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ECHO
Press Releases 2007
FOR IMMEDIATE RELEASE
Electronic Clearing House, Inc. (ECHO)
Announces Second Quarter Fiscal 2007 Results
Camarillo, Calif., May 9,
2007 -
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, 2007.
Second Quarter Highlights:
Financial highlights for the second
quarter of fiscal 2007 as compared to the same period last year are
as follows:
- Total revenue increased 4.0% to
$20.0 million from $19.2 million
- Gross margins from processing
and transaction revenue decreased to 30.2% from 32.8%
- Operating loss was $3.2 million,
due to a number of one-time expenses
- Diluted net loss per share was
$0.29 as compared to diluted net income per share of $0.06
- Bankcard and transaction
processing revenue increased 11.5% to $16.4 million
- Bankcard processing volume
increased 13.3% to $525.4 million
- Check-related revenue decreased
20.1% to $3.6 million
- ACH transactions processed
decreased 23.6% to 6.9 million
"During the second quarter, ECHO
management dedicated a substantial amount of time and resources to
issues that diverted our attention from furthering our core
business, namely our terminated merger with Intuit and our
participation as a witness in the federal investigation related to
our Internet wallet business," said Joel Barry, Chairman and Chief
Executive Officer of Electronic Clearing House, Inc. "This impeded
our progress in implementing operational initiatives and developing
our new business pipeline. Additionally, we incurred substantial
expenses in the quarter related to these issues which affected our
bottom line results.
"We're pleased that in spite of the
issues we faced in the second quarter, our revenue increased 4%
year-over-year. The fundamentals of our business remain solid and we
have resumed our focus on growing our core business. We expect it
will take a couple of quarters to regain momentum. Our strong
balance sheet and our comprehensive payment processing solutions
position us well to capitalize on our long-term growth opportunity."
Fiscal 2007 Second Quarter Financial
Results
Revenue
Total revenue for the second quarter
of fiscal 2007 increased 4.0% to $20.0 million from $19.2 million
for the same period last year. Bankcard revenue increased 11.5% to
$16.4 million from $14.7 million in the second quarter of fiscal
2006 due to organic growth from existing merchants and several new
merchants with high volume processing. This increase was offset by a
20.1% decline in our check services business, primarily reflecting
the wind-down of our Internet wallet business.
Gross Margin
Gross margin declined to 30.2% for
the quarter from 32.8% for the same period last year, due primarily
to a 20.1% decrease in check-related revenue which generally has a
higher gross margin than bankcard revenue.
Expenses
Total operating expenses increased
25.6% to $23.2 million in the second quarter of 2007 as compared to
$18.4 million for the comparable 2006 quarter. Included in the
operating expenses are approximately $4.1 million of one-time
expenses.
Processing and Transaction Expenses:
Processing and transaction expenses were $13.9 million in the second
quarter of 2007 as compared to $12.9 million in 2006, primarily due
to increased bankcard processing revenue.
Selling, General and Administrative
Expenses: Selling, general and administrative expenses increased
27.8% to $3.5 million from $2.8 million in the second fiscal quarter
of 2006. This was primarily attributable to increased salaries and
bonuses of $291,000; an increase in stock compensation expenses of
$97,000; and a non-recurring expense of $602,000 to investigate and
respond to a security incident. The investigation involved
unauthorized online system access and concluded that no files had
been downloaded during the incident.
Other Operating Costs: Other
operating costs increased 8.5% to $1.6 million for the current
fiscal quarter from $1.5 million in the second quarter of 2006.
R&D Expenses: Research and
development expenses increased to $542,000 in the current year
quarter from $394,000 for the quarter ended March 31, 2006. The
Company anticipates making continued investments in its IT
initiatives and expects research and development expenses to remain
at current levels for the remainder of the 2007 fiscal year.
Legal Settlements: The Company also
incurred approximately $2.9 million in one-time legal settlement
expenses during the quarter. These include a $2.3 million civil
disgorgement payment made in connection with a government
non-prosecution agreement and $589,000 in legal expenses associated
with the resolution of this matter.
