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ECHO
Press Releases 2004
FOR IMMEDIATE RELEASE
Electronic
Clearing House, Inc. (ECHO)
Announces Strong First Quarter FY 2004 Results
Camarillo, Calif., February 12, 2004 -
Electronic Clearing House, Inc. (Nasdaq: ECHO), a leading provider of electronic
payment and transaction processing services, announced
today reported financial and operating
results for the three months ended December 31, 2003.
First Quarter Highlights:
- Revenue increased 22.1% to $11.4
million compared to Q1 FY 2003.
- Check-related revenue increased
53% to $2.7 million, or 24% of total revenue.
- ACH transactions processed jumped
613% to 7.3 million transactions.
- Gross margin from processing and
transaction revenue improved to 38.9% from 31.8%.
- Operating income rose to $1.0
million up from $0.5 million.
- Diluted earnings per share
increased to $0.09 from $0.04 before the cumulative effect of an
accounting change in the year-ago quarter.
Revenue for the first quarter of
fiscal 2004 was a record $11,355,000, an increase of 22.1%, as
compared to $9,301,000 in the prior-year quarter.
Bankcard processing and transaction
revenue increased 14.7% from $7,519,000 for the prior-year quarter
to $8,624,000 in the first quarter of fiscal 2004. This increase was
primarily due to our merchants' strong organic growth in bankcard
processing volume and the continued success of the Company's
marketing strategy.
Check-related revenues increased to
$2,731,000, or 24.1% of total revenue, for the three months ended
December 31, 2003, compared with $2,473,000, or 22.5%, in the prior
quarter, and $1,782,000, or 19.2%, in the prior-year quarter. This
increase was primarily due to strong growth in both the Visa POS
Check Service and an increase in ACH and check conversion revenue.
"We are very pleased with our
strong results during the first quarter," said Joel M. Barry,
Chairman and CEO of Electronic Clearing House, Inc. "Our
higher-margin check services business, which accounted for 24% of
our revenue, is gaining momentum and drove strong revenue and margin
growth in the quarter. As we add banks and their respective
retailers to our customer base in the Visa POS Check Service, we see
the potential for continued strong growth in the check services
business as the advantages of this solution are recognized by
merchants."
Gross profit from processing and
transaction revenue rose to $4,394,000 from $4,067,000 in the prior
quarter and $2,918,000 in the prior-year quarter. This translates to
a gross margin of 38.9% in the first quarter of fiscal 2004, up from
37.3% in the fourth quarter of fiscal 2003 and 31.8% in the first
quarter of fiscal 2003. Gross margins improved because the
higher-margin check services business grew as a percentage of total
revenue and a rate adjustment implemented in August 2003 favorably
impacted our year-over-year comparisons.
Other operating costs as a percentage
of total revenue increased to 11.8%, from 10.3% in the first quarter
of fiscal 2003. The Visa POS Check Service required a substantial
increase in personnel costs to undertake training and program
implementation of the various financial institutions that have
chosen ECHO as their Third-Party Processor. In addition, the Company
hired additional risk management and customer support staff to
support the Visa POS Check Service.
Selling, general and administrative
expenses were 15.2% of revenue in the first quarter of fiscal 2004,
compared with 12.7% in the first quarter of fiscal 2003. This
increase was primarily attributable to the increase in sales and
marketing expenses as we continue to follow our sales and marketing
strategies, the increase in administrative salaries and the increase
in rent expense as we moved into a new corporate location in October
2003.
Operating income rose to $1,013,000,
or 8.9% of revenues, in the first quarter, from $869,000, or 7.9% of
revenues, in the prior quarter, and $527,000, or 5.7% of revenues,
in the same period last year. The improvement can be primarily
attributed to strong revenue growth and expansion in the gross
profit margin.
The Company reported net income of
$589,000, or $0.09 per share on a fully diluted basis, in the first
quarter of fiscal 2004, as compared to $518,000, or $0.08 per share,
in the fourth quarter of fiscal 2003 and a loss of $4,473,000, or
$0.77 per share, in the first quarter of fiscal 2003. During the
year-ago quarter, the Company adopted SFAS 142 and accordingly wrote
off $4,707,000 to eliminate goodwill.
The Company generated $5,989,000 of
cash from operating activities in the three months ended December
31, 2003, as compared to $1,112,000 of cash generated in the same
period last year. A large portion of this increase was attributable
to a $4,954,000 net increase in settlement payable to merchants.
Mr. Barry commented, "ECHO's
balance sheet is very strong, with $14,569,000 in cash and cash
equivalents, $6,427,000 in working capital, $2,230,000 in long-term
debt and $13,775,000 in stockholders' equity as of December 31,
2003. During the quarter, we completed a $3 million private
placement of common stock and secured a new $3 million revolving
credit facility. Our current cash reserves will enable us to
continue to grow our check services business."
