,835         10,627
Software.................................               2,005           5,934               690          7,023
Corporate................................              (9,973)         (8,083)          (19,375)       (16,106)
Purchase accounting amortization.........            (104,858)        (46,157)         (214,428)       (92,314)
Impairment of intangible assets .........            (155,072)             --          (155,072)            --
Impact of warrants.......................                   -              --                 -            644
                                                  -----------    ------------        ----------     ----------
       Total Operating Loss..............         $  (258,251)     $ ( 17,437)       $ (370,296)    $  (38,588)
                                                  ===========    ============        ==========     ==========
</TABLE>

         ELECTRONIC COMMERCE. Revenue in our Electronic Commerce business
increased by $12.6 million, or 15%, from $85.6 million for the three months
ended December 31, 2001, to $98.2 million for the three months ended December
31, 2002. Revenue increased by $24.3 million, or 14%, from $170.5 million for
the six months ended December 31, 2001, to $194.8 million for the six months
ended December 31, 2002. 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 than previously reported subscriber-based metrics. We offer two
levels of electronic billing and payment services to our customers. Customers
that utilize our Full Service offering outsource their electronic billing and
payment process to us, including customer care. 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


                                      22
<PAGE>
both. Customers that utilize our Payment Services offering receive a subset of
our electronic billing and payment services. An example of a Payment Services
customer may be a bank that hosts its own bill payment warehouse and builds its
own user interface into that payment warehouse, and then uses CheckFree to
process its payments. Additionally, within the Payment Services offering, we
provide services to Biller customers that compensate us for electronic bill
distribution and hosting services, as well as other payment services like
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:

<TABLE>
<CAPTION>
                                                                               THREE MONTHS ENDED
                                                  ---------------------------------------------------------------------------
                                                  9/30/01       12/31/01      3/31/02      6/30/02       9/30/02     12/31/02
                                                  -------       --------      -------      -------       -------     --------
                                                                                (In millions)
<S>                                              <C>         <C>           <C>           <C>          <C>           <C>
FULL SERVICE RELATIONSHIPS
  Revenue.............................           $  65.0     $    67.2     $    71.1     $   74.1     $    71.6     $   75.1

  Active Subscribers..................               2.6           2.7           2.9          3.1           3.2          3.5

  Transactions processed..............              56.1          60.9          65.5         69.0          67.2         74.9

PAYMENT SERVICE RELATIONSHIPS

  Revenue.............................           $   9.9     $    10.2     $    10.3     $   10.7     $    14.7     $   13.9

  Transactions processed..............              13.4          15.5          16.9         18.9          29.5         30.1

OTHER ELECTRONIC COMMERCE

  Revenue.............................           $  10.0     $     8.2     $     8.3     $    9.8     $     9.7     $    9.2

  Non-cash warrant impact on revenue..                --            --            --     $   (2.7)    $     0.6           --

TOTALS

  Electronic Commerce revenue.........           $  84.9     $    85.6     $    89.7     $   91.9     $    96.6     $   98.2

  Transactions processed..............              69.5          76.4          82.4         87.9          96.7        105.0
</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 operating margin over time. Although Bank of America
accounts for approximately 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. We saw part of the impact of this discount in the latest
quarter, and the full impact will be seen in the quarter ended March 31, 2003.
Our pricing with Bank of America is based on subscribers. In addition, as
previously described in the Processing and Servicing Fee Revenue section of this
report, we anticipate reductions in subscribers and/or transactions from Full
Service customers Wachovia-First Union and Bank One over the course of the rest
of this fiscal year, which will result in lower revenue from these customers.

