ECHO Press Releases

FOR IMMEDIATE RELEASE

Electronic Clearing House Inc. Announces
Improved Fourth Quarter FY 2003 Results

Camarillo, Calif., December 16, 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 months and fiscal year ended September 30, 2003.

Fourth Quarter Highlights:

• Revenue increases 28.3% to $11 million versus Q4 FY 2002
• Gross margin from processing and transaction revenue improved from 28% to 38%
• Operating income of $0.9 million up from a loss of $0.3 million
• Diluted earnings per share rise to $0.08 from a loss of $0.03

Revenue for the fourth quarter of fiscal 2003 was a record $10,990,000, an increase of 28.3%, as compared to $8,569,000 in the prior-year quarter.

Operating income rose to $869,000 in the fourth quarter, as compared to an operating loss of $321,000 in the same period last year. The year-over-year improvement can be primarily attributed to the 28.3% revenue growth and the improvement in gross margin from processing and transaction revenue, from 28% to 38%.

The Company reported net income of $518,000, or $0.08 per share on a fully diluted basis, in the fourth quarter of fiscal 2003, as compared to a net loss of $207,000, or $0.03 per share in the fourth quarter of fiscal 2002.

For the fiscal year ended September 30, 2003, the Company earned $0.23 per share on revenue of $40,636,000 before the cumulative effect of an accounting change to record the impairment of goodwill. This compares to a loss of $0.41 per share on revenue of $33,291,000 for the fiscal year ended September 30, 2002. Including the cumulative effect of the accounting change, the Company lost $0.58 per share in fiscal 2003.

"We are very pleased to report double-digit growth in revenue and significantly improved margins in the fourth quarter," said Joel M. Barry, Chairman and CEO of Electronic Clearing House, Inc. "We are successfully executing our business plan and experiencing strong growth for both our bankcard and check services products. Our expanding gross margins reflect the positive returns to scale we are realizing in our check services business, driven by the market reception to the Visa POS Check service. In fiscal 2003, our check services business segment made a positive contribution to the overall profitability of the Company. The momentum in this business is continuing as we add to our customer base of banks and retailers which use ECHO's processing infrastructure.

"During the fiscal fourth quarter, ECHO launched another value-added payment processing solution. The service, Recurring Payment Manager (RPM(sm)), is an innovative, web-based payment management program that is an easy-to-use flexible means of processing recurring payments from customers with weekly, bi-weekly or monthly payment arrangements. We believe this service has strong growth potential as businesses are rapidly adopting recurring payments as a means to cut processing costs, improve collection ratios and boost cash flow."

Bankcard processing and transaction revenue increased 20.9% to $8,517,000 for this fiscal quarter, from $7,045,000 in the fourth fiscal quarter 2002. This increase was primarily due to our merchants' strong organic growth in bankcard processing volume and the continued success in the Company's marketing strategy.

Check-related revenues increased 62.3% to $2,473,000 for the three months ended September 30, 2003, from $1,524,000 from the prior-year quarter. This increase was primarily due to strong growth in the ACH and check conversion services and the revenue generated from the Visa POS program. A national retail merchant fully implemented the Visa program in June 2003.

Gross margins from processing and transaction services jumped to 38% in the quarter from 28% in the year-ago quarter. The improvement in margins was primarily due to a larger proportion of higher-margin, check-related revenue, which comprises 22.5% of total revenue for this fiscal quarter as compared to 17.8% for the prior-year quarter; a rate adjustment implemented in August 2003; and substantially lower chargeback losses.

The Company generated $1,316,000 of cash from operating activities in the three months ended September 30, 2003, as compared to $369,000 of cash generated in the same period last year. Mr. Barry commented, "ECHO's balance sheet continues to be strong, with $5,641,000 in cash and cash equivalents, $3,201,000 in working capital and $10,369,000 in stockholders' equity as of September 30, 2003. The subsequent completion of a $3 million equity funding, combined with a new $3 million line of credit facility, gives us the flexibility to continue to fund our growth initiatives in the check services business.

"Looking to the first quarter of fiscal 2004, we are gaining momentum in our check services program as well as our bankcard and transaction processing services, and we are optimistic that we will continue our strong double-digit revenue growth and improving gross margins," Mr. Barry concluded.

