Agoura Hills, Calif., December 9, 2002 – Electronic Clearing House, Inc. (NASDAQ:ECHO), a leading provider of electronic payment and transaction processing services, today reported financial results for the fiscal fourth quarter and fiscal year ended September 30, 2002. 

Total revenues for fiscal 2002 were $33.3 million, an increase of 11.2% over fiscal 2001. ECHO reported a net loss for the year of $2.4 million, or $(0.41) per share, as compared to net income of $434,000, or $0.07 per share, in fiscal 2001. The loss reflects a one-time legal settlement in the amount of $2.5 million on a pre-tax basis. 

Revenues for the fourth quarter were $8.6 million, a 9.5% increase from $7.8 million in the same period last year. Fourth quarter net loss was $207,000, as compared to a loss of $37,000 in the fourth quarter of 2001. The net loss was attributable to a combination of factors, including a write-down of $80,000 in inventory, increased expenses related to the development of the Visa POS Check Services program (“Visa Program”), higher net interest expense and lower gross margin. 

Commenting on the year, Joel M. Barry, Chairman and CEO of Electronic Clearing House, said, “Fiscal 2002 was a transitional year for ECHO, during which we invested significant resources and management focus in new business initiatives that are only now beginning to make a significant contribution to revenues. After nearly two years of beta-testing and fine-tuning, we have essentially completed the development of the Visa Program platform and several of the banks participating in the pilot program are beginning to market the service to their merchants with very encouraging results.” 

Visa POS Check Services Program

Over the past two years, ECHO has devoted significant development efforts for the Visa Program, including writing and testing several point-of-sale terminal-based programs that incorporate the Visa transaction requirements, building a unique front-end transaction management system, developing and integrating a back-end transaction exchange process, and enhancing internal database verification and fraud prevention processes to assure the Company fully evaluates each check transaction before an approval or decline decision is made.

With the development and beta-testing nearing completion, several of the large financial institutions participating in the Visa pilot program have decided to move into a full implementation phase. The Company anticipates that a significant increase in transaction volume will occur due to the value proposition of the program and the proven marketing ability of the participating banks. As more banks recognize the competitive advantages of the Visa Program, the Company expects that new banks will seek to implement these services.

In addition to working with select banks, the Company is actively assisting in development initiatives with several national merchant accounts, including a major national clothing retailer with over 3,000 outlets, for the Visa Program. Additionally, the Company's primary credit card sponsoring bank, First Regional Bank (FRB), has decided to participate in the Visa Program. This enables ECHO to provide independent sales organizations with a sponsoring bank to offer the Visa Program to merchants in the marketplace. This is expected to accelerate acceptance and merchant utilization of the Visa Program and provides ECHO with a higher margin on transactional activity processed under FRB sponsorship.

Direct and Private-Label Check Services

ECHO has been developing both its direct and private-label check services business by marketing to mid-sized retail chains that can benefit most from automating check processing and verification. In fiscal 2002, the Company secured several major check management customers, including Hastings Entertainment, a national chain of 130 video and entertainment rental stores.

MERCHANTAMERICA Agent Bank Program

The Company has identified an underserved market of regional and community banks for its MERCHANTAMERICA bankcard program and is beginning to market its innovative credit card and check processing services to this new customer base. Initial reception to the bank program has been positive and has confirmed that the breadth of multiple payment options, the effective use of Internet-based reporting and, most importantly, the pricing that ECHO offers to regional and community banks is superior to other offerings in the marketplace.

Quarterly and Fiscal 2002 Financial Highlights

ECHO's total processing and transaction revenue increased 8.6% to $8.4 million for the fourth quarter this year, up from $7.8 million in the same quarter in 2001. For the year, total processing and transaction revenue increased 13.0% to $32.9 million as the volume of bankcard transactions continues to grow and ECHO continues to secure new check services accounts.

Bankcard processing and transaction revenue rose to $7.0 million for the quarter, compared to $6.6 million in the fourth quarter of 2001. ECHO reported an 8.4% increase in bankcard processing and transaction revenue of $27.3 million for fiscal 2002, as compared to $25.2 million in fiscal 2001.

Check-related revenues increased approximately 20.5% to $1.5 million in Q4 2002, as compared to $1.2 million in the prior year quarter, and grew by 34.2% to $5.8 million for the full year, as compared to $4.3 million in the prior year.

Gross margin from processing and transaction revenue decreased from 33.4% in the fourth quarter of fiscal 2001 to 28.0% for the quarter ended September 30, 2002 due to the departure of several high volume/high margin merchants combined with higher overall operating cost. For the year, gross margin from processing and transaction revenue declined to 30.8% from 33.9% in fiscal 2001.

The Company recently implemented a rate increase to its credit card processing merchants, which is expected to offset the higher operating costs and to improve the gross margin from credit card processing activities in fiscal 2003.

