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ECHO
Press Releases 2005
FOR IMMEDIATE RELEASE
Electronic
Clearing House Inc.
Announces
Third Quarter FY 2005 Results
Camarillo, Calif., August 8, 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 June 30,
2005.
Third Quarter Highlights:
- Total revenue increased 15.6% to
$14.3 million
- Bankcard and transaction
processing revenue advanced 11.1% to $10.6 million
- Check-related revenue grew 30.5%
to $3.7 million
- ACH transactions processed
increased 29.5% to 7.9 million transactions
- Gross margin from processing and
transaction revenue was 36.3% for the current quarter, versus
36.5% for the same period last year
- Diluted EPS of $0.06, as compared
to diluted EPS of $0.09 in third quarter (Q3) 2004
"Overall, we are pleased with
our two primary business segments' performance at this stage in the
fiscal year," stated Joel M. Barry, Chairman and CEO of
Electronic Clearing House, Inc. "However, abnormally high legal
and regulatory compliance costs continued to impact ECHO's
profitability, but we expect that legal expense related to a patent
lawsuit will decrease in the second half of calendar 2005.
"Our main corporate priority for
the balance of this year remains focused on revenue growth, which we
believe will lead to enhanced profitability once legal and
regulatory costs normalize and the Company's ongoing IT initiatives
are implemented to reduce processing costs for our card-based
transactions.
"As we expected, ECHO's
bankcard business returned to its historical pace of growth in the
third quarter, which we plan on maintaining going forward. We
believe that the additional sales resources devoted to the division
and more targeted marketing efforts brought its performance back in
line with our internal plans.
"Our check business continues to
experience good growth. The Visa POS Check Service program now
connects to upwards of 40% of personal checking accounts in some
parts of the nation. Combining this fact with the positive,
empirical feedback that we are receiving from current program
participants on the overall value of the program, we believe Visa's
increased connectivity and ECHO's proven performance will
become very compelling reasons for major retail chains to
participate in the Visa POS Check Service program."
Third Quarter Financial Highlights
Total revenue for the third quarter
of fiscal 2005 (Q3 2005) was $14.3 million, an increase of 15.6%,
versus $12.4 million in the prior year quarter. The increase can be
primarily attributed to the 11.1% growth in bankcard processing
revenue and 30.5% revenue growth in the check services business
segment as compared to the same period last year. This growth has
occurred organically from our existing merchants and from other
marketing initiatives.
Bankcard processing and transaction
revenue was up by 11.1% from $9.5 million for the prior year quarter
to $10.6 million in Q3 2005. This revenue increase was mainly
attributable to organic growth and new merchants generated from
other marketing programs.
Check-related revenues increased
30.5% to $3.7 million, or 25.9% of total revenues, for the three
months ended June 30, 2005, compared with $2.8 million, or 23.0% of
total revenues, in the prior-year quarter. This was attributable to
the increase in ACH processing, which advanced 29.5% for a total of
7.9 million transactions in the quarter ended June 30, 2005, as
compared to 6 million in the prior year quarter.
Gross margin from processing and
transaction services remained relatively consistent at 36.3% for the
current quarter as compared to 36.5% for the same period last year.
This slight decrease was from a higher commission expense that was
offset by relatively fixed data center processing costs.
Other operating costs, such as
personnel costs, telephone and depreciation expenses increased
20.4%, from $1,240,000 in the third quarter of 2004 to $1,493,000
for the current fiscal quarter as a result of the increase in
personnel costs and telephone expenses.
Research and development (R&D)
expenses remained relatively constant for the quarter ended June 30,
2005 at $354,000 as compared to $363,000 for the same period last
year. We anticipate that this level of investment will continue
throughout the remainder of this year.
Selling, general and administrative (SG&A)
expenses increased 42.6% from $1,880,000 in the third fiscal quarter
of 2004 to $2,680,000 for the current fiscal quarter. This $800,000
increase was primarily attributable to: 1) $518,000 of legal expense
primarily related to a patent litigation claim; and 2) approximately
$100,000 in one-time professional service expenses. As a percentage
of total revenue, selling, general and administrative expenses
increased from 15.2% in the third fiscal quarter of 2004 to 18.8% in
the quarter ended June 30, 2005. As a result of the completion of
the discovery and deposition phase of the patent lawsuit in July
2005, legal expenses related to the patent lawsuit should decrease
for the second half of 2005, until the case gets closer to trial in
April 2006.
Operating income for the quarter
ended June 30, 2005 was $703,000 as compared to operating income of
$1,082,000 in the same period last year. The decrease in operating
income was primarily due to the increase in SG&A expenses.
The Company reported net income of
$433,000, or $0.06 per share on a fully diluted basis, in the Q3
2005, as compared to $144,000, or $0.02 per share, in the second
quarter of fiscal 2005, and $651,000, or $0.09 per fully diluted
share, in the third quarter of fiscal 2004.
"ECHO's balance sheet
remains strong, with $6.8 million in cash and cash equivalents, $7.6
million in working capital, $766,000 in long-term debt and capital
leases, and $17.3 million in stockholders' equity as of June 30,
2005," emphasized Mr. Barry.
Business Outlook
"For the fourth quarter and
full-year of fiscal 2005, we maintain our prior forecast of double
digit revenue growth in both of our business segments,"
concluded Mr. Barry.
