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ECHO Press Releases

FOR IMMEDIATE RELEASE

Electronic Clearing House Announces 
Record Third Quarter FY 2003 Results

Revenue Increases 25.7% to Record $10.6 Million

Agoura Hills, Calif., August 4, 2003 - Electronic Clearing House, Inc. (Nasdaq: ECHO), a leading provider of electronic payment and transaction processing services, today reported financial and operating results for the three and nine months ended June 30, 2003.

Revenue for the third quarter of fiscal 2003 was a record $10,578,000, an increase of 25.7%, as compared to $8,415,000 in the prior-year quarter.

Operating income rose to $564,000, as compared to an operating loss of $143,000 in the same period last year. The year-over-year improvement can be attributed to the significant increase in bankcard and transaction processing revenue, reduction in research and development expenditures as the Visa Point-of-Sale (POS) Check Service program moved from beta testing to implementation, and elimination of $129,000 in amortization of goodwill.

The Company reported net income of $308,000, or $0.05 per share on a fully diluted basis, in the quarter, as compared to a net loss of $168,000, or $0.03 per share, in the third quarter of fiscal 2002.

"We are pleased to announce another strong quarter of revenue growth and profitability," said Joel M. Barry, Chairman and CEO of Electronic Clearing House, Inc. "ECHO continues to make significant progress on our strategic plan by expanding our check services business and introducing our credit card agent bank program to smaller regional and community banks. During the quarter, we completed a full implementation of a major global specialty retailer, with close to 3,000 storefronts, into the Visa program. As a result of the growing client base in check services, our ACH processing volume rose threefold, a clear indication of the substantial growth we anticipate through the Visa program.

"ECHO is currently providing key processing infrastructure to eight of the ten banks participating in Visa's POS Check Service program. These banks are becoming very effective at convincing their merchants that the Visa program lowers check costs and greatly diminishes fraudulent activity. We continue to believe that the Visa POS check service program is well poised to become the industry standard for electronic check processing in the near future," Mr. Barry added.

Total processing and transaction revenue for this fiscal quarter increased 26.3% to $10,526,000 from $8,337,000 in the same period last year. For the quarter, gross margin from processing and transaction revenue increased to 32.9%, from 30.5% in the third quarter of fiscal 2002.

Bankcard processing and transaction revenue increased 24.1% to $8,612,000 for this fiscal quarter, from $6,940,000 in the third fiscal quarter 2002. This increase was mainly attributable to the organic growth from the Company's existing merchants and from new merchants generated from our marketing initiatives, such as the Company's MerchantAmerica program and other sales programs.

Check-related revenues increased 33.3% to $1,966,000 for the three months ended June 30, 2003, from $1,475,000 for the three months ended June 30, 2002, due to a 13.4% increase in check verification revenue and a 222.1% increase in other electronic check services revenue, such as check conversion services. Check conversion revenue has grown significantly in recent months as a result of broader market acceptance of the product and as a result of the growth in the Visa POS Check Services program.

"The Company generated $5,366,000 of cash from operating activities in the nine months ended June 30, 2003, as compared to $307,000 cash used in the same period last year. The cash generated was attributable to income of $810,000 before a non-cash charge of $4,707,000 due to a cumulative change in accounting principle, $3,202,000 from the net change in settlements payable and receivable, and other operating activities," continued Mr. Barry. "ECHO's balance sheet continues to improve over the prior quarter, with $5,563,000 in cash and cash equivalents, $3,294,000 in working capital, and $9,705,000 in stockholders' equity as of June 30, 2003.

"We are excited about our continued success in the growth of our bankcard processing and check processing revenue. As a result, we are projecting approximately 22% increase in revenue for fiscal 2003, as compared to fiscal 2002, and we anticipate that check-related revenue will represent nearly 20% of total revenue this year," Mr. Barry concluded.

About Electronic Clearing House, Inc. (ECHO)

Electronic Clearing House, Inc. 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.

For more information about ECHO, please visit www.echo-inc.com.

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 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 SHEETS
                              (Unaudited)

                                ASSETS
                                               June 30,  September 30,
                                                 2003         2002

Current assets:
  Cash and cash equivalents                  $ 5,563,000  $ 2,409,000
  Restricted cash                              1,112,000      906,000
  Settlement receivable                          707,000      148,000
  Accounts receivable less allowance of
   $438,000 and $431,000                       1,891,000    1,596,000
  Prepaid expenses and other assets              459,000      403,000
  Deferred tax asset                              79,000      266,000
     Total current assets                      9,811,000    5,728,000

Noncurrent assets:
  Property and equipment, net                  6,396,000    5,101,000
  Deferred tax asset                           1,634,000    2,018,000
  Other assets, less accumulated
   amortization of $293,000 and $259,000         529,000      637,000
  Goodwill, net                                      -0-    4,707,000

     Total assets                            $18,370,000  $18,191,000


                 LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Short-term borrowings and current portion
   of long-term debt                        $    625,000  $   515,000
  Accounts payable                               111,000      201,000
  Settlement payable                           4,490,000      729,000
  Accrued expenses                             1,291,000      987,000
  Deferred income                                    -0-       62,000
     Total current liabilities                 6,517,000    2,494,000

Long-term debt                                 2,148,000    2,159,000
     Total liabilities                         8,665,000    4,653,000

Commitments and contingencies

Stockholders' equity:
  Common stock, $.01 par value, 36,000,000
   authorized: 5,855,674 and 5,835,331
   shares issued; 5,816,405 and
   5,796,062 shares outstanding                   59,000       58,000
  Additional paid-in capital                  21,498,000   21,435,000
  Accumulated deficit                        (11,383,000)  (7,486,000)
  Less treasury stock at cost, 39,269
   common shares                                (469,000)    (469,000)
     Total stockholders' equity                9,705,000   13,538,000

