ECHO Merchant Processing Services

ECHO Press Releases

FOR IMMEDIATE RELEASE

Electronic Clearing House (ECHO) Announces
First Quarter FY 2002 Results

Revenue increases 13.5% to $7.9 million

Agoura Hills Calif., February 7, 2002 – Electronic Clearing House, Inc. (NASDAQ:ECHO) reported revenue of $7,921,000 in the first quarter of fiscal 2002, an increase of 13.5% as compared to $6,979,000 in the prior year quarter.

The Company reported a net loss for the quarter of $93,000, or $0.02 per diluted share, as compared to net earnings of $22,000, or $0.00 per share, for the same period last year. The loss reflected a high level of product development and program management expense in support of the Company’s Visa POS check service program during the quarter, as well as over $300,000 in litigation expense related to the Premier Lifestyle International Corporation lawsuit as disclosed in previous filings.

Total processing and transaction revenue for this fiscal quarter increased 15.7%, from $6,780,000 in fiscal 2001 to $7,846,000 in fiscal 2002.

Bankcard processing and transaction revenue increased 8.9% to $6,595,000 for this fiscal quarter, from $6,056,000 in the first fiscal quarter 2001. This increase was mainly attributable to an 8.8% increase in bankcard processing volume as a result of the Company’s merchant growth despite a decrease in overall consumer spending in this quarter.

Check-related revenues increased 61.3% to $1,326,000, from $822,000 for the three months ended December 31, 2000. Terminal sales and lease revenue for the three months ended December 31, 2001 was $75,000, which represents a 23.5% decrease from $98,000 for the same fiscal quarter last year.

As a result of the changing revenue mix, the Company’s gross margin improved to 35.6% in the quarter, as compared to 31.9% in the first quarter of fiscal 2001.

“During the quarter, ECHO continued to make excellent progress in implementing our relationship with VISA to complete development and testing of their POS check service. Pilot programs with several member banks are moving forward as planned. We continue to demonstrate the security and scalability of our third-party check verification and ACH backbone. And we expect the program will be ready for broader roll out early in the third calendar quarter of 2002,” said Joel M. Barry, Chairman and CEO of Electronic Clearing House, Inc.

“The continued rapid growth in our check-related services and 3.7% improvement in gross margin confirm that we are on track with our business strategy. The Company generated $496,000 of positive cash flow from operations in the first fiscal quarter. We anticipate that ECHO will continue to experience solid top-line growth and a high level of development expense in the second fiscal quarter, as we continue to invest in new services that are the key to our future growth.”

Mr. Barry noted that the Company’s balance sheet continues to be strong, with $4.2 million in cash, $15.7 million in stockholders’ equity, and $733,000 in long-term debt as of December 31, 2001. Inventories and receivables both declined in the quarter despite the increased revenue base.

On January 25, 2002, closing arguments in Premier Lifestyle International Corporation v. Electronic Clearing House, Inc. concluded and the case was submitted to the judge for deliberations. The judge strongly encouraged the parties to enter into settlement negotiations during her deliberation. Although management, based upon the advice of legal counsel, believes that the Company has meritorious defenses to this lawsuit, there is no assurance that the ultimate resolution of these claims will not result in material liability to the Company.

[Financial Tables Below]

About ECHO:

Electronic Clearing House Inc. provides debit and credit card processing, check guarantee, check verification, check conversion, check re-presentment, check collection and inventory tracking to more than 60,000 retail merchants and U-Haul dealers across the nation.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Any statements set forth above that are not historical facts are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Potential risks and uncertainties include, but are not limited to, such factors as successful completion of the Visa POS check service pilot program, acceptance of the service by Visa member banks, fluctuations in demand for the company's products and services, the introduction of new products and services, the company's ability to maintain customer and strategic business relationships, technological advancements, impact of competitive products and services and pricing, growth in targeted markets and other information detailed from time to time in the company's filings with the United States Securities and Exchange Commission.

ELECTRONIC CLEARING HOUSE, INC.
CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS

	December 31,	September 30,
	2001	2001

Current assets:
Cash and cash equivalents	$ 4,165,000	$ 4,147,000
Restricted cash	1,304,000	1,410,000
Accounts receivable less allowance of $460,000 and $313,000	1,774,000	1,864,000
Inventory, net	560,000	573,000
Prepaid expenses and other assets	177,000	137,000

Total current assets	7,980,000	8,131,000

Noncurrent assets:
Long term receivables	16,000	21,000
Property and equipment, net	3,985,000	3,754,000
Real estate held for investment, net	252,000	252,000
Deferred tax assets	758,000	778,000
Other assets	803,000	800,000
Goodwill, net	5,059,000	5,185,000

Total assets	$18,853,000	$ 18,921,000


LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Short-term borrowings and current portion of long-term debt $ 254,000		$ 240,000
Accounts payable	169,000	135,000
Settlement payable to merchants	695,000	618,000
Accrued expenses	1,296,000	1,395,000
Deferred income	50,000	50,000

Total current liabilities	2,464,000	2,438,000

Long-term debt	733,000	744,000

Total liabilities	3,197,000	3,182,000

Stockholders' equity:
Convertible preferred stock, $.01 par value, 5,000,000 shares authorized:
Series "K", 25,000 and 25,000 shares issued and outstanding -0-		-0-
Common stock, $.01 par value, 36,000,000 authorized:
5,814,621 and 5,809,121 shares issued; 5,775,373 and
5,769,873 shares outstanding	58,000	58,000
Additional paid-in capital	21,271,000	21,260,000
Accumulated deficit	(5,204,000)	(5,110,000)
Less treasury stock at cost, 39,248 common shares	(469,000)	(469,000)

Total stockholders' equity	15,656,000	15,739,000

Total liabilities and stockholders' equity	$ 18,853,000	$ 18,921,000

	Three Months
	Ended December 31,
	2001	2000

REVENUES:
Processing revenue	$ 3,807,000	$ 3,588,000
Transaction revenue	4,039,000	3,192,000
Terminal sales	75,000	98,000
Other revenue	-0-	101,000
	7,921,000	6,979,000

COSTS AND EXPENSES:
Processing and transaction expense	5,049,000	4,617,000
Cost of terminals sold	76,000	96,000
Other operating costs	1,005,000	856,000
Selling, general and administrative expenses	1,739,000	1,245,000
Amortization expense - goodwill	128,000	102,000
	7,997,000	6,916,000

(Loss) income from operations	(76,000)

LIABILITIES AND STOCKHOLDERS' EQUITY