Business Outlook
"As we move into the second
quarter of fiscal 2004, we believe the growth in our check services
program and continued solid results in our bankcard and transaction
processing services will drive continued double-digit revenue
growth. For fiscal year 2004, we expect revenues to grow between
15-20%. Gross margin is expected to be between 36-38%, largely due
to a recently announced increase in the interchange rates in our
bankcard business. Given the enhancements we have made to our
management team and anticipated continuing higher level sales and
development expenses related to the Visa POS Check Service, we now
expect that our operating margin for the fiscal year 2004 will run
between 7-9%," 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 first quarter
2004 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
(Unaudited)
Three Months
Ended December 31,
2003 2002
Revenues:
Processing revenue $ 5,693,000 $ 4,747,000
Transaction revenue 5,592,000 4,415,000
Other revenue 70,000 139,000
11,355,000 9,301,000
Costs and expenses:
Processing and transaction expense 6,891,000 6,244,000
Other operating costs 1,340,000 961,000
Research and development expense 383,000 384,000
Selling, general and administrative
expenses 1,728,000 1,185,000
10,342,000 8,774,000
Income from operations 1,013,000 527,000
Interest income 13,000 8,000
Interest expense (56,000) (52,000)
Income before provision for income taxes
and cumulative effect of an accounting
change 970,000 483,000
Provision for income taxes (381,000) (249,000)
Income before cumulative effect of an
accounting change 589,000 234,000
Cumulative effect of an accounting change to
adopt SFAS 142 -0- (4,707,000)
Net earnings (loss) $ 589,000 $(4,473,000)
Basic net earnings (loss) per share
Before cumulative effect of accounting
change $ 0.10 $ 0.04
Cumulative effect of accounting change -0- (0.81)
Basic net earnings (loss) per share $ 0.10 $ (0.77)
Diluted net earnings (loss) per share
Before cumulative effect of accounting
change $ 0.09 $ 0.04
Cumulative effect of accounting change -0- (0.81)
Diluted net earnings (loss) per share $ 0.09 $ (0.77)
Weighted average shares outstanding
Basic 6,182,767 5,796,062
Diluted 6,678,880 5,809,309
ELECTRONIC CLEARING HOUSE, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31, September 30,
2003 2003
(Unaudited)
Current assets:
Cash and cash equivalents $13,440,000 $ 5,641,000
Restricted cash 1,129,000 977,000
Settlement receivable 1,078,000 717,000
Accounts receivable less allowance of
$115,000 and $91,000 2,021,000 1,918,000
Prepaid expenses and other assets 392,000 307,000
Deferred tax asset 105,000 86,000
Total current assets 18,165,000 9,646,000
Noncurrent assets:
Property and equipment, net 3,209,000 2,928,000
Software, net 5,043,000 4,445,000
Deferred tax asset 856,000 1,256,000
Other assets, net 470,000 500,000
Total assets $27,743,000 $18,775,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current
portion of long-term debt $ 1,039,000 $ 901,000
Accounts payable 450,000 779,000
Settlement payable 8,744,000 3,429,000
Accrued expenses 1,405,000 1,336,000
Deferred income 100,000 -0-
Total current liabilities 11,738,000 6,445,000
Long-term debt 2,230,000 1,961,000
Total liabilities 13,968,000 8,406,000
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value,
36,000,000 authorized; 6,376,331 and
5,920,174 shares issued; 6,338,062 and
5,881,905 shares outstanding,
respectively 64,000 59,000
Additional paid-in capital 24,453,000 21,641,000
Accumulated deficit (10,276,000) (10,865,000)
Less treasury stock at cost, 38,269
common shares (466,000) (466,000)
Total stockholders' equity 13,775,000 10,369,000
Total liabilities and stockholders'
equity $ 27,743,000 $ 18,775,000
ELECTRONIC CLEARING HOUSE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months
Ended December 31,
2003 2002
Cash flows from operating activities:
Net income (loss) $ 589,000 $(4,473,000)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation 176,000 164,000
Amortization of software 330,000 203,000
Provisions for losses on accounts and notes
receivable 28,000 94,000
Deferred income taxes 381,000 249,000
Stock option compensation 9,000 -0-
Cumulative effect of an accounting change -0- 4,707,000
Changes in assets and liabilities:
Restricted cash (152,000) (52,000)
Accounts receivable (131,000) (174,000)
Settlement receivable (361,000) (35,000)
Accounts payable (329,000) (108,000)
Settlement payable 5,315,000 413,000
Deferred income 100,000 (62,000)
Accrued expenses 69,000 225,000
Prepaid expenses and other assets (35,000) (39,000)
Net cash provided by operating activities 5,989,000 1,112,000
Cash flows from investing activities:
Other assets 1,000 (46,000)
Purchase of equipment (305,000) (48,000)
Purchased and capitalized software (664,000) (410,000)
Net cash used in investing activities (968,000) (504,000)
Cash flows from financing activities:
Proceeds from issuance of notes payable 211,000 -0-
Repayment of notes payable (112,000) (43,000)
Repayment of capitalized leases (129,000) (125,000)
Proceeds from private placement 2,761,000 -0-
Proceeds from exercise of stock options 47,000 -0-
Net cash provided by (used in) financing
activities 2,778,000 (168,000)
Net increase in cash 7,799,000 440,000
Cash and cash equivalents at beginning of
period 5,641,000 2,409,000
Cash and cash equivalents at end of period $13,440,000 $ 2,849,000
Contact:
Electronic Clearing House, Inc.
Donna Rehman, 805-419-8533
corp@ECHO-inc.com
http://www.echo-inc.com
or
Coffin Communications Group
Crocker Coulson, 818-789-0100
crocker.coulson@coffincg.com
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