          Total liabilities and
           stockholders' equity             $ 18,370,000  $18,191,000


                    ELECTRONIC CLEARING HOUSE, INC.
                 CONSOLIDATED STATEMENTS OF OPERATIONS
                              (Unaudited)

                           Three Months             Nine Months
                           Ended June 30,          Ended June 30,
                        2003        2002         2003         2002

Revenues:
 Processing revenue $ 5,673,000  $4,180,000  $15,559,000  $12,048,000
 Transaction
  revenue             4,853,000   4,157,000   13,837,000   12,413,000
 Other revenue           52,000      78,000      250,000      261,000
                     10,578,000   8,415,000   29,646,000   24,722,000

Costs and expenses:
 Processing and
  transaction
  expense             7,059,000   5,795,000   19,596,000   16,675,000
 Other operating
  costs                 812,000     688,000    2,329,000    2,238,000
 Research and
  development
  expense               375,000     466,000    1,042,000    1,264,000
 Selling, general
  and
  administrative
  expenses            1,768,000   1,480,000    5,123,000    5,008,000
 Amortization
  expense -
  goodwill                  -0-     129,000          -0-      385,000
 Legal settlement           -0-         -0-          -0-    2,500,000
                     10,014,000   8,558,000   28,090,000   28,070,000

Income (loss) from
 operations             564,000    (143,000)   1,556,000   (3,348,000)

Interest income           6,000      10,000       21,000       46,000
Interest expense        (51,000)    (46,000)    (150,000)     (84,000)

Income (loss)
 before provision
 for income taxes
 and cumulative
 effect of an
 accounting change      519,000    (179,000)   1,427,000   (3,386,000)

(Provision) benefit
 for income taxes      (211,000)     11,000     (617,000)   1,217,000
Income (loss)
 before cumulative
 effect of an
 accounting change      308,000    (168,000)     810,000   (2,169,000)
Cumulative effect
 of an accounting
 change to adopt
 SFAS 142                   -0-         -0-   (4,707,000)         -0-

Net income (loss)   $   308,000  $ (168,000) $(3,897,000) $(2,169,000)

Basic net earnings
 (loss) per share
 Before cumulative
  effect of
  accounting change $      0.05  $    (0.03) $      0.14  $     (0.38)
 Cumulative effect
  of accounting
  change                    -0-         -0-        (0.81)         -0-
 Basic net earnings
  (loss) per share  $      0.05  $    (0.03) $     (0.67) $     (0.38)

Diluted net
 earnings (loss)
 per share
 Before cumulative
  effect of
  accounting change $      0.05  $    (0.03) $      0.14  $     (0.38)
 Cumulative effect
  of accounting
  change                    -0-         -0-        (0.81)         -0-
 Diluted net
  earnings (loss)
  per share         $      0.05  $    (0.03) $     (0.67) $     (0.38)

Weighted average
 shares outstanding
 Basic                5,810,787   5,796,109    5,802,802    5,785,362
 Diluted              6,039,990   5,796,109    5,802,802    5,785,362


                    ELECTRONIC CLEARING HOUSE, INC.
                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (Unaudited)

                                                    Nine Months
                                                   Ended June 30,
                                                 2003         2002

Cash flows from operating activities:
 Net loss                                    $(3,897,000) $(2,169,000)

 Adjustments to reconcile net loss to net
    cash provided by (used in) operating
    activities:
   Depreciation                                  498,000      476,000
   Amortization of software                      649,000      377,000
   Amortization of goodwill                          -0-      385,000
   Provision for losses on accounts and
    notes receivable                              45,000      258,000
   Provision for obsolete inventory                  -0-      201,000
   Write-down of real estate                         -0-      100,000
   Fair value of stock issued in connection
    with directors' compensation                  21,000       45,000
   Deferred income taxes                         571,000   (1,236,000)
   Stock option compensation                      20,000          -0-
   Legal settlement                                  -0-    1,300,000
   Cumulative effect of an accounting change   4,707,000          -0-

 Changes in assets and liabilities:
   Restricted cash                              (206,000)     520,000
   Accounts receivable                          (340,000)    (110,000)
   Settlement receivable                        (559,000)     (68,000)
   Accounts payable                              (90,000)      (3,000)
   Settlement payable                          3,761,000      (60,000)
   Accrued expenses                              304,000     (315,000)
   Prepaid expenses                             (118,000)      (8,000)

   Net cash provided by (used in) operating
    activities                                 5,366,000     (307,000)

Cash flows from investing activities:
 Other assets                                     74,000      (62,000)
 Purchase of equipment and software           (2,129,000)  (1,439,000)

 Net cash used in investing activities        (2,055,000)  (1,501,000)

Cash flows from financing activities:
 Proceeds from issuance of notes payable         292,000          -0-
 Repayment of notes payable                     (133,000)    (105,000)
 Repayment of capitalized leases                (339,000)    (144,000)
 Proceeds from sale and leaseback of
    equipment                                        -0-      390,000
 Proceeds from exercise of stock options          23,000       11,000

 Net cash (used in) provided by
      financing activities                      (157,000)     152,000

Net increase (decrease) in cash                3,154,000   (1,656,000)
Cash and cash equivalents at beginning of
 period                                        2,409,000    4,147,000
Cash and cash equivalents at end of period   $ 5,563,000  $ 2,491,000
Contact: 
     Electronic Clearing House, Inc., Agoura Hills
     Donna Rehman, 818-706-8999, ext. 3033

About Electronic Clearing House, Inc. (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.

 

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

2003
2002
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

 
 

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