Conference Call

The Company will host a conference call at 1:30 p.m. PST (4:30 p.m. EST) today to discuss 2003 fourth-quarter and year-end results. To participate in the conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 800-399-7496. International callers should dial 706-634-6508. There is no pass code required for this call. This conference call will be broadcast live over the Internet and can be accessed by all interested parties on the Investor Relations section of ECHO's website at www.echo-inc.com.

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 STATEMENTS OF OPERATIONS

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

Revenues:
 Processing
  revenue           $ 5,592,000  $4,315,000  $21,151,000  $16,363,000
 Transaction
  revenue             5,325,000   4,113,000   19,162,000   16,526,000
 Other revenue           73,000     141,000      323,000      402,000
                     10,990,000   8,569,000   40,636,000   33,291,000

Costs and expenses:
 Processing and
  transaction
  expense             6,764,000   6,072,000   26,360,000   22,747,000
 Other operating
  costs               1,029,000     774,000    3,358,000    3,012,000
 Research and
  development
  expense               363,000     455,000    1,405,000    1,719,000
 Selling, general
  and administrative
  expenses            1,965,000   1,485,000    7,088,000    6,493,000
 Amortization
  expense - goodwill        -0-     104,000          -0-      489,000
 Legal settlement           -0-         -0-          -0-    2,500,000
                     10,121,000   8,890,000   38,211,000   36,960,000

Income (loss) from
 operations             869,000    (321,000)   2,425,000   (3,669,000)
Interest income           7,000       9,000       28,000       55,000
Interest expense        (50,000)    (45,000)    (200,000)    (129,000)

Income (loss)
 before provision
 for income taxes       826,000    (357,000)   2,253,000   (3,743,000)

(Provision) benefit
 for income taxes      (308,000)    150,000     (925,000)   1,367,000
Income (loss)
 before cumulative
 effect of an
 accounting change      518,000    (207,000)   1,328,000   (2,376,000)
Cumulative effect
 of an accounting
 change to adopt
 SFAS 142                   -0-         -0-   (4,707,000)         -0-

Net income (loss)   $   518,000  $ (207,000) $(3,379,000) $(2,376,000)

Basic net earnings
 (loss) per share
   Before
    cumulative
    effect of
    accounting
    change          $      0.09  $    (0.03) $      0.23  $     (0.41)
   Cumulative
    effect of
    accounting
    change                  -0-         -0-        (0.81)         -0-
   Basic net
    earnings (loss)
    per share       $      0.09  $    (0.03) $     (0.58) $     (0.41)

Diluted net
 earnings (loss)
 per share
   Before
    cumulative
    effect of
    accounting
    change          $      0.08  $    (0.03) $      0.23  $     (0.41)
   Cumulative
    effect of
    accounting
    change                  -0-         -0-        (0.81)         -0-
   Diluted net
    earnings (loss)
    per share       $      0.08  $    (0.03) $     (0.58) $     (0.41)

Weighted average
 shares outstanding
   Basic              5,839,775   5,796,109    5,812,005    5,788,071
   Diluted            6,261,209   5,796,109    5,812,005    5,788,071


                    ELECTRONIC CLEARING HOUSE, INC.
                 CONSOLIDATED STATEMENTS OF CASH FLOWS

                                       Year ended September 30,
                                    2003         2002         2001

Cash flows from operating
 activities:
 Net (loss) income              $(3,379,000) $(2,376,000) $   434,000
   Adjustments to reconcile net
    (loss) income to net cash
    provided by operating
    activities:
 Depreciation                       512,000      480,000      384,000
 Amortization of software         1,081,000      697,000      537,000
 Amortization of goodwill               -0-      489,000      414,000
 Provisions for losses on
   accounts and notes
   receivable                        67,000      302,000      326,000
 Provision for obsolete
  inventory                         110,000      300,000          -0-
 Write-down of real estate           55,000      100,000          -0-
 Fair value of stock issued in
   connection
   with director's compensation      21,000       45,000       45,000
 Deferred income taxes              942,000   (1,375,000)     436,000
 Stock option compensation           28,000          -0-          -0-
 Legal settlement                       -0-    1,300,000          -0-
 Loss (gain) on sale of asset        16,000          -0-     (350,000)
 Cumulative effect of an
   accounting change              4,707,000          -0-          -0-
Changes in assets and
 liabilities, net of effects of
 acquisitions:
  Restricted cash                   (71,000)     504,000     (393,000)
  Accounts receivable              (389,000)    (226,000)    (307,000)
  Settlement receivable            (569,000)     (42,000)         -0-
  Accounts payable                  578,000       66,000       15,000
  Settlement payable              2,700,000      111,000      448,000
  Accrued expenses                  349,000     (376,000)     349,000
  Prepaid expenses                  (76,000)      63,000       11,000
  Net cash provided by
   operating activities           6,682,000       62,000    2,349,000
Cash flows from investing
 activities:
  Other assets                      (51,000)     (81,000)    (458,000)
  Purchase of equipment            (664,000)    (253,000)    (280,000)
  Purchase and capitalized
   software                      (2,627,000)  (1,501,000)  (1,124,000)
  Proceeds from sale of asset        71,000          -0-      350,000
  Cash used in acquisition              -0-          -0-     (169,000)

