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ECHO
Press Releases 2006
FOR IMMEDIATE RELEASE
Electronic
Clearing House Inc.
Announces First Quarter FY 2006 Results
Camarillo, Calif., February 13,
2006 -
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 December 31, 2005.
First Quarter Highlights:
- Total revenue increased 32.6% to
$16.9 million.
- Bankcard and transaction
processing revenue grew 37% to $12.6 million.
- Check-related revenue advanced
21.5% to $4.3 million.
- Gross margin from processing and
transaction revenue was 34.2%, compared to 36.0% for the same
period last year.
- Bankcard processing volume
increased 47.9% to $388,000,000.
- ACH transactions processed
increased 11.3% to 9.8 million transactions.
- Stock compensation expense
increased to $218,000 from $8,000 as a result of the Company's
adoption of SFAS 123R this fiscal quarter.
- Diluted EPS was $0.09, compared to
diluted EPS of $0.01 for the same period last year.
"We are very pleased with our
first quarter results which benefited from record growth in both our
bankcard and transaction services and check-related
businesses," said Joel M. Barry, Chairman and Chief Executive
Officer of Electronic Clearing House, Inc. "The unique value
proposition ECHO brings to its customers provides us with a
great opportunity from which to build an even stronger, more
competitive payment processing platform.
"By successfully implementing
our growth plan while also focusing on completing several
infrastructure enhancements that will help improve our operating
leverage, we feel confident that we can deliver above-average growth
and improved shareholder value."
Fiscal 2006 First Quarter Financial
Highlights
Total revenue for the first quarter
of fiscal 2006 was $16.9 million, an increase of 32.6%, versus $12.8
million in the prior year quarter and an increase of 11.4%, as
compared to $15.2 million in the fourth quarter of fiscal 2005. The
increase in total revenue was primarily attributed to a 47.9%
bankcard processing volume growth and check services revenue growth
as compared to the same period last year.
Revenue from bankcard processing and
transactions grew 37.0% from $9.2 million in the first quarter of
fiscal 2005 to $12.6 million in the first quarter of fiscal 2006, as
compared to $11.5 million in the fourth quarter of fiscal 2005. The
increase in the Company's bankcard processing and transaction
revenue resulted from a mix of organic growth and from enhanced
marketing initiatives. Bankcard processing and transaction revenues
accounted for 74.3% of total Company revenues in the first quarter
of fiscal 2006.
Check-related revenues increased
21.5% to $4.3 million for the three months ended December 31, 2005,
versus $3.6 million in the prior-year quarter and grew 16.8% from
$3.7 million for the three months ended September 30, 2005. The
increase in the Company's check-related revenue resulted from a
15.2% increase in Automated Clearing House (ACH) processing revenue,
a 22.0% increase in check verification revenue, and a 72.8% increase
in check collection revenue. The Company processed 9.8 million ACH
transactions in the first quarter of fiscal 2006. Check-related
revenues accounted for 25.7% of the Company's total revenues in the
first quarter of fiscal 2006.
Gross margin declined to 34.2% in the
first quarter of fiscal 2006, compared to 36.0% in the same quarter
last year, but increased slightly from 33.6% in the fourth quarter
of fiscal 2005. The year-over-year decrease in gross margin was
primarily related to the presence of several high-volume merchants
in the Company's revenue mix which receive better pricing in
exchange for ECHO's support of a higher volume of
transactions.
Other operating costs increased
slightly, from $1.33 million, or approximately 10% of total
revenues, in the first quarter of fiscal 2005, to $1.34 million, or
approximately 8% of total revenues, in the same quarter of fiscal
2006.
Research and development expenses
increased to $479,000, or 3% of total revenues, for the quarter
ended December 31, 2005, compared to $448,000, or 4% of revenues,
for same period last year. The Company anticipates a similar level
of R&D investment throughout fiscal 2006.
