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ECHO
Press Releases 2005
FOR IMMEDIATE RELEASE
Electronic
Clearing House Inc. Announces Fourth Quarter and Full-Year
Fiscal 2005 Results Company Posts 21st Consecutive Quarter of
Revenue Growth
Camarillo, Calif., December 7, 2005 -
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 and full-year
ended September 30, 2005.
Fourth Quarter Highlights:
- Total revenue increased 21.5% to
$15.2 million.
- Bankcard and transaction
processing revenue advanced 23.3% to $11.5 million.
- Check-related revenue grew 16.3%
to $3.7 million.
- Gross margin from processing and
transaction revenue was 33.5% for the current quarter, versus
36.8% for the same period last year.
- ACH transactions processed
increased 12.3% to 7.8 million transactions.
- Diluted EPS was $0.06 compared to
diluted EPS of $0.06 in fourth quarter of fiscal 2004.
"We are very pleased with our
ability to consistently post meaningful revenue gains, as solid
year-over-year performance in both of our business segments
contributed to ECHO's strongest quarterly growth this fiscal
year," said Joel M. Barry, Chairman and Chief Executive Officer
of Electronic Clearing House, Inc. "Our bankcard and
transaction services business grew 23.3% year-over-year and 8.4%
over the prior quarter, while our check services business grew 16.3%
year-over-year and remained consistent with the prior quarter. As we
move into fiscal 2006, we'll be focused on solidifying our position
as one of the only full-service point-of-sale management providers
while identifying and addressing several under served markets that
would benefit greatly from our suite of payment processing
solutions.
"Although legal and regulatory
compliance costs declined slightly from the prior quarter, they
continued to affect our bottom line. As we work to reduce operating
costs through a variety of IT initiatives aimed at improving our
overall efficiency, we'll be well positioned to leverage our top
line growth into sustainable and long-term profitability."
Fourth Quarter Financial Highlights
Total revenue for the fourth quarter
of fiscal 2005 was $15.2 million, an increase of 21.5% versus
$12.5 million in the prior year quarter. The increase was
primarily attributed to growth in the Company's bankcard
processing revenue and check services revenue as compared to the
same period last year.
Revenue from bankcard processing
and transactions grew 23.3% from $9.3 million in the fourth
quarter of fiscal 2004 to $11.5 million in the fourth quarter of
fiscal 2005, as the result of growth within the Company's current
customer base as well as from new merchants acquired through
enhanced marketing programs. Bankcard processing and transaction
revenues accounted for 75.5% of total Company revenues in the
fourth quarter of fiscal 2005.
Check-related revenues increased
16.3% to $3.7 million for the three months ended September 30,
2005, compared with $3.2 million in the prior-year quarter, as the
result of an increase in Automated Clearing House (ACH) processing
during the quarter. Fourth quarter fiscal 2005 ACH processing grew
12.3% to 7.8 million transactions in the quarter ended September
30, 2005, compared to 7.0 million transactions in the prior-year
quarter. Check-related revenues accounted for 24.5% of the total
revenues in the fourth quarter of fiscal 2005.
Gross margin from processing and
transaction services declined to 33.5% in the fourth quarter of
fiscal 2005 compared to 36.8% in the same quarter last year. The
decrease was primarily related to higher commission expense,
higher depreciation and amortization expense, and lower margins
from one high volume merchant who started processing during the
fourth quarter of 2005.
Other operating costs increased
10.8%, from $1.3 million, or approximately 10% of total revenues,
in the fourth quarter of fiscal 2004 to $1.4 million, or
approximately 9% of total revenues, in the same quarter of fiscal
2005. The increase in other expenses on an absolute dollar basis
was the result of an increase in personnel costs to support the
Company's business growth.
Research and development expenses
decreased slightly to $338,000 for the quarter ended September 30,
2005 compared to $375,000 for same period last year. It is
anticipated that this level of investment will continue throughout
fiscal 2006.
Selling, general and administrative
(SG&A) expenses increased 16.7% from $2.3 million, or
approximately 18% of total revenues, in the fourth quarter of
fiscal 2004 to $2.7 million, or approximately 18% of total
revenues, for the fourth quarter of fiscal 2005. The increase in
SG&A expenses on an absolute dollar basis was primarily
attributable to $426,000 in legal expense in the fourth quarter of
fiscal 2005 related to a patent litigation claim. It is expected
that litigation expenses will remain consistent throughout the
first half of fiscal 2006. The Company's patent litigation lawsuit
is scheduled to go to trial in April 2006.
