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ECHO
Press Releases 2006
FOR IMMEDIATE RELEASE
Electronic
Clearing House, Inc. (ECHO)
Announces
Third Quarter FY 2006 Results
Camarillo, Calif., Aug 9,
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 June 30, 2006.
Third Quarter Highlights:
- Total revenue increased 39.1% to
$19.9 million.
- Bankcard and transaction
processing revenue grew 42.9% to $15.1 million.
- Check-related revenue advanced
28.3% to $4.8 million.
- Gross margins from processing and
transaction revenue were 33.1%, compared to 36.6% for the same
period last year.
- Bankcard processing volume
increased 57.5% to $472.1 million.
- ACH transactions processed
increased 18.5% to 9.3 million transactions.
- Cash flow from operations
increased 133% to $6.5 million from $2.8 million.
- Stock compensation expense
increased to $269,000 from $0 in the same period last year as a
result of the Company's adoption of SFAS 123R this fiscal year.
- Diluted EPS was $0.14, compared to
diluted EPS of $0.06 for the same period last year.
"The third quarter numbers
primarily reflect the impact of three things: solid organic growth
from our existing merchants, continued performance from our historic
sales channels and careful control over our operating costs,"
said Joel M. Barry, Chairman and Chief Executive Officer of
Electronic Clearing House, Inc. "In addition to these positive
factors, we now see a solid pipeline developing from our new
go-to-market strategy that emphasizes several new multi-channel
sales avenues. The significant cash flow improvement is also a good
sign that we are beginning to outrun the inherent marketing and
sales costs associated with growth and we are starting to reap the
financial benefits that come with higher processing volume and
operating leverage."
Fiscal 2006 Third Quarter Financial
Highlights
Total revenue for the third quarter
of fiscal 2006 was $19.9 million, an increase of 39.1%, versus $14.3
million in the prior year quarter and an increase of 3.3%, as
compared to $19.2 million in the second quarter of fiscal 2006. The
increase in total revenue was significantly impacted by a 42.9%
increase in bankcard processing revenue and a 28.3% increase in
check services revenue as compared to the same period last year.
Revenue from bankcard processing and
transactions grew 42.9% from $10.6 million in the third quarter of
fiscal 2005 to $15.1 million in the third quarter of fiscal 2006, as
compared to $14.7 million in the second quarter of fiscal 2006.
Strong organic growth from existing customers and growth from our
marketing initiatives continued to drive performance during the
quarter. Bankcard processing and transaction revenues accounted for
76.1% of total Company revenues in the third quarter of fiscal 2006.
Check-related revenues, which account
for 23.9% of the Company's total revenues, increased 28.3% to $4.8
million for the three months ended June 30, 2006, versus $3.7
million in the prior-year quarter. The increase in the Company's
check-related revenue resulted from a 15.7% increase in Automated
Clearing House (ACH) and check verification revenue, and a 98.6%
increase in check collection revenue. The Company processed 9.3
million ACH transactions in the third quarter of fiscal 2006.
Gross margin decreased to 33.1% in
the third quarter of fiscal 2006, compared to 36.6% in the same
quarter last year. The year-over-year decrease in gross margin was
primarily due to several high volume merchants that contributed
slightly lower margin. In particular, two merchants each made up
approximately 8% of total bankcard revenue in third quarter of
fiscal 2006.
Processing and transaction expense
increased 46.9% in the third quarter of fiscal 2006 to $13.3
million, up from $9.1 million in the comparable 2005 quarter.
Research and development expenses
decreased slightly from $354,000 for the quarter ended June 30, 2005
to $316,000 in the current year quarter. Research and development
remained consistent during the third quarter, and should remain at
current levels for the remainder of the 2006 fiscal year, and into
fiscal 2007. During the quarter, the Company continued to improve
its technology infrastructure, which is expected to create operating
efficiencies as well as cost savings. Several of our previously
disclosed IT projects are on track for deployment during the fourth
quarter of 2006. The Company will continue to make necessary IT
improvements that will contribute to ECHO's continued growth.
Selling, general and administrative (SG&A)
expenses increased 13.1% from $2.7 million, or 18.8% of total
revenues, in the third quarter of fiscal 2005, to $3.0 million, or
15.3% of total revenues, for the third quarter of fiscal 2006. The
increase in SG&A expenses on an absolute dollar basis was
primarily attributable to a $269,000 increase in stock-based
compensation expense as compared to the prior year quarter as a
result of the adoption of SFAS No. 123R, effective October 1, 2005.
SOX compliance expense also increased by $115,000 year over year.
Operating income increased 153.9% to
$1.8 million for the third quarter of fiscal 2006, versus $703,000
in the same period last year. The Company reported net income of
$1,010,000, or $0.14 per share on a fully diluted basis, in the
third quarter of fiscal 2006, versus net income of $433,000, or
$0.06 per share on a fully diluted basis, in the third quarter of
fiscal 2005.
Balance Sheet Summary
ECHO's balance sheet remains
healthy, with approximately $10.3 million in cash and cash
equivalents, $2.3 million in restricted cash, $11.7 million in
working capital, $521,000 in long-term debt and capital leases, and
$21.3 million in stockholders' equity at June 30, 2006.