Selling, general and administrative (SG&A)
expenses increased 6.7% from $2.7 million, or approximately 21% of
total revenues, in the first quarter of fiscal 2005, to $2.9
million, or approximately 17% of total revenues, for the first
quarter of fiscal 2006. The increase in SG&A expenses on an
absolute dollar basis was primarily attributable to an increase in
stock-based compensation expense, higher cash compensation expense
and increased legal expense related to the Company's ongoing patent
litigation claim, which is expected to go to trial in April 2006.
As a result of the adoption of SFAS
No. 123R effective October 1, 2005, ECHO reported a stock
compensation expense of $218,000 in the first quarter of fiscal
2006. The Company's stock compensation expense was not material in
the first quarter of fiscal 2005.
Operating income for the quarter
ended December 31, 2005 was $1.1 million, versus $87,000 in the same
period last year and $651,000 in the fourth quarter of fiscal 2005.
The Company reported net income of $592,000, or $0.09 per share on a
fully diluted basis, in the first quarter of fiscal 2006, versus
$52,000, or $0.01 per share on a fully diluted basis, in the first
quarter of fiscal 2005. In the fourth quarter of fiscal 2005, ECHO
reported net income of $404,000, or $0.06 per share on a fully
diluted basis.
ECHO's balance sheet remains
healthy, with $6.9 million in unrestricted cash and cash
equivalents, $9.4 million in working capital, $657,000 in long-term
debt and capital leases and $18.9 million in stockholders' equity at
December 31, 2005.
Business Outlook
As detailed in its January 18, 2006
press release, the following estimates are based on ECHO's
current expectations for the 2006 fiscal year ending September 30,
2006. These statements are forward-looking and actual results may
differ materially as a result of factors referenced in the safe
harbor section at the end of this press release.
For the 2006 fiscal year, ECHO
is targeting total revenue growth in the 17% to 24% range, driven by
18% to 25% growth in its bankcard business and 15% to 22% growth in
its check processing business. The Company said that it believes its
fiscal 2006 revenues will be at the high end of the previously
mentioned range. The Company also reiterated that fiscal 2006
margins will likely be impacted by the revenue contribution from
card-not-present transactions, offset by ECHO's new
third-party reseller strategy.
Net income in fiscal 2006 is expected
to range from $1.5 million to $2.5 million. This estimate includes
an anticipated stock compensation expense of approximately $900,000
as a result of the Company's adoption of SFAS No. 123R and expected
legal expense of approximately $1.0 million.
Conference Call
The Company will host a conference
call at 1:30 p.m. PST (4:30 p.m. EST) today to discuss first quarter
fiscal 2006 results. To participate in the conference call, please
dial the following number five to ten minutes prior to the scheduled
conference call time: (800) 218-8862. International callers should
dial (303) 262-2125. 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.
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 statements relating to ECHO's
future financial performance. Potential risks and uncertainties that
may cause actual results to differ materially include, but are not
limited to, such factors as unanticipated events causing litigation
expenses to exceed estimates, additional time and resources required
to comply with compliance efforts, 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, the
effect 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
December 31, September 30,
2005 2005
---- ----
Current assets:
Cash and cash equivalents $ 6,902,000 $ 6,732,000
Restricted cash 2,007,000 1,448,000
Settlement deposits 24,936,000 17,094,000
Settlement receivables less allowance of
$25,000 and $25,000 1,461,000 981,000
Accounts receivable less allowance of
$232,000 and $92,000 2,716,000 2,421,000
Prepaid expenses and other assets 455,000 385,000
Deferred tax asset 228,000 249,000
----------- -----------
Total current assets 38,705,000 29,310,000
Noncurrent assets:
Property and equipment, net 2,357,000 2,337,000
Software, net 9,065,000 8,876,000
Other assets, net 284,000 294,000
----------- -----------