The Company continued to target its expenditures to support its long-term strategy to provide merchants and banks with electronic connectivity to various payment services in the credit card, debit card and check-related markets. Research and development expense increased to $455,000 in the fourth fiscal quarter, from $239,000 in the same period last year. For the year, research and development expense was $1.7 million, as compared to $1.1 million in fiscal 2001.

ECHO reported $3.2 million in working capital and $13.5 million in stockholder's equity as of September 30, 2002. The Company ended fiscal 2002 with $2.4 million in cash and cash equivalents, and $906,000 in restricted cash.

Business Outlook

Mr. Barry concluded, "We are encouraged by the operational milestones that we completed during the fourth quarter of fiscal 2002 and optimistic about the potential from our participation in the Visa Program, as well as our other growth initiatives. Based on current trends, we expect a return to positive net income in the first quarter of fiscal 2003, excluding a potentially material impairment of goodwill write-down as a result of the Company's adoption of FASB 142, `Goodwill and Other Intangible Assets.' Further, we expect to experience positive earnings for the remainder of the year as the adoption rate for check services from the Visa Program and our own direct and private-label check services business continues to grow."

About ECHO:

Electronic Clearing House, Inc. (www.echo-inc.com) provides a complete solution to the payment processing needs of merchants, banks and collection agencies. ECHO's services include debit and credit card processing, check guarantee, check verification, check conversion, check re-presentment, check collection, and inventory tracking.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Any statements set forth above that are not historical facts re 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 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, the adequacy of the Company's liquidity and financial strength to support its growth, 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

                                ASSETS
                                                    Unaudited
                                                  September 30
                                             -----------------------
                                                2002         2001
                                             ----------   ----------
Current assets:
 Cash and cash equivalents                   $2,409,000   $4,147,000
 Restricted cash                                906,000    1,410,000
 Accounts receivable less allowance
  of $431,000 and $313,000                    1,744,000    1,864,000
 Inventory                                      234,000      573,000
 Prepaid expenses and other assets              169,000      137,000
 Deferred tax asset                             266,000      128,000

    Total current assets                      5,728,000    8,259,000

Noncurrent assets:
 Property and equipment, net                  5,101,000    3,754,000
 Deferred tax asset                           2,018,000      650,000
 Other assets less accumulated
  amortization of $259,000 and $212,000         637,000    1,073,000
 Goodwill, net                                4,707,000    5,185,000

    Total assets                            $18,191,000  $18,921,000


                 LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
 Short-term borrowings and current
  portion of long-term debt                    $515,000     $240,000
 Accounts payable                               201,000      135,000
 Settlement payable to merchants                729,000      618,000
 Accrued expenses                               987,000    1,395,000
 Deferred income                                 62,000       50,000

    Total current liabilities                 2,494,000    2,438,000

Long-term debt                                2,159,000      744,000

    Total liabilities                         4,653,000    3,182,000

Stockholders' equity:
 Convertible preferred stock, $.01 par value,
  5,000,000 shares authorized:
  Series "K", -0- and 25,000 shares
  issued and outstanding                             -0-          -0-
 Common stock, $.01 par value,
  36,000,000 authorized:
  5,835,357 and 5,809,121 shares issued;
  5,796,109 and 5,769,873 shares outstanding     58,000       58,000
  Additional paid-in capital                 21,435,000   21,260,000
  Accumulated deficit                        (7,486,000)  (5,110,000)
  Less treasury stock at cost,
   39,248 common shares                        (469,000)    (469,000)

    Total stockholders' equity               13,538,000   15,739,000

    Total liabilities
     and stockholders' equity               $18,191,000  $18,921,000


                    ELECTRONIC CLEARING HOUSE, INC.
                 CONSOLIDATED STATEMENTS OF OPERATIONS

                           Unaudited                Unaudited
                       Three Months Ended      Twelve Months Ended
                          September 30,           September 30,
                        2002       2001         2002         2001
                     ----------  ----------  -----------  -----------
Revenues:
 Processing revenue  $4,315,000  $3,798,000  $16,363,000  $14,719,000
 Transaction revenue  4,113,000   3,963,000   16,526,000   14,377,000
 Terminal sales          61,000      58,000      252,000      447,000
 Other revenue           80,000       7,000      150,000      400,000

                      8,569,000   7,826,000   33,291,000   29,943,000

Costs and expenses:
 Processing and
  transaction expense 6,072,000   5,165,000   22,747,000   19,239,000
 Cost of terminals sold 151,000      74,000      588,000      419,000
 Other operating costs  623,000     609,000    2,424,000    2,468,000
 Research and
  development expense   455,000     239,000    1,719,000    1,070,000
 Selling, general
  and administrative
   expenses           1,485,000   1,678,000    6,493,000    5,760,000
 Amortization expense
  - goodwill            104,000     114,000      489,000      424,000
 Legal settlement            -0-         -0-   2,500,000           -0-