         We experienced consistent growth in revenue and transactions processed
in the Payment Services category until the September 30, 2002 quarter. As
previously mentioned, Wells Fargo converted from a Full Service relationship to
a Payment Services relationship, which caused the significant increase in
revenue and transactions in this category. We had anticipated that J.P. Morgan
Chase ("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,


                                      23
<PAGE>
but by December 31, 2002, all of Chase's non-PFM volume was moved off of our
system. While the delay in movement provided unexpected revenue in previous
quarters, the move ultimately had a dampening effect on growth in the quarter
ended December 31, 2002, as nearly 3.0 million quarterly transactions and the
related revenue were removed from the Payment Services category. Growth in
Payment Services revenue and transactions processed are the combined result of
broad underlying growth of CSPs in this category, the shift of Wells Fargo from
a Full Service relationship into a Payment Services relationship, and growth in
electronic bills delivered, which are accounted for in this category as well. In
addition, as previously described in the Processing and Servicing Revenue
section of this report, we anticipate reductions in subscribers and/or
transactions from Wells Fargo over the course of the remainder of this fiscal
year, which will result in lower revenue from that customer. We delivered over
6.7 million bills in the quarter ended December 31, 2002, an increase of over
200% from the quarter ended December 31, 2001, and an increase of 41%
sequentially over the 4.8 million bills delivered in the quarter ended September
30, 2002. Changes in the mix of the various transactions in this category will
tend to result in variability in the underlying revenue per transaction.

         The 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 declined 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 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.

         Operating income in our Electronic Commerce business, net of purchase
accounting amortization, intangible asset impairment charges and the impact of
warrants, has improved from $4.2 million for the three months ended December 31,
2001, to $25.1 million for the three months ended December 31, 2002, and from
$7.1 million for the six months ended December 31, 2001, to $51.5 million for
the six months ended December 31, 2002. We continue to drive improved efficiency
and quality within our Genesis processing platform and operations. Our ratio of
electronic payments to total payments has improved from over 68% as of December
31, 2001, to over 73% as of December 31, 2002. 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 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 Genesis and cleared outstanding customer care claims. By
March 2002, we eliminated this redundant payment platform and were able to close
our San Francisco customer care facility by 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. Finally, 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. Our focus in the Electronic Commerce business in fiscal 2003 continues
to be geared 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 on 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 by $0.2 million, or 1%, from $19.7 million for the three months ended
December 31, 2001, to $19.9 million for the three months ended December 31,
2002, and increased by $1.4 million, or 4%, from $39.1 million for the six
months ended December 31, 2001, to $40.5 million for the six months ended
December 31, 2002. The total number of accounts managed has remained


                                      24
<PAGE>
relatively flat at 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 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 third fiscal quarter and
beyond, until stock market performance improves.

         Operating income in our Investment Services business, net of purchase
accounting amortization, has increased by $0.3 million, or 6%, from $5.5 million
for the three months ended December 31, 2001, to $5.8 million for the three
months ended December 31, 2002, and decreased by $0.2 million, or 2%, from $10.8
million for the six months ended December 31, 2001, to $10.6 million for the six
months ended December 31, 2002. With revenue improving only modestly, the
increase in operating income on a quarter over quarter basis is due to the
reversal of a formula based bad debt reserve that was originally established in
the quarter ended September 30, 2002. On a year over year basis, the modest
decline in operating income is due to investment spending on new product
offerings and quality improvement initiatives.

         Throughout fiscal 2003, the key initiatives in the Investment Services
division 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;

         -        continued development of a relational database allowing our
                  clients easier access to their data; and

         -        initiation of a Sigma program to improve quality.

         SOFTWARE. Revenue in our Software business has increased by $1.4
million, or 9%, from $16.0 million for the three months ended December 31, 2001,
to $17.4 million for the three months ended December 31, 2002, and increased by
$2.0 million, or 7%, from $28.5 million for the six months ended December 31,
2001, to $30.5 million for the six months ended December 31, 2002. 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. 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 improved from $2.0 million for the three months ended December
31, 2001, to $5.9 million for the three months ended December 31, 2002.
Operating income has improved from $0.7 million for the six months ended
December 31, 2001, to $7.0 million for the six months ended December 31, 2002.
Improvements in operating results are primarily the result of continued efforts
to manage discretionary expenses in light of the current economy. On March 19,
2002, we announced a company-wide reorganization that resulted in a net
reduction in force. As part of these actions, we announced the closing of our
Ann Arbor, Michigan office. The recurring savings that resulted from these
actions have carried into fiscal 2003.