Merger Related Costs: The Company
incurred approximately $620,000 in non-recurring legal, professional
and other fees and expenses related to its proposed merger with
Intuit which was mutually terminated on March 26, 2007.
Operating Loss
Operating loss for the quarter was
$3.2 million as compared to operating income of $781,000 in the same
period last year, primarily due to the increases in general and
administrative expenses, legal settlements and merger related costs
incurred during the quarter.
Net Loss per Share
Net loss was $0.29 per diluted share
for the second quarter as compared to net income of $0.06 per
diluted share for the same period last year.
Balance Sheet Summary
ECHO's balance sheet remains
strong, with $9.8 million in cash and cash equivalents, $1.2 million
in restricted cash, $10.8 million in working capital, only $302,000
in long-term debt, and $21.8 million in stockholders' equity at
March 31, 2007.
Conference Call
ECHO will host a conference
call today at 1:30 p.m. PDT (4:30 p.m. EDT) to discuss its second
quarter fiscal 2007 results. To participate in the conference call,
please dial the following number at least ten minutes prior to the
scheduled conference call time (800) 257-1836. International callers
should dial (303) 205-0044. 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 merchant accounts, 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:
This release contains "forward-looking statements" that
include information relating to future events and future
financial and operating performance. Examples of
forward-looking statements made in this release include
statements regarding ECHO's anticipated continued
investments in IT initiatives. Forward-looking
statements should not be read as a guarantee of future
performance or results, and will not necessarily be
accurate indications of the times at, or by, which that
performance or those results will be achieved.
Forward-looking statements are based on information
available at the time they are made and/or management's
good faith belief as of that time with respect to future
events, and are subject to risks and uncertainties that
could cause actual performance or results to differ
materially from those expressed in or suggested by the
forward-looking statements. Important factors that could
cause these differences include, but are not limited to,
the risk factors detailed from time to time in ECHO's
filings with the United States Securities and Exchange
Commission. For a more detailed description of the risk
factors and uncertainties affecting ECHO, please
refer to the Company's recent securities filings, which
are available at
www.sec.gov. ECHO undertakes no obligation to
publicly update or revise any forward-looking
statements, whether as a result of new information,
future events or otherwise. ELECTRONIC CLEARING HOUSE, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
March 31, September 30,
2007 2006
Current assets:
Cash and cash equivalents $9,810,000 $11,604,000
Restricted cash 1,218,000 1,594,000
Settlement deposits and funds held in
trust 10,691,000 23,282,000
Settlement receivables, less
allowance of $42,000 and $16,000 401,000 1,499,000
Accounts receivable, less allowance
of $477,000 and $392,000 3,455,000 2,914,000
Prepaid expenses and other assets 775,000 494,000
Deferred tax asset 435,000 506,000
------------ --------------
Total current assets 26,785,000 41,893,000
Noncurrent assets:
Property and equipment, net 2,421,000 2,521,000
Software, net 10,559,000 10,340,000
Other assets, net 234,000 253,000
------------ --------------
Total assets $39,999,000 $55,007,000
============ ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current
portion of long-term debt $292,000 $291,000
Accounts payable 537,000 352,000
Settlement payable and trust payable 11,092,000 24,781,000
Accrued expenses 2,629,000 2,257,000
Accrued compensation expenses 1,432,000 1,670,000
------------ --------------
Total current liabilities 15,982,000 29,351,000
Noncurrent liabilities:
Long-term debt, net of current
portion 302,000 448,000
Deferred tax liability 1,934,000 2,922,000
------------ --------------
Total liabilities 18,218,000 32,721,000
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Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value,
