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ECHO
Press Releases 2005
FOR IMMEDIATE RELEASE
Electronic
Clearing House Inc. Announces
Second Quarter FY 2005 Results
Camarillo, Calif., May 10, 2005 -
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 ended March 31, 2005.
Second Quarter Highlights:
- Total revenue increased 11.2% to
$13.3 million
- Bankcard and transaction
processing revenue advanced 5.8% to $9.9 million
- Check-related revenue grew 30.1%
to $3.4 million
- ACH transactions processed
increased 41.6% to 7.7 million transactions
- Gross margin from processing and
transaction revenue was 35.4% for Q2 2005, as compared to 35.6%
for the same period last year
- Diluted EPS of $0.02, as compared
to diluted EPS of $0.17 in Q2 2004
"As we announced last quarter, ECHO's
profitability has been impacted by higher levels of legal and
regulatory compliance costs during the first half of fiscal 2005.
However, in the second half of fiscal 2005, we expect that the
return of these expenses to more normalized levels, combined with
continued top-line growth, should set the stage for an improving
profit picture," said Joel M. Barry, Chairman and CEO of
Electronic Clearing House, Inc. "And, we are forging ahead with
marketing, sales, and technology initiatives that we believe will
contribute to accelerated revenue growth through the rest of this
year.
"Our bankcard business continued
to grow in the first quarter, but at a pace that is below our
historical norms and expectations. We have added sales resources in
this area and increased our focus on market segments where ECHO
has a very compelling offering. As a result, we expect to see
improved performance in the coming quarters.
"Our check business continues to
advance at a healthy clip but, here too, we feel we can do better as
the advantages of our check solutions receive greater recognition by
major retail chains. Pearle Vision, a national eyewear merchant who
recently implemented the Visa POS Check service, announced a
reduction in bad check losses of 63% at the Payments 2005
conference. We believe these types of documented results and
tangible return on investment will contribute to broader adoption of
the Visa POS Check service by other major national merchants."
Financial Highlights
Revenue for the second quarter of
fiscal 2005 was $13.3 million, an increase of 11.2%, versus $12
million in the prior-year quarter.
Bankcard processing and transaction
revenue was up by 5.8% from $9.3 million for the prior-year quarter
to $9.9 million in Q2 2005. This expansion was mainly caused by
organic growth in transactions with existing customers and new
merchants generated from other marketing programs.
Check-related revenues increased
30.1% to $3.4 million, or 25.9% of total revenue, for the three
months ended March 31, 2005, compared with $2.7 million, or 22.2% of
total revenue, in the prior-year quarter. This increase was
attributable to higher ACH processing transactions, which grew from
5.4 million to 7.7 million, a 41.6% increase.
Gross margin from processing and
transaction services remained relatively constant at 35.4% for the
current quarter as compared to 35.6% for the same period last year.
This slight decrease was due to a higher commission expense that was
offset by relatively fixed data center processing costs.
Other operating costs, such as
personnel costs and telephone and depreciation expenses were $1.4
million, or 10.6% of total revenues, as compared to $1.3 million, or
11% of total revenues, in Q2 2004.
Research and development expense
increased to $469,000, as the Company continued investing in several
major software development projects. Several of these projects are
in the final phase of development, and the Company anticipates that
this investment level will continue throughout the remainder of this
fiscal year.
Selling, general, and administrative
(SG&A) expenses rose to $2.6 million, or 19.8% of revenues, for
the current fiscal quarter from $1.9 million, or 16.1% of revenues,
in Q2 2004. This increase was primarily attributable to: 1) $225,000
of legal expense primarily related to a patent litigation claim; 2)
$300,000 of selling expenses in promoting the MERCHANTAMERICA San
Diego campaign, which was rolled out in January 2005; and 3)
approximately $94,000 in professional service expenses and salaries
for Sarbanes-Oxley Act Section 404 Compliance efforts currently in
progress.
Operating income was $238,000, or
1.8% of revenue, in Q2 2005, compared to $87,000, or 0.7% of revenue
in the prior quarter, and $706,000, or 5.9% of revenue in the same
period last year. The decrease in operating income from last year
was primarily due to the increase in research and development
expense and selling, general, and administrative expenses as
described above.
The Company reported net income of
$144,000, or $0.02 per share on a fully diluted basis, in the second
quarter of fiscal 2005, as compared to $52,000, or $0.01 per share,
in the first quarter of fiscal 2005 and $1.2 million, or $0.17 per
fully diluted share, in the second quarter of fiscal 2004.
Mr. Barry observed, "ECHO's
balance sheet is solid, with $6.6 million in cash and cash
equivalents, $7.3 million in working capital, $838,000 in long-term
debt and capital leases, and $16.8 million in stockholders' equity
as of March 31, 2005."
Business Outlook
"Looking into the third quarter
of fiscal 2005, we believe that our Company will experience
sustained double-digit revenue growth in both of its business
segments," stated Mr. Barry.