         CORPORATE. Our Corporate segment represents charges for legal, human
resources, finance and other various unallocated overhead expenses. In
Corporate, we incurred operating expenses of $10.0 million, or 8.2% of total
revenue, for the three months ended December 31, 2001, and operating expenses of
$8.1 million, or 6.0% of total revenue for the three months ended December 31,
2002. We incurred operating expenses of $19.4 million, or 8.1% of total revenue,
for the six months ended December 31, 2001, and of $16.1 million, or 6.1% of
total revenue, for the six months ended December 31, 2002. We continue to manage
our corporate expenses through attrition and discretionary cost reduction,
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


                                      25
<PAGE>
accounting amortization has decreased from $104.9 million for the three months
ended December 31, 2001, to $46.2 million for the three months ended December
31, 2002, and from $214.4 million for the six month period ended December 31,
2001, to $92.3 million for the six months ended December 31, 2002. In July 2002,
we adopted SFAS 142, "Goodwill and Other Intangible Assets." Upon adoption,
goodwill was no longer subject to amortization over its estimated useful life.
Instead, goodwill will be 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:

<TABLE>
<CAPTION>
                                                THREE MONTHS ENDED               SIX MONTHS ENDED
                                                    DECEMBER 31,                    DECEMBER 31,
                                            ---------------------------     --------------------------
                                                 2001          2002            2001             2002
                                            -----------     -----------     -----------      ---------
                                                                  (In thousands)
<S>                                         <C>             <C>             <C>              <C>
Electronic Commerce...........              $    94,004     $    43,757     $   188,720      $  87,514
Investment Services...........                    1,342           1,655           2,684          3,310
Software......................                   11,512             745          23,024          1,490
                                            -----------     -----------     -----------      ---------
   Total......................              $   104,858     $    46,157     $   214,428      $  92,314
                                            ===========     ===========     ===========      =========
</TABLE>

         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 six months ended December 31, 2002:

<TABLE>
<CAPTION>
                                                       THREE MONTHS    SIX MONTHS
                                                          ENDED          ENDED
                                                       DECEMBER 31,   DECEMBER 31,
                                                           2002           2002
                                                       ------------   ------------
                                                            (In thousands)
      <S>                                               <C>             <C>
      Net cash provided by (used in):
         Operating activities.....................      $   47,004    $  71,051
         Investing activities.....................         (15,694)     (34,026)
         Financing activities.....................           1,881       (3,262)
                                                        ----------     --------
      Net increase in cash and cash equivalents         $   33,191     $  33,763
                                                        ==========     =========
</TABLE>

         As of December 31, 2002, we have $213.8 million of cash, cash
equivalents and short-term investments on hand, and an additional $113.9 million
in long-term investments. Our balance sheet reflects a current ratio of 3.0 and
related working capital of $208.1 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 six months ended December 31, 2002, we generated $71.1 million
of cash from operating activities. Of this amount, $47.0 million was generated
in the quarter ended December 31, 2002, and the remaining $24.1


                                      26
<PAGE>
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 $34.0 million of cash
during the six months ended December 31, 2002. Of this amount, $16.8 million was
used for the net purchase of investments and another $16.4 million was used for
the purchase of property and equipment. The remaining $0.8 million is the net of
a $1.4 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 $3.3 million of cash during
the six months ended December 31, 2002. Of this amount, $6.4 million was used
for principal payments under capital leases and other long-term obligations. We
have also received $3.1 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 in excess of $100.0 million of free cash flow for
the fiscal year ended June 30, 2003. For purposes of this discussion, we define
free cash flow as cash flow from operations 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 six months ended December 31, 2002.