Conference Call
The Company will host a conference
call at 1:30 p.m. PDT (4:30 p.m. EDT) today to discuss its third
quarter fiscal 2006 results. To participate in the conference call,
please dial the following number at least five minutes prior to the
scheduled conference call time: (800) 240-6709. International
callers should dial (303) 262-2050. 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
June 30, September 30,
2006 2005
Current assets:
Cash and cash equivalents $10,250,000 $7,009,000
Restricted cash 2,322,000 1,448,000
Settlement deposits 17,050,000 16,817,000
Settlement receivables, less
allowance of $25,000 and
$25,000 1,551,000 981,000
Accounts receivable, less
allowance of $528,000 and
$92,000 3,136,000 2,421,000
Prepaid expenses and other
assets 526,000 385,000
Deferred tax asset 441,000 249,000
Total current assets 35,276,000 29,310,000
Noncurrent assets:
Property and equipment, net 2,420,000 2,337,000
Software, net 9,976,000 8,876,000
Other assets, net 263,000 294,000
Total assets $47,935,000 $40,817,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and
current portion of long-term
debt $305,000 $426,000
Accounts payable 663,000 305,000
Settlement payable 18,601,000 17,798,000
Trust payable 834,000 277,000
Accrued expenses 3,133,000 2,467,000
Total current liabilities 23,536,000 21,273,000
Noncurrent liabilities:
Long-term debt, net of
current portion 521,000 705,000
Deferred tax liability 2,626,000 1,067,000
Total liabilities 26,683,000 23,045,000
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value,
36,000,000 shares
authorized; 6,801,304 and
6,620,531 shares issued;
6,763,035 and 6,582,262
shares outstanding,
respectively 68,000 66,000
Additional paid-in capital 26,607,000 25,574,000
Accumulated deficit (4,957,000) (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 21,252,000 17,772,000
Total liabilities and
stockholders' equity $47,935,000 $40,817,000
ELECTRONIC CLEARING HOUSE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Nine Months
Ended June 30, Ended June 30,
2006 2005 2006 2005
REVENUES: $19,869,000 $14,281,000 $56,023,000 $40,362,000
COSTS AND
EXPENSES:
Processing and
transaction
expenses 13,299,000 9,051,000 37,357,000 25,783,000
Other operating
costs 1,438,000 1,493,000 4,266,000 4,236,000
Research and
development
expenses 316,000 354,000 1,189,000 1,271,000
Selling, general
and
administrative
expenses 3,031,000 2,680,000 9,584,000 8,044,000
18,084,000 13,578,000 52,396,000 39,334,000
Income from
operations 1,785,000 703,000 3,627,000 1,028,000
Interest income 73,000 37,000 173,000 95,000
Interest expense (21,000) (29,000) (68,000) (87,000)
Income before
provision for
income taxes 1,837,000 711,000 3,732,000 1,036,000
Provision for
income taxes (827,000) (278,000) (1,706,000) (407,000)
Net income $1,010,000 $433,000 $2,026,000 $629,000
Basic net earnings
per share $0.15 $0.07 $0.31 $0.10
Diluted net
earnings per
share $0.14 $0.06 $0.29 $0.09
Weighted average
shares
outstanding
Basic 6,630,055 6,512,411 6,596,737 6,469,632
Diluted 7,156,204 6,942,122 7,016,342 6,956,111
ELECTRONIC CLEARING HOUSE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months
Ended June 30,
2006 2005
Cash flows from operating activities:
Net income $2,026,000 $629,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 581,000 558,000
Amortization of software 1,939,000 1,258,000
Provisions for losses on accounts and notes
receivable 443,000 31,000
Deferred income taxes 1,367,000 280,000
Stock option compensation 698,000 8,000
Restricted stock issued to director 38,000 -0-
Tax benefit from exercise of stock option -0- 82,000
Changes in assets and liabilities:
Restricted cash (874,000) (201,000)
Settlement deposits (233,000) (86,000)
Accounts receivable (1,158,000) (177,000)
Settlement receivable (570,000) (387,000)
Accounts payable 358,000 53,000
Settlement payable 803,000 682,000
Trust payable 557,000 104,000
Accrued expenses 666,000 (24,000)
Prepaid expenses (141,000) (25,000)
Net cash provided by operating activities 6,500,000 2,785,000
Cash flows from investing activities:
Other assets 3,000 36,000
Purchase of equipment (662,000) (623,000)
Purchased and capitalized software (3,011,000) (2,896,000)
Net cash used in investing activities (3,670,000) (3,483,000)
Cash flows from financing activities:
Proceeds from issuance of notes payable -0- 400,000
Repayment of notes payable (209,000) (330,000)
Repayment of capitalized leases (98,000) (373,000)
Proceeds from exercise of stock options 482,000 329,000
Excess tax benefit from exercise of stock
options 236,000 -0-
Net cash provided by financing activities 411,000 26,000
Net increase (decrease) in cash 3,241,000 (672,000)
Cash and cash equivalents at beginning of
period 7,009,000 7,680,000
Cash and cash equivalents at end of period $10,250,000 $7,008,000
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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