  Net cash used in investing
   activities                    (3,271,000)  (1,835,000)  (1,681,000)

Cash flows from financing
 activities:
  Proceeds from issuance of
   notes payable                    292,000          -0-          -0-
  Repayment of notes payable       (177,000)    (151,000)    (130,000)
  Repayment of capitalized
   leases                          (452,000)    (215,000)     (47,000)
  Proceeds from sales and
   leaseback of equipment               -0-      390,000          -0-
  Proceeds from exercise of
   stock options                    158,000       11,000       47,000
  Repurchase of common stock            -0-          -0-     (332,000)

  Net cash (used in) provided
   by financing activities         (179,000)      35,000     (462,000)

Net increase (decrease) in cash   3,232,000   (1,738,000)     206,000
Cash and cash equivalents at
 beginning of period              2,409,000    4,147,000    3,941,000

Cash and cash equivalents at
 end of period                  $ 5,641,000  $ 2,409,000  $ 4,147,000


                    ELECTRONIC CLEARING HOUSE, INC.
                      CONSOLIDATED BALANCE SHEETS

                                                   September 30,
                                                 2003         2002

 ASSETS
 Current assets:
     Cash and cash equivalents               $ 5,641,000  $ 2,409,000
     Restricted cash                             977,000      906,000
     Settlement receivable                       717,000      148,000
     Accounts receivable less allowance of
      $91,000 and $431,000                     1,918,000    1,596,000
     Prepaid expenses and other assets           307,000      403,000
     Deferred tax asset                           86,000      266,000

         Total current assets                  9,646,000    5,728,000

 Noncurrent assets:
   Property and equipment, net                 2,928,000    2,248,000
   Software, net                               4,445,000    2,853,000
   Deferred tax asset                          1,256,000    2,018,000
   Other assets less accumulated
    amortization of $305,000 and $259,000        500,000      637,000
   Goodwill, net                                     -0-    4,707,000

         Total assets                        $18,775,000  $18,191,000

 LIABILITIES AND STOCKHOLDERS' EQUITY

 Current liabilities:
   Short-term borrowings and current
    portion of long-term debt               $    901,000  $   515,000
   Accounts payable                              779,000      201,000
   Settlement payable                          3,429,000      729,000
   Accrued expenses                            1,336,000      987,000
   Deferred income                                   -0-       62,000

         Total current liabilities             6,445,000    2,494,000

 Long-term debt                                1,961,000    2,159,000

         Total liabilities                     8,406,000    4,653,000

 Commitments and contingencies

 Stockholders' equity:
   Common stock, $.01 par value, 36,000,000
    shares authorized; 5,920,174 and
    5,835,331 shares issued; 5,881,906
    and 5,796,062 shares outstanding              59,000       58,000
 Additional paid-in capital                   21,641,000   21,435,000
 Accumulated deficit                         (10,865,000)  (7,486,000)
  Less treasury stock at cost, 38,269 and
   39,269 common shares                         (466,000)    (469,000)

         Total stockholders' equity           10,369,000   13,538,000
         Total liabilities and
          stockholders' equity              $ 18,775,000  $18,191,000

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.
(800) 262-3246 Ext. 8533 
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) 262-3246 Ext. 8533, or by email to corp@echo-inc.com

2003
2002
2001
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Electronic Clearing House, Inc. (ECHO)
28001 Dorothy Drive
Agoura Hills, CA 91301

Phone: (800) 262-3246 Ext. 8533
Fax: (805) 419-8689
E-Mail: echo@echo-inc.com
URL: http://www.echo-inc.com