Operating income for the quarter
ended September 30, 2005 was $651,000 compared to $656,000 in the
same period last year. The Company reported net income of
$404,000, or $0.06 per share on a fully diluted basis, in the
fourth quarter of fiscal 2005, compared to $403,000, or $0.06 per
share on a fully diluted basis, in the fourth quarter of fiscal
2004 and $433,000, or $0.06 per fully diluted share, in the third
quarter of fiscal 2005. Operating income was negatively affected
by the $426,000 of legal expenses referred to above.
ECHO's balance sheet remains
strong, with $6.7 million in unrestricted cash and cash
equivalents, $8.0 million in working capital, $705,000 in
long-term debt and capital leases, and $17.8 million in
stockholders' equity at September 30, 2005.
Fiscal 2005 Full-Year Financial
Highlights
ECHO reported revenue of
$55.6 million for fiscal 2005, an approximate 15% increase from
revenue of $48.3 in fiscal 2004. Fiscal 2005 net income was $1.0
million, or $0.15 per share on a fully diluted basis, compared to
$2.8 million, or $0.41 per share on a fully diluted basis, in
fiscal 2004. Increased legal expenses related to the Company's
outstanding patent litigation negatively affected fiscal 2005 net
income. Excluding litigation expense totaling $1.3 million for the
full fiscal year, net income in fiscal 2005 would have been $1.8
million, or $0.26 per share on a fully diluted basis.
Full-year operating highlights
include:
- An 11.4% increase in bankcard
and transaction processing revenue to $41.1 million. Bankcard
and transaction processing revenue accounted for approximately
74% of total Company revenues in fiscal 2005.
- A 26.6% increase in
check-related revenue. Check related revenue accounted for
approximately 26% of total Company revenues in fiscal 2005.
- A 24.6% increase in ACH
transactions processed to 32.1 million transactions.
Business Outlook
With the addition of Charles Harris
as President and Chief Operating Officer, the Company has
significantly strengthened its executive management team and will
benefit from his extensive experience in the payment processing
industry. ECHO recently reorganized its principal operating
units to report to Mr. Harris, allowing him to restructure the
Company's sale force and coordinate several operating and IT
initiatives, thus permitting the Company's Chairman and Chief
Executive Officer, Joel M. Barry, to focus on high level customer
contacts, external strategic initiatives and enhanced investor
relations efforts. Altogether, these initiatives will allow the
Company to more effectively implement its strategic plan for
double-digit revenue growth for both its bankcard and check
processing segments in fiscal 2006 and beyond.
The Company anticipates holding a
conference call in January 2006 to introduce Mr. Harris to the
investment community and to provide an overview of its business
outlook for 2006.
Conference Call
The Company will host a conference
call at 1:30 p.m. PST (4:30 p.m. EST) today to discuss fourth
quarter fiscal year 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) 240-5318.
