|
ECHO
Press Releases 2004
FOR IMMEDIATE RELEASE
Electronic
Clearing House, Inc.
Announces Second Quarter FY 2004 Results
Revenue Up 20% From Q2 FY03
Operating Income Rises 52%
Camarillo, Calif., May 10, 2004 -
Electronic Clearing House, Inc. (Nasdaq: ECHO), a leading provider of electronic
payment and transaction processing services, today
reported financial and operating results for the second fiscal quarter
ended March 31, 2004.
Second Quarter Highlights:
Financial highlights for the second
quarter of 2004 as compared to the same period last year were as
follows:
- Revenue increased 20.5% to $11.8
million
- Check-related revenue increased
34.8% to $2.7 million, or 22.6% of total revenue
- Bankcard processing volume
increased 15.5% to $272.9 million
- ACH transactions processed jumped
320.6% to 5.4 million transactions
- Gross margin from processing and
transaction revenue improved to 36.2% from 33.8% in Q2 FY 2003
- Operating income rose to $0.7
million, up from $0.5 million in Q2 FY 2003
- Diluted earnings per share
increased to $0.17 from $0.05 in Q2 FY 2003
Revenue for the second quarter of
fiscal 2004 was a record $11,766,000, an increase of 20.5%, as
compared to $9,767,000 in the prior year quarter.
Bankcard processing and transaction
revenue increased 16.9% to $9,110,000 in the second quarter of
fiscal 2004 from $7,796,000 in the prior year quarter. This increase
was primarily due to strong organic growth in bankcard processing
volume from existing merchants and from new merchants generated by
our marketing programs.
Check-related revenues increased
34.8% to $2,656,000 for the three months ended March 31, 2004,
compared with $1,971,000 in the prior year quarter. This increase
was primarily due to strong growth in both the Visa POS Check
Service program and an increase in ACH and check conversion revenue.
The Company recorded net income of
$1,206,000, or $0.17 per share on a fully diluted basis, in the
second quarter of fiscal 2004, as compared to $268,000 or $0.05 per
share in the same period last year. Second quarter results were
favorably affected by a pre-tax gain on sale of $1,319,000 resulting
from the sale of the building that formerly held the Company's
principal executive offices. After the sale, the Company used a
portion of the proceeds to pay off two loans totaling $1,524,000,
which was collateralized by the building.
"We are very pleased with our
strong results during the second quarter," said Joel M. Barry,
Chairman and CEO of Electronic Clearing House, Inc. "The
positive effects of the strategies we have implemented over the past
two years are materializing in our financial results. During the
second quarter 2004, both our check services and bankcard businesses
grew rapidly, while gross margins remained well above last year's
levels. Additionally, we continued to build our customer base for
the Visa POS Check Service program, with several thousand new
merchant locations expected to come on line in the second half of
the year."
Gross profit from processing and
transaction revenue rose to $4,243,000 from $3,278,000 in the prior
year quarter. This translates to a gross margin of 36.2% in the
second quarter of fiscal 2004, up from 33.8% in the year-ago
quarter. Gross margins declined from the prior quarter (Q1 2004) as
a result of an interchange fee increase implemented by the card
associations in February 2004. The Company began passing the fee
increase to merchants in April and expects this fee increase to
positively increase gross margins in the third quarter of 2004 and
beyond.
Other operating costs as a percentage
of total revenue increased to 11.2%, from 10.7% in the second
quarter of fiscal 2003. The Visa POS Check Service required a
substantial increase in personnel costs to undertake training and
program implementation for 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 16.4% of revenue in the second quarter of fiscal 2004,
compared with 15.2% in the second quarter of fiscal 2003. This
increase was primarily attributable to increases in sales and
marketing expenses, in employee salaries, bonuses and benefit costs,
and in rent expense as the Company moved its principal executive
offices to a new corporate location in October 2003.
Operating income rose to $706,000, or
6.0% of revenues in the second quarter, from $465,000, or 4.8% of
revenues in the year-ago quarter. The improvement can be primarily
attributed to strong revenue growth and expansion in the gross
profit margin over the prior year quarter. The Company anticipates
continued improvement in operating income as the gross margin
increases in the coming quarters.