                      8,890,000   7,879,000   36,960,000   29,380,000

(Loss) income from
 operations            (321,000)    (53,000)  (3,669,000)     563,000

Interest income           9,000      34,000       55,000      187,000
Interest expense        (45,000)    (21,000)    (129,000)     (81,000)
Gain on sale of asset        -0-         -0-          -0-     350,000

(Loss) income before
 benefit (provision)
  for income taxes     (357,000)    (40,000)  (3,743,000)   1,019,000

Benefit (provision)
 for income taxes       150,000       3,000    1,367,000     (585,000)

Net (loss) income     $(207,000)   $(37,000) $(2,376,000)    $434,000

 (Loss) earnings per
  share - Basic          $(0.03)     $(0.01)      $(0.41)       $0.07

 (Loss) earnings per
  share - Diluted        $(0.03)    $( 0.01)      $(0.41)       $0.07

 Shares used in
  computing basic
  (loss) earnings
   per share          5,796,109   5,782,486    5,788,071    5,797,120

 Shares used in
  computing diluted
  (loss) earnings
   per share          5,796,109   5,782,486    5,788,071    5,963,808


                    ELECTRONIC CLEARING HOUSE, INC.
                 CONSOLIDATED STATEMENT OF CASH FLOWS

                                                    Unaudited
                                             Year Ended September 30
                                             ------------------------
                                                 2002         2001
                                             -----------  -----------
Cash flows from operating activities:
 Net (loss) income                           $(2,376,000)   $434,000
 Adjustments to reconcile net (loss)
  income to net cash provided
   by operating activities:
 Depreciation                                    640,000     488,000
 Amortization of software                        537,000     433,000
 Amortization of goodwill                        489,000     414,000
 Provisions for losses on accounts
  and notes receivables                          302,000     326,000
 Provision for obsolete inventory                300,000          -0-
 Write-down of real estate                       100,000          -0-
 Fair value of stock issued
  in connection with director's
   compensation                                   45,000      45,000
 Deferred income taxes                        (1,375,000)    436,000
 Legal settlement                              1,300,000          -0-
 Gain on sale of asset                                -0-   (350,000)
Changes in assets and liabilities,
net of effects of acquisitions:
 Restricted cash                                 504,000    (393,000)
 Accounts receivable                            (268,000)   (307,000)
 Inventory                                        39,000      21,000
 Accounts payable                                 66,000      15,000
 Settlement payable to merchants                 111,000     448,000
 Accrued expenses                               (376,000)    349,000
 Other                                            24,000      10,000

 Net cash provided by operating activities        62,000   2,349,000

Cash flows from investing activities:
 Other assets                                    (81,000)   (458,000)
 Purchase of equipment and software           (1,754,000) (1,404,000)
 Proceeds from sale of asset                          -0-    350,000
 Cash (used) acquired in acquisition                  -0-   (169,000)

 Net cash used in investing activities        (1,835,000) (1,681,000)

Cash flows from financing activities:
 Repayment of notes payable                     (151,000)   (130,000)
 Repayment of capitalized leases                (215,000)    (47,000)
 Proceeds from sales and leaseback
  of equipment                                   390,000          -0-
 Proceeds from exercise of stock options          11,000      47,000
 Repurchase of common stock                           -0-   (332,000)

 Net cash provided by (used in)
  financing activities                            35,000    (462,000)

Net (decrease) increase in cash               (1,738,000)    206,000
Cash and cash equivalents
 at beginning of period                        4,147,000   3,941,000

Cash and cash equivalents at end of period    $2,409,000  $4,147,000

Electronic Clearing House, Inc. (www.echo-inc.com) provides a complete solution to the payment processing needs of merchants, banks and collection agencies. ECHO’s services include debit and credit card processing, check guarantee, check verification, check conversion, check re-presentment, check collection, and inventory tracking.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Any statements set forth above that are not historical facts re 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 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, the adequacy of the Company’s liquidity and financial strength to support its growth, and other information detailed from time to time in the Company’s filings with the United States Securities and Exchange Commission.

Investor Contacts:

Donna Rehman, Corporate Secretary 
Electronic Clearing House, Inc.
818-706-8999, ext. 3033 
Agoura Hills, Calif. 
E-MAIL: corp@ECHO-inc.com
URL: http://www.ECHO-inc.com

Crocker Coulson, Partner
Coffin Communications Group
818-789-0100
E-MAIL: crocker.coulson@coffincg.com

Press Releases are also available by calling (800) 233-0406 ext. 3033, or by email to corp@echo-inc.com

2001
2000

Electronic Clearing House, Inc. (ECHO)
28001 Dorothy Drive
Agoura Hills, CA 91301

Phone: (800) 233-0406
Fax: (818) 991-5973
E-Mail: echo@echo-inc.com
URL: http://www.echo-inc.com