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ECHO
Press Releases 2004
FOR IMMEDIATE RELEASE
Electronic
Clearing House, Inc. ECHO
Announces Third Quarter FY 2004 Results
- Total revenue
increases 14.9% to $12.2 million
- Operating income
rises 91.8% to $1.1 million
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Camarillo, Calif., Aug 11, 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
third fiscal quarter ended June 30, 2004.
Third Quarter Highlights:
Financial highlights for the third
quarter of 2004, as compared to the same period last year, were as
follows:
- Total revenue increased 14.9% to
$12.2 million
- Check-related revenue increased
44.3% to $2.8 million, or 23.3% of total revenue
- Bankcard and transaction
processing revenue increased 8.2% to $9.3 million
- ACH transactions processed jumped
98.7% to 6 million transactions
- Gross margin from processing and
transaction revenue improved to 37.1% from 32.2% in Q3 FY 2003
- Operating income rose to $1.1
million, up from $0.6 million in Q3 FY 2003
- Diluted earnings per share
increased to $0.09 from $0.05 in Q3 FY 2003
"We are pleased to report
another quarter of solid revenue growth and improving profitability,
driven by organic growth in our bankcard processing business and the
increasing contribution of our higher margin check services to our
overall results," said Joel M. Barry, Chairman and CEO of
Electronic Clearing House, Inc.
"During the third quarter, we
continued to focus on growing our check services by training Visa
member banks' sales teams and associates on the Visa POS Check
program's numerous merchant benefits. We have now successfully
rolled out the program at Cole National Corporation's Pearle Vision
and Things Remembered chains, with a total of 1,200 locations
running on the system. Discussions and bidding activity with
prospective customers, including a number of national retail chains,
picked up significantly during the third quarter. We continue to
build strategic relationships with other service providers in
related industries to quicken our check services time to market via
our current distribution channels. We also continue to make progress
in rolling out our MerchantAmerica Agent Bank program, with more
than 20 banks enrolled in this program in the past year," said
Mr. Barry.
Total revenue for the third quarter
of fiscal 2004 was a record $12,152,000, an increase of 14.9%, as
compared to $10,578,000 in the prior year quarter.
Bankcard processing and transaction
revenue increased 8.2% to $9,315,000 in the third quarter of fiscal
2004 from $8,612,000 in the prior year quarter. This increase was
primarily attributable to the Company's continuous organic growth in
bankcard processing volume from existing merchants and new merchants
generated as a result of other marketing programs.
Check-related revenues increased
44.3% to $2,837,000 for the three months ended June 30, 2004,
compared with $1,966,000 in the prior year quarter. This was
primarily due to an increase in ACH processing revenue, which
increased as a result of a 98.7% increase in total ACH transactions
processed, 6 million transactions in the quarter ended June 30,
2004, as compared to 3 million in the prior year quarter, an
increase of check conversion revenue as a result of growing
acceptance of ECHO's Visa POS Check Service program, and
increased verification revenue.
The Company reported net income of
$651,000, or $0.09 per fully diluted share, in the third quarter of
fiscal 2004, as compared to $308,000, or $0.05 per fully diluted
share, in the same period last year. Third quarter results were
favorably affected by revenue growth in all business segments and a
decrease in interest expense due to the repayment of loans
associated with the sale of the building formerly housing ECHO's
executive offices in March 2004.
Gross margin from processing and
transaction revenue rose to $4,484,000 from $3,391,000 in the prior
year quarter. This translated to a gross margin of 37.1% in the
third quarter of fiscal 2004, up from 32.2% in the year-ago quarter
and up from 36.2% in the prior quarter (Q2 2004). The gross margins
improved from the prior quarter as a result of an interchange fee
increase implemented by the card associations in February 2004 that ECHO
began passing to its merchants in April 2004.
Other operating costs as a percentage
of total revenue increased to 10.2%, from 9.9% in the third quarter
of fiscal 2003. ECHO continued to invest in personnel costs
to support the implementation and training of the various financial
institutions that have chosen the Company as their Third-Party
Processor under the Visa POS Check program. Additionally, the cost
of customer support increased substantially over the prior year
period due to significantly higher volumes of checks processed.
Selling, general and administrative
expenses were 15.5% of total revenue in the third quarter of fiscal
2004, compared with 13.8% in the third quarter of fiscal 2003. This
was primarily attributable to an increase in personnel costs and
employee benefits, increases in sales and marketing expenses, and an
increase in rent expense due to ECHO's new corporate
relocation in October 2003.
Operating income rose to $1,082,000,
or 8.9% of revenues in the third quarter of 2004, from $564,000, or
5.3% 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 generated $9,045,000 of
cash from operating activities in the nine months ended June 30,
2004, as compared to $5,366,000 cash provided by operating
activities in the same period last year. A significant portion of
this cash increase was attributable to a $5,110,000 net increase in
settlement receivable/payable to merchants.
Mr. Barry observed that, "ECHO's
balance sheet is very solid, with $15,316,000 in cash and cash
equivalents, $7,772,000 in working capital, only $888,000 in
long-term debt, and $15,664,000 in stockholders' equity as of June
30, 2004. This strong financial condition provides us with the
flexibility to support strategic growth initiatives in our check
services business."
Business Outlook
For the fiscal year 2004, the Company
tightened its guidance on revenue growth to 16-20% and confirming
gross margin guidance of 36-38%, and income from operations of 7-9%.
Conference Call
The Company will host a conference
call at 1:30 p.m. PDT (4:30 p.m. EDT) today to discuss third 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)
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.