The Company used $3,931,000 of cash
in its operating activities in the three months ended March 31,
2004, as compared to generating $785,000 of cash in the same period
last year. However, excluding settlement fees payable, which vary
from quarter to quarter depending on the timing of the receipt and
payout of funds, operating cash flow was a positive $364,000 for the
three-month period ended March 31, 2004.
Mr. Barry commented, "ECHO's
balance sheet is very strong, with $10,802,000 in cash, $7,733,000
in working capital, $1,093,000 in long-term debt, and $14,930,000 in
stockholders' equity as of March 31, 2004. Additionally, we are
internally generating the cash necessary to continue building our
check services business."
Business Outlook
"As we move through the third
quarter of fiscal 2004, we believe the growth in both our check
services program and our bankcard and transaction processing
services will drive continued double digit revenue growth. In the
second quarter, several additional financial institutions have
signed on to the Visa POS program. Additionally, in April, Global
Check Services began rolling out ECHO's Visa POS Check Service to
5,000 of its merchant locations. Altogether, we anticipate adding
more banks and their retailers to our Visa POS program in the coming
quarters," said Mr. Barry.
"Therefore, for the full fiscal
year 2004, we are raising our prior guidance of revenue growth from
15-20% to 16-22% and maintaining gross margin guidance between
36-38%. Given the enhancements we have made to our management team
and anticipated continuing higher level sales and development
expenses related to the Visa POS program, we still 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. PDT (4:30 p.m. EDT) today to discuss second
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: 877-299-8279. 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.
ELECTRONIC CLEARING HOUSE, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, September 30,
2004 2003
---- ----
ASSETS
Current assets:
Cash and cash equivalents $ 9,541,000 $ 5,641,000
Restricted cash 1,261,000 977,000
Settlement receivable 429,000 717,000
Accounts receivable less allowance of
$118,000 and $91,000 2,276,000 1,918,000
Prepaid expenses and other assets 386,000 307,000
Deferred tax asset 184,000 86,000
----------- ------------
Total current assets 14,077,000 9,646,000
Noncurrent assets:
Property and equipment, net 2,246,000 2,928,000
Software, net 5,622,000 4,445,000
Deferred tax asset -0- 1,256,000
Other assets, net 422,000 500,000
----------- ------------
Total assets $22,367,000 $ 18,775,000
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current portion
of long-term debt $ 954,000 $ 901,000
Accounts payable 277,000 779,000
Settlement payable 3,800,000 3,429,000
Accrued expenses 1,243,000 1,336,000
Deferred income 69,000 -0-
----------- ------------
Total current liabilities 6,343,000 6,445,000
Long-term debt 1,093,000 1,961,000
----------- ------------
Total liabilities 7,436,000 8,406,000
=========== ============
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value, 36,000,000
authorized: 6,378,831 and 5,920,174
shares issued; 6,340,562 and 5,881,905
shares outstanding 64,000 59,000
Additional paid-in capital 24,403,000 21,641,000
Accumulated deficit (9,070,000) (10,865,000)
Less treasury stock at cost, 38,269
common shares (466,000) (466,000)
----------- ------------
Total stockholders' equity 14,931,000 10,369,000
----------- ------------
Total liabilities and stockholders'
equity $22,367,000 $ 18,775,000
=========== ============
ELECTRONIC CLEARING HOUSE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Six Months
Ended March 31, Ended March 31,
--------------- ---------------
2004 2003 2004 2003
---- ---- ---- ----
Revenues:
Processing
revenue $ 6,242,000 $5,139,000 $11,935,000 $ 9,886,000
Transaction
revenue 5,468,000 4,569,000 11,060,000 8,984,000
Other revenue 56,000 59,000 126,000 198,000
----------- ---------- ----------- -----------
11,766,000 9,767,000 23,121,000 19,068,000
----------- ---------- ----------- -----------
Costs and expenses:
Processing and
transaction
expense 7,467,000 6,430,000 14,358,000 12,674,000
Other operating
costs 1,323,000 1,041,000 2,663,000 2,002,000