Total assets $50,411,000 $40,817,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Short-term borrowings and current portion
of long-term debt $ 359,000 $ 426,000
Accounts payable 337,000 305,000
Settlement payable 26,397,000 18,075,000
Accrued expenses 2,238,000 2,467,000
----------- -----------
Total current liabilities 29,331,000 21,273,000
Noncurrent liabilities:
Long-term debt 657,000 705,000
Deferred tax liability 1,497,000 1,067,000
----------- -----------
Total liabilities 31,485,000 23,045,000
----------- -----------
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value, 36,000,000
authorized; 6,723,020 and 6,620,531
shares issued; 6,684,751 and 6,582,262
shares outstanding, respectively 67,000 66,000
Additional paid-in capital 25,716,000 25,574,000
Accumulated deficit (6,391,000) (6,983,000)
Less treasury stock at cost, 38,269 and
38,269 common shares (466,000) (466,000)
Less unearned stock compensation -0- (419,000)
----------- -----------
Total stockholders' equity 18,926,000 17,772,000
----------- -----------
Total liabilities and stockholders'
equity $50,411,000 $40,817,000
=========== ===========
ELECTRONIC CLEARING HOUSE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months
Ended December 31,
------------------------
2005 2004
----------- -----------
REVENUES $16,926,000 $12,760,000
----------- -----------
COSTS AND EXPENSES:
Processing and transaction expense 11,142,000 8,171,000
Other operating costs 1,341,000 1,333,000
Research and development expense 479,000 448,000
Selling, general and administrative
expenses 2,903,000 2,721,000
----------- -----------
15,865,000 12,673,000
----------- -----------
Income from operations 1,061,000 87,000
Interest income 47,000 28,000
Interest expense (25,000) (28,000)
----------- -----------
Income before provision for income tax 1,083,000 87,000
Provision for income taxes (491,000) (35,000)
----------- -----------
Net income $ 592,000 $ 52,000
=========== ===========
Basic net earnings per share $ 0.09 $ 0.01
=========== ===========
Diluted net earnings per share $ 0.09 $ 0.01
=========== ===========
Weighted average shares outstanding
Basic 6,627,275 6,427,305
=========== ===========
Diluted 6,960,373 6,882,761
=========== ===========
ELECTRONIC CLEARING HOUSE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months
Ended December 31,
------------------------
2005 2004
---- ----
Cash flows from operating activities:
Net income $ 592,000 $ 52,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 207,000 183,000
Amortization of software 622,000 407,000
Provisions for losses on accounts and
notes receivable 140,000 50,000
Deferred income taxes 451,000 34,000
Stock option compensation 218,000 8,000
Tax benefit from exercise of stock
option 3,000 -0-
Changes in assets and liabilities:
Restricted cash (559,000) (236,000)
Settlement deposits (7,842,000) 3,200,000
Accounts receivable (435,000) (167,000)
Settlement receivable (480,000) (393,000)
Accounts payable 32,000 79,000
Settlement payable 8,322,000 (2,810,000)
Accrued expenses (217,000) 665,000
Prepaid expenses and other assets (70,000) (174,000)
------------ -----------
Net cash provided by operating
activities 984,000 898,000
------------ -----------
Cash flows from investing activities:
Other assets 1,000 3,000
Purchase of equipment (227,000) (140,000)
Purchased and capitalized software (802,000) (939,000)
------------ -----------
Net cash used in investing activities (1,028,000) (1,076,000)
------------ -----------
Cash flows from financing activities:
Repayment of notes payable (73,000) (111,000)
Repayment of capitalized leases (42,000) (136,000)
Proceeds from exercise of stock
options 291,000 123,000
Tax benefit from exercise of stock
options 38,000 -0-
------------ -----------
Net cash provided by (used in)
financing activities 214,000 (124,000)
------------ -----------
Net increase (decrease) in cash 170,000 (302,000)
Cash and cash equivalents at beginning
of period 6,732,000 7,576,000
------------ -----------
Cash and cash equivalents at end of
period $ 6,902,000 $ 7,274,000
Contact:
Electronic Clearing House, Inc.
Donna Rehman, 805-419-8533
corp@ECHO-inc.com
http://www.echo-inc.com
or
Financial Relations Board
Erin Cox, (310) 854-8319
ecox@financialrelationsboard.com
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