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 FY 2005 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. Examples of forward-looking statements
included in this press release include the potential for expansion
of ECHO's check guarantee business and the continued strong
demand for ECHO's check products. Potential risks and
uncertainties that may cause actual results to differ materially
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
March 31, September 30,
2005 2004
Current assets:
Cash and cash equivalents $ 6,580,000 $ 7,576,000
Restricted cash 1,121,000 1,024,000
Settlement deposits 19,421,000 18,282,000
Settlement receivable less
allowance of $25,000 and $22,000 904,000 451,000
Accounts receivable less allowance
of $121,000 and $111,000 2,077,000 1,943,000
Prepaid expenses and other assets 382,000 368,000
Deferred tax asset 115,000 279,000
Total current assets 30,600,000 29,923,000
Noncurrent assets:
Property and equipment, net 2,450,000 2,293,000
Software, net 7,976,000 6,844,000
Other assets, net 346,000 368,000
Total assets $ 41,372,000 $ 39,428,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current
portion of long-term debt and
capital leases $ 691,000 $ 878,000
Accounts payable 297,000 305,000
Settlement payable 20,325,000 18,733,000
Accrued expenses 1,956,000 2,003,000
Total current liabilities 23,269,000 21,919,000
Noncurrent liabilities:
Long-term debt and capital leases 838,000 704,000
Deferred tax liability 466,000 565,000
Total liabilities 24,573,000 23,188,000
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value,
36,000,000 authorized; 6,544,381
and 6,451,331 shares issued;
6,506,112 and 6,413,062 shares
outstanding, respectively 65,000 64,000
Additional paid-in capital 25,020,000 24,658,000
Accumulated deficit (7,820,000) (8,016,000)
Less treasury stock at cost,
38,269 common shares (466,000) (466,000)
Total stockholders' equity 16,799,000 16,240,000
Total liabilities and
stockholders' equity $ 41,372,000 $ 39,428,000
ELECTRONIC CLEARING HOUSE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Six Months
Ended March 31, Ended March 31,
2005 2004 2005 2004
REVENUES: $13,321,000 $11,983,000 $26,081,000 $23,466,000
COSTS AND
EXPENSES:
Processing and
transaction
expense 8,561,000 7,684,000 16,732,000 14,703,000
Other operating
costs 1,410,000 1,323,000 2,743,000 2,663,000
Research and
development
expense 469,000 344,000 917,000 727,000
Selling, general
and,
administrative
expenses 2,643,000 1,926,000 5,364,000 3,654,000
13,083,000 11,277,000 25,756,000 21,747,000
Income from
operations 238,000 706,000 325,000 1,719,000
Interest income 30,000 17,000 58,000 30,000
Interest expense (30,000) (59,000) (58,000) (115,000)
Gain on sale of
building -0- 1,319,000 -0- 1,319,000
Income before
provision for
income taxes 238,000 1,983,000 325,000 2,953,000
Provision for
income taxes (94,000) (777,000) (129,000) (1,158,000)
Net income $ 144,000 $ 1,206,000 $ 196,000 $ 1,795,000
Basic net earnings
per share $ 0.02 $ 0.19 $ 0.03 $ 0.29
Diluted net
earnings per
share $ 0.02 $ 0.17 $ 0.03 $ 0.26
Weighted average
shares
outstanding
Basic 6,469,645 6,340,018 6,448,242 6,260,963
Diluted 6,946,036 7,006,689 6,931,745 6,779,909
ELECTRONIC CLEARING HOUSE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended March 31,
2005 2004
Cash flows from operating activities:
Net income $ 196,000 $ 1,795,000
Adjustments to reconcile net income
to net
cash provided by operating
activities:
Gain on sale of building -0- (1,319,000)
Depreciation 352,000 269,000
Amortization of software and other
assets 808,000 681,000
Provisions for losses on accounts
and notes receivable 13,000 38,000
Deferred income taxes 65,000 1,158,000
Stock option compensation 8,000 17,000
Tax benefit from exercise of stock
option 61,000 -0-
Changes in assets and liabilities:
Restricted cash (97,000) (284,000)
Settlement deposits (1,139,000) (638,000)
Accounts receivable (144,000) (396,000)
Settlement receivable (456,000) 288,000
Accounts payable (8,000) (502,000)
Settlement payable 1,592,000 371,000
Deferred income -0- 69,000
Accrued expenses (47,000) (98,000)
Prepaid expenses (14,000) (29,000)
Net cash provided by operating
activities 1,190,000 1,420,000
Cash flows from investing activities:
Other assets 3,000 8,000
Purchase of equipment (470,000) (332,000)
Proceeds from sale of building -0- 2,233,000
Purchased and capitalized software (1,921,000) (1,565,000)
Net cash (used in) provided by
investing activities (2,388,000) 344,000
Cash flows from financing activities:
Proceeds from issuance of notes
payable 400,000 811,000
Repayment of notes payable (223,000) (1,742,000)
Repayment of capitalized leases (269,000) (321,000)
Proceeds from private placement of
common stock -0- 2,693,000
Proceeds from exercise of stock
options 294,000 57,000
Net cash provided by financing
activities 202,000 1,498,000
Net (decrease) increase in cash (996,000) 3,262,000
Cash and cash equivalents at
beginning of period 7,576,000 2,908,000
Cash and cash equivalents at end of
period $ 6,580,000 $ 6,170,000
Contact:
Electronic Clearing House, Inc.
Donna Rehman, 800-262-3246, ext. 8533
http://www.echo-inc.com
corp@echo-inc.com
or
CCG Investor Relations
Crocker Coulson, 818-789-0100
crocker.coulson@ccgir.com
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