Conference Call
The Company hosted a conference call
at 1:30 p.m. PDT (4:30 p.m. EDT) today to discuss third quarter FY
2005 results. 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) (a)
ASSETS
June 30, September 30,
2005 2004
Current assets:
Cash and cash equivalents $ 6,800,000 $ 7,576,000
Restricted cash 1,225,000 1,024,000
Settlement deposits 18,472,000 18,282,000
Settlement receivable less allowance of
$25,000 and $22,000 835,000 451,000
Accounts receivable less allowance of
$126,000 and $111,000 2,092,000 1,943,000
Prepaid expenses and other assets 393,000 368,000
Deferred tax asset 148,000 279,000
Total current assets 29,965,000 29,923,000
Noncurrent assets:
Property and equipment, net 2,397,000 2,293,000
Software, net 8,510,000 6,844,000
Other assets, net 304,000 368,000
Total assets $41,176,000 $ 39,428,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current
portion of long-term debt and capital
leases $ 552,000 $ 878,000
Accounts payable 358,000 305,000
Settlement payable 19,519,000 18,733,000
Accrued expenses 1,979,000 2,003,000
Total current liabilities 22,408,000 21,919,000
Noncurrent liabilities:
Long-term debt and capital leases 766,000 704,000
Deferred tax liability 714,000 565,000
Total liabilities 23,888,000 23,188,000
Commitments and contingencies
Stockholders' equity:
Common stock, $0.01 par value,
36,000,000 authorized:
6,554,481 and 6,451,331 shares issued;
6,516,212 and 6,413,062 shares
outstanding 65,000 64,000
Additional paid-in capital 25,076,000 24,658,000
Accumulated deficit (7,387,000) (8,016,000)
Less treasury stock at cost, 38,269
common shares (466,000) (466,000)
Total stockholders' equity 17,288,000 16,240,000
Total liabilities and stockholders'
equity $41,176,000 $ 39,428,000
(a) Note: Selected financial information. Please see the appropriate
Company reports on Forms 10-Q and 10-K as filed with the
Securities and Exchange Commission for complete financial
information and Notes.
ELECTRONIC CLEARING HOUSE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) (a)
Three Months Ended Nine Months Ended
June 30, June 30,
2005 2004 2005 2004
REVENUE: $14,281,000 $12,356,000 $40,362,000 $35,822,000
COSTS AND EXPENSES:
Processing and
transaction
expense 9,051,000 7,791,000 25,783,000 22,494,000
Other operating
costs 1,493,000 1,240,000 4,236,000 3,903,000
Research and
development
expense 354,000 363,000 1,271,000 1,090,000
Selling, general
and
administrative
expenses 2,680,000 1,880,000 8,044,000 5,534,000
13,578,000 11,274,000 39,334,000 33,021,000
Income from
operations 703,000 1,082,000 1,028,000 2,801,000
Interest income 37,000 19,000 95,000 49,000
Interest expense (29,000) (31,000) (87,000) (146,000)
Gain on sale of
building -0- -0- -0- 1,319,000
Income before
provision for
income taxes 711,000 1,070,000 1,036,000 4,023,000
Provision for
income taxes (278,000) (419,000) (407,000) (1,577,000)
Net income $ 433,000 $ 651,000 $ 629,000 $ 2,446,000
Basic net earnings
per share $ 0.07 $ 0.10 $ 0.10 $ 0.39
Diluted net
earnings per
share $ 0.06 $ 0.09 $ 0.09 $ 0.35
Weighted average
shares
outstanding
Basic 6,512,411 6,347,919 6,469,632 6,289,843
Diluted 6,942,122 6,977,897 6,956,111 6,890,389
(a) Note: Selected financial information. Please see the appropriate
Company reports on Forms 10-Q and 10-K as filed with the
Securities and Exchange Commission for complete financial
information and Notes.
ELECTRONIC CLEARING HOUSE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (a)
Nine Months Ended
June 30,
2005 2004
Cash flows from operating activities:
Net income $ 629,000 $ 2,446,000
Adjustments to reconcile net income to
net cash provided by operating
activities:
Gain on sale of building -0- (1,319,000)
Depreciation 558,000 446,000
Amortization of software 1,258,000 1,061,000
Provision for losses on accounts
receivable 31,000 84,000
Deferred income taxes 280,000 1,561,000
Stock option compensation 8,000 25,000
Tax benefit from exercise of stock option 82,000 -0-
Changes in assets and liabilities:
Restricted cash (201,000) (65,000)
Settlement deposits (190,000) (5,120,000)
Accounts receivable (177,000) (82,000)
Settlement receivable (387,000) 219,000
Accounts payable 53,000 (455,000)
Settlement payable 786,000 4,891,000
Accrued expenses (24,000) 165,000
Prepaid expenses and other assets (25,000) 68,000
Net cash provided by operating
activities 2,681,000 3,925,000
Cash flows from investing activities:
Other assets 36,000 17,000
Purchase of equipment (623,000) (398,000)
Proceed from sale of building -0- 2,233,000
Purchased and capitalized software (2,896,000) (2,554,000)
Net cash used in investing activities (3,483,000) (702,000)
Cash flows from financing activities:
Proceeds from issuance of notes payable 400,000 811,000
Repayment of notes payable (330,000) (1,827,000)
Repayment of capitalized leases (373,000) (476,000)
Proceeds from private placement of
common stock -0- 2,693,000
Proceeds from exercise of stock options 329,000 131,000
Net cash provided by financing
activities 26,000 1,332,000
Net (decrease) increase in cash (776,000) 4,555,000
Cash and cash equivalents at beginning of
period 7,576,000 2,908,000
Cash and cash equivalents at end of period $ 6,800,000 $ 7,463,000
(a) Note: Selected financial information. Please see the appropriate
Company reports on Forms 10-Q and 10-K as filed with the
Securities and Exchange Commission for complete financial
information and Notes.
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@ccgir.com
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