Research and
development
expense 344,000 342,000 727,000 726,000
Selling, general
and
administrative
expenses 1,926,000 1,489,000 3,654,000 2,674,000
----------- ---------- ----------- -----------
11,060,000 9,302,000 21,402,000 18,076,000
----------- ---------- ----------- -----------
Income from
operations 706,000 465,000 1,719,000 992,000
Interest income 17,000 7,000 30,000 15,000
Interest expense (59,000) (47,000) (115,000) (99,000)
Gain on sale of
building 1,319,000 -0- 1,319,000 -0-
----------- ---------- ----------- -----------
Income before
provision for
income taxes and
cumulative effect
of an accounting
change 1,983,000 425,000 2,953,000 908,000
Provision for
income taxes (777,000) (157,000) (1,158,000) (406,000)
----------- ---------- ----------- -----------
Income before
cumulative effect
of an accounting
change 1,206,000 268,000 1,795,000 502,000
Cumulative effect
of an accounting
change to adopt
SFAS 142 -0- -0- -0- (4,707,000)
----------- ---------- ----------- -----------
Net earnings (loss) $ 1,206,000 $ 268,000 $ 1,795,000 $(4,205,000)
=========== ========== =========== ===========
Basic net earnings
(loss) per share
Before
cumulative
effect of
accounting
change $ 0.19 $ 0.05 $ 0.29 $ 0.09
Cumulative
effect of
accounting
change -0- -0- -0- (0.81)
----------- ---------- ----------- -----------
Basic net
earnings (loss)
per share $ 0.19 $ 0.05 $ 0.29 $ (0.72)
=========== ========== =========== ===========
Diluted net
earnings (loss)
per share
Before
cumulative
effect of
accounting
change $ 0.17 $ 0.05 $ 0.26 $ 0.09
Cumulative
effect of
accounting
change -0- -0- -0- (0.81)
----------- ---------- ----------- -----------
Diluted net
earnings (loss)
per share $ 0.17 $ 0.05 $ 0.26 $ (0.72)
=========== ========== =========== ===========
Weighted average
shares outstanding
Basic 6,340,018 5,801,619 6,260,963 5,798,810
=========== ========== =========== ===========
Diluted 7,006,689 5,914,121 6,779,909 5,852,717
=========== ========== =========== ===========
ELECTRONIC CLEARING HOUSE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months
Ended March 31,
---------------
2004 2003
---- ----
Cash flows from operating activities:
Net income (loss) $ 1,795,000 $(4,205,000)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Gain on sale of building (1,319,000) -0-
Depreciation 269,000 245,000
Amortization of software 681,000 510,000
Provision for losses on accounts and
notes receivable 38,000 26,000
Fair value of stock issued in connection
with directors' compensation -0- 21,000
Deferred income taxes 1,158,000 407,000
Stock option compensation 17,000 -0-
Cumulative effect of an accounting change -0- 4,707,000
Changes in assets and liabilities:
Restricted cash (284,000) (151,000)
Accounts receivable (396,000) (69,000)
Settlement receivable 288,000 (102,000)
Accounts payable (502,000) (106,000)
Settlement payable 371,000 472,000
Deferred income 69,000 -0-
Accrued expenses (98,000) 251,000
Prepaid expenses (29,000) (109,000)
----------- -----------
Net cash provided by operating activities 2,058,000 1,897,000
Cash flows from investing activities:
Other assets 8,000 72,000
Purchase of equipment (332,000) (998,000)
Proceeds from sale of building 2,233,000 -0-
Purchased and capitalized software (1,565,000) (472,000)
----------- -----------
Net cash provided by (used in) investing
activities 344,000 (1,398,000)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of notes payable 811,000 292,000
Repayment of notes payable (1,742,000) (88,000)
Repayment of capitalized leases (321,000) (234,000)
Proceeds from private placement 2,693,000 -0-
Proceeds from exercise of stock options 57,000 -0-
----------- -----------
Net cash provided by (used in) financing
activities 1,498,000 (30,000)
Net increase in cash 3,900,000 469,000
Cash and cash equivalents at beginning of
period 5,641,000 2,409,000
----------- -----------
Cash and cash equivalents at end of period $ 9,541,000 $ 2,878,000
=========== ===========
About Electronic Clearing House, Inc.
(ECHO)
ECHO (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, and check
collection.
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.
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
|
|