         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 six months ended December 31, 2002.

         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 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 six months
ended December 31, 2002.


                                      27
<PAGE>
         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)." We are 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 are effective for
financial statements of interim or annual periods ending after December 15,
2002. 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. These disclosure requirements are effective for our third
quarter of fiscal 2003.

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 they require our most difficult, subjective or complex judgments, often as a
result of the need to make estimates about the effect of matters that are
inherently uncertain. In our 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.


                                      28
<PAGE>
         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. 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.

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


                                      29
<PAGE>
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 two percent of our
revenue for the six months ended December 31, 2002, we market, sell and license
our products throughout the world. As a result, our future revenue could be
somewhat affected by weak economic conditions in foreign markets that could
reduce demand for our products.

         Our exposure to interest rate risk 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.


                                      30
<PAGE>
PART II. OTHER INFORMATION

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         The Annual Meeting of Stockholders of the Company was held on
Wednesday, November 6, 2002, for the following purposes:

         (1)      To elect three Class I Directors of the Company to serve for a
                  three-year term expiring at the 2005 Annual Meeting of
                  Stockholders;

         (2)      To approve and adopt the Company's 2002 Stock Incentive Plan;
                  and

         (3)      To consider and act upon a proposed amendment to the Company's
                  Associate Stock Purchase Plan to increase the number of shares
                  of the Company's common stock reserved and available for sale
                  under the Associate Stock Purchase Plan from 1,000,000 shares
                  to 2,000,000 shares.

         Management's proposals as presented in the proxy statement was approved
with the following vote:

         Proposal 1:       The election of three Class I Directors of the
                           Company, to serve until the 2005 Annual Meeting of
                           Stockholders or until his successor is elected and
                           qualified.

<TABLE>
<CAPTION>
                                                   NUMBER OF SHARES VOTED
                              ---------------------------------------------------------------
                                                           WITHHOLD
                                      FOR                  AUTHORITY                 TOTAL
                                  ----------               ---------               ----------
<S>                               <C>                      <C>                     <C>
William P. Boardman               76,951,550               2,965,106               79,916,656
James D. Dixon                    76,692,682               3,223,974               79,916,656
Henry C. Duques                   77,612,825               2,303,831               79,916,656
</TABLE>

         Proposal 2:       The approval and adoption of the Company's 2002 Stock
                           Incentive Plan.

<TABLE>
<CAPTION>
                                               NUMBER OF SHARES VOTED
              ------------------------------------------------------------------------------------
               FOR                        AGAINST                  ABSTAIN                TOTAL
              ----------                 ----------                --------             ----------
              <S>                        <C>                       <C>                  <C>
              50,401,376                 15,746,075                286,747              66,434,198
</TABLE>

        Proposal 3:        The approval of a proposed amendment to the
                           Company's Associate Stock Purchase Plan to increase
                           the number of shares of the Company's common stock
                           reserved and available for sale under the Associate
                           Stock Purchase Plan from 1,000,000 shares to
                           2,000,000 shares.

<TABLE>
<CAPTION>
                                             NUMBER OF SHARES VOTED
              ------------------------------------------------------------------------------------
               FOR                        AGAINST                  ABSTAIN                TOTAL
              ----------                  ---------                --------             ----------
              <S>                         <C>                      <C>                  <C>
              64,928,102                  1,185,589                320,507              66,434,198
</TABLE>

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

         (a)      EXHIBITS.

                  None.

         (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 December 31, 2002.


                                      31
<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:  February 12, 2003        By: /s/ David E. Mangum
                                    -------------------------------------------
                                    David E. Mangum, Executive Vice President
                                    and Chief Financial Officer*
                                    (Principal Financial Officer)

Date:  February 12, 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.


                                      32
<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:  February 12, 2003

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


                                      33
<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: February 12, 2003

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


                                      34