ELECTRONIC CLEARING HOUSE, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
June 30, September 30,
2004 2003
Current assets:
Cash and cash equivalents $15,316,000 $5,641,000
Restricted cash 1,042,000 977,000
Settlement receivable 498,000 717,000
Accounts receivable less
allowance of $157,000 and $91,000 1,916,000 1,918,000
Prepaid expenses and other assets 289,000 307,000
Deferred tax asset 0 86,000
Total current assets 19,061,000 9,646,000
Noncurrent assets:
Property and equipment, net 2,135,000 2,928,000
Software, net 6,261,000 4,445,000
Deferred tax asset 0 1,256,000
Other assets, net 384,000 500,000
Total assets $27,841,000 $18,775,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and
current portion of long-term debt $919,000 $901,000
Accounts payable 324,000 779,000
Settlement payable 8,320,000 3,429,000
Accrued expenses 1,487,000 1,336,000
Deferred income 20,000 0
Deferred tax liability 219,000 0
Total current liabilities 11,289,000 6,445,000
Long-term debt 888,000 1,961,000
Total liabilities 12,177,000 8,406,000
Commitments and contingencies
Stockholders' equity:
Common stock, $0.01 par
value, 36,000,000 authorized:
6,408,081 and 5,920,174 shares
issued; 6,369,812 and
5,881,905 shares outstanding 64,000 59,000
Additional paid-in capital 24,485,000 21,641,000
Accumulated deficit (8,419,000) (10,865,000)
Less treasury stock at cost,
39,269 common shares (466,000) (466,000)
Total stockholders' equity 15,664,000 10,369,000
Total liabilities and
stockholders' equity $27,841,000 $18,775,000
ELECTRONIC CLEARING HOUSE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Nine Months
Ended June 30, Ended June 30,
2004 2003 2004 2003
Revenues:
Processing revenue $6,217,000 $5,673,000 $18,152,000 $15,559,000
Transaction revenue 5,854,000 4,853,000 16,914,000 13,837,000
Other revenue 81,000 52,000 207,000 250,000
12,152,000 10,578,000 35,273,000 29,646,000
Costs and expenses:
Processing and
transaction expense 7,587,000 7,135,000 21,945,000 19,809,000
Other operating
costs 1,240,000 1,047,000 3,903,000 3,049,000
Research and
development expense 363,000 375,000 1,090,000 1,101,000
Selling, general
and administrative
expenses 1,880,000 1,457,000 5,534,000 4,131,000
11,070,000 10,014,000 32,472,000 28,090,000
Income from operations 1,082,000 564,000 2,801,000 1,556,000
Interest income 19,000 6,000 49,000 21,000
Interest expense (31,000) (51,000) (146,000) (150,000)
Gain on sale of building 0 0 1,319,000 0
Income before provision for
income tax and cumulative
effect of an accounting
change 1,070,000 519,000 4,023,000 1,427,000
Provision for income
taxes (419,000) (211,000) (1,577,000) (617,000)
Income before cumulative
effect of an accounting
change 651,000 308,000 2,446,000 810,000
Cumulative effect of
an accounting change
to adopt SFAS 142 0 0 0 (4,707,000)
Net earnings (loss) $651,000 $308,000 $2,446,000 $(3,897,000)
Basic net earnings (loss)
per share
Before cumulative
effect of
accounting change $0.10 $0.05 $0.39 $0.14
Cumulative effect
of accounting
change 0 0 0 (0.81)
Basic net earnings
(loss) per share $0.10 $0.05 $0.39 $(0.67)
Diluted net earnings
(loss) per share
Before cumulative
effect of
accounting change $0.09 $0.05 $0.35 $0.14
Cumulative effect
of accounting change 0 0 0 (0.80)
Diluted net earnings
(loss) per share $0.09 $0.05 $0.35 $(0.66)
Weighted average shares
outstanding
Basic 6,347,919 5,810,787 6,289,843 5,802,802
Diluted 6,977,897 6,039,990 6,890,389 5,917,532
ELECTRONIC CLEARING HOUSE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months
Ended June 30,
2004 2003
Cash flows from operating activities:
Net income (loss) $ 2,446,000 $(3,897,000)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Gain on sale of building (1,319,000) 0
Depreciation 446,000 498,000
Amortization of software 1,061,000 649,000
Provision for losses on accounts
and notes receivable 84,000 45,000
Fair value of stock issued in
connection with directors'
compensation 0 21,000
Deferred income taxes 1,561,000 571,000
Stock option compensation 25,000 20,000
Cumulative effect of an accounting
change 0 4,707,000
Changes in assets and liabilities:
Restricted cash (65,000) (206,000)
Accounts receivable (82,000) (340,000)
Settlement receivable 219,000 (559,000)
Accounts payable (455,000) (90,000)
Settlement payable 4,891,000 3,761,000
Deferred income 20,000 0
Accrued expenses 145,000 304,000
Prepaid expenses 68,000 (118,000)
Net cash provided by operating
activities 9,045,000 5,366,000
Cash flows from investing activities:
Other assets 17,000 74,000
Purchase of equipment (398,000) (139,000)
Proceed from sale of building 2,233,000 0
Purchased and capitalized software (2,554,000) (1,990,000)
Net cash used in investing activities (702,000) (2,055,000)
Cash flows from financing activities:
Proceeds from issuance of notes
payable 811,000 292,000
Repayment of notes payable (1,827,000) (133,000)
Repayment of capitalized leases (476,000) (339,000)
Proceeds from private placement 2,693,000 0
Proceeds from exercise of stock
options 131,000 23,000
Net cash provided by (used in)
financing activities 1,332,000 (157,000)
Net increase in cash 9,675,000 3,154,000
Cash and cash equivalents at
beginning of period 5,641,000 2,409,000
Cash and cash equivalents at end of
period $15,316,000 $5,563,000
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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