International callers should dial (303) 262-2190. There is no pass
code required for this call. This conference call will also 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
September 30,
2005 2004
ASSETS
Current assets:
Cash and cash equivalents $ 6,732,000 $ 7,576,000
Restricted cash 1,448,000 1,024,000
Settlement deposits 17,094,000 18,282,000
Settlement receivables less allowance
of $25,000 and $22,000 981,000 451,000
Accounts receivable less allowance of
$92,000 and $111,000 2,421,000 1,943,000
Prepaid expenses and other assets 385,000 368,000
Deferred tax asset 249,000 279,000
Total current assets 29,310,000 29,923,000
Noncurrent assets:
Property and equipment, net 2,337,000 2,293,000
Software, net 8,876,000 6,844,000
Other assets, net 294,000 368,000
Total assets $40,817,000 $39,428,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current portion
of long-term debt $ 426,000 $ 878,000
Accounts payable 305,000 305,000
Settlement payable 18,075,000 18,733,000
Accrued expenses 2,467,000 2,003,000
Total current liabilities 21,273,000 21,919,000
Noncurrent liabilities:
Long-term debt 705,000 704,000
Deferred tax liability 1,067,000 565,000
Total liabilities 23,045,000 23,188,000
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value, 36,000,000
shares authorized; 6,620,531 and
6,451,331 shares issued; 6,582,262 and
6,413,062 shares outstanding 66,000 64,000
Additional paid-in capital 25,574,000 24,658,000
Accumulated deficit (6,983,000) (8,016,000)
Less treasury stock at cost, 38,269 and
38,269 common shares (466,000) (466,000)
Less unearned compensation (419,000) -0-
Total stockholders' equity 17,772,000 16,240,000
Total liabilities and stockholders'
equity $40,817,000 $39,428,000
ELECTRONIC CLEARING HOUSE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Twelve Months
Ended September 30, Ended September 30,
2005 2004 2005 2004
REVENUES: $15,189,000 $12,498,000 $55,551,000 $48,320,000
COSTS AND
EXPENSES:
Processing and
transaction
expense 10,084,000 7,876,000 35,867,000 30,370,000
Other operating
costs 1,417,000 1,279,000 5,653,000 5,182,000
Research and
development
expense 338,000 375,000 1,609,000 1,465,000
Selling,
general and
administrative
expenses 2,699,000 2,312,000 10,743,000 7,846,000
14,538,000 11,842,000 53,872,000 44,863,000
Income from
operations 651,000 656,000 1,679,000 3,457,000
Interest income 41,000 22,000 136,000 71,000
Interest expense (26,000) (29,000) (113,000) (175,000)
Gain on sale of
building -0- -0- -0- 1,319,000
Income before
provision for
income tax 666,000 649,000 1,702,000 4,672,000
Provision for
income taxes (262,000) (246,000) (669,000) (1,823,000)
Net income $ 404,000 $ 403,000 $1,033,000 $2,849,000
Basic net
earnings per
share $ 0.06 $ 0.06 $ 0.16 $ 0.45
Diluted net
earnings per
share $ 0.06 $ 0.06 $ 0.15 $ 0.41
Weighted average
shares
outstanding
Basic 6,531,098 6,376,570 6,485,125 6,311,643
Diluted 6,958,048 6,875,983 6,939,381 6,900,251
ELECTRONIC CLEARING HOUSE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended September 30,
2005 2004
Cash flows from operating activities:
Net income $1,033,000 $ 2,849,000
Adjustments to reconcile net income to
net cash provided by operating
activities:
Gain on sale of building -0- (1,319,000)
Depreciation 776,000 634,000
Amortization of software 1,865,000 1,350,000
Provisions for losses on accounts and
notes receivable 43,000 92,000
Provision for obsolete inventory 10,000 46,000
Deferred income taxes 532,000 1,628,000
Stock option compensation 14,000 33,000
Tax benefit from exercise of stock option 91,000 75,000
Changes in assets and liabilities:
Restricted cash (424,000) (47,000)
Settlement deposits 1,188,000 (15,549,000)
Accounts receivable (518,000) (95,000)
Settlement receivables (533,000) 244,000
Accounts payable -0- (474,000)
Settlement payables (658,000) 15,304,000
Accrued expenses 464,000 661,000
Prepaid expenses 5,000 (107,000)
Net cash provided by operating activities 3,888,000 5,325,000
Cash flows from investing activities:
Other assets 4,000 141,000
Purchase of equipment (781,000) (744,000)
Purchased and capitalized software (3,859,000) (3,534,000)
Proceeds from sale of building -0- 2,233,000
Net cash used in investing activities (4,636,000) (1,904,000)
Cash flows from financing activities:
Proceeds from issuance of notes payable 400,000 811,000
Repayment of notes payable (438,000) (1,916,000)
Repayment of capitalized leases (452,000) (562,000)
Proceeds from private placement -0- 2,693,000
Proceeds from exercise of stock options 394,000 221,000
Net cash (used in) provided by financing
activities (96,000) 1,247,000
Net (decrease) increase in cash (844,000) 4,668,000
Cash and cash equivalents at beginning of
period 7,576,000 2,908,000
Cash and cash equivalents at end of period $6,732,000 $ 7,576,000
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. 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.
Contact:
Electronic Clearing House, Inc.
Donna Rehman, 805-419-8533
corp@ECHO-inc.com
http://www.echo-inc.com
or
Financial Relations Board
Amy Cozamanis, 310-854-8314
acozamanis@financialrelationsboard.com
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