500,000 shares authorized, none
outstanding at March 31, 2007 and
September 30, 2006 -0- -0-
Common stock, $.01 par value,
36,000,000 shares authorized;
6,894,683 and 6,839,333 shares
issued; 6,856,414 and 6,801,064
shares outstanding, respectively 69,000 68,000
Additional paid-in capital 28,430,000 27,350,000
Accumulated deficit (6,252,000) (4,666,000)
Less treasury stock at cost, 38,269
and 38,269 common shares (466,000) (466,000)
------------ --------------
Total stockholders' equity 21,781,000 22,286,000
------------ --------------
Total liabilities and stockholders'
equity $39,999,000 $55,007,000
============ ==============
ELECTRONIC CLEARING HOUSE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Six Months
Ended March 31, Ended March 31,
------------------------- -------------------------
2007 2006 2007 2006
------------ ------------ ------------ ------------
REVENUES: $19,993,000 $19,228,000 $39,372,000 $36,154,000
------------ ------------ ------------ ------------
COSTS AND
EXPENSES:
Processing and
transaction
expense 13,948,000 12,916,000 26,898,000 24,058,000
Other operating
costs 1,614,000 1,487,000 3,185,000 2,828,000
Research and
development
expense 542,000 394,000 1,009,000 873,000
Selling,
general and
administrative
expenses 3,549,000 2,778,000 7,085,000 5,314,000
Legal
settlements 2,889,000 872,000 2,898,000 1,239,000
Merger related
costs 620,000 -0- 906,000 -0-
------------ ------------ ------------ ------------
23,162,000 18,447,000 41,981,000 34,312,000
------------ ------------ ------------ ------------
(Loss) income from
operations (3,169,000) 781,000 (2,609,000) 1,842,000
Interest income 135,000 53,000 265,000 100,000
Interest expense (13,000) (22,000) (30,000) (47,000)
------------ ------------ ------------ ------------
(Loss) income
before income tax
benefits/
provision (3,047,000) 812,000 (2,374,000) 1,895,000
Income tax
benefits/
provision for
income taxes 1,122,000 (388,000) 788,000 (879,000)
------------ ------------ ------------ ------------
Net (loss) income $(1,925,000) $424,000 $(1,586,000) $1,016,000
============ ============ ============ ============
Basic net (loss)
earnings per
share $(0.29) $0.06 $(0.24) $0.15
============ ============ ============ ============
Diluted net (loss)
earnings per
share $(0.29) $0.06 $(0.24) $0.14
============ ============ ============ ============
Weighted average
shares
outstanding
Basic 6,735,334 6,698,577 6,718,828 6,662,534
============ ============ ============ ============
Diluted 6,735,334 7,088,143 6,718,828 7,022,427
============ ============ ============ ============
ELECTRONIC CLEARING HOUSE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months
Ended March 31,
------------------------
2007 2006
------------ -----------
Cash flows from operating activities:
Net (loss) income $(1,586,000) $1,016,000
Adjustments to reconcile net (loss) income
to net cash provided by operating
activities:
Depreciation 471,000 341,000
Amortization of software 1,600,000 1,276,000
Loss on disposal of fixed assets 15,000 -0-
Loss on disposal of capitalized software 3,000 -0-
Provisions for losses on accounts and
notes receivable 117,000 327,000
Provision for deferred income taxes (917,000) 824,000
Stock-based compensation 675,000 434,000
Excess tax benefit from stock-based
compensation (108,000) (52,000)
Changes in assets and liabilities:
Restricted cash 376,000 (266,000)
Settlement deposits and funds held in
trust 12,591,000 (3,396,000)
Accounts receivable (632,000) (1,069,000)
Settlement receivable 1,072,000 (356,000)
Accounts payable 185,000 (18,000)
Settlement payable and trust payable (13,689,000) 3,256,000
Accrued expenses 480,000 1,502,000
Accrued compensation expenses (254,000) (588,000)
Prepaid expenses and other assets (281,000) (130,000)
------------ -----------
Net cash provided by operating activities 118,000 3,101,000
------------ -----------
Cash flows from investing activities:
Other assets -0- 2,000
Purchase of equipment (386,000) (277,000)
Purchased and capitalized software (1,803,000) (1,746,000)
------------ -----------
Net cash used in investing activities (2,189,000) (2,021,000)
------------ -----------
Cash flows from financing activities:
Repayment of notes payable (145,000) (137,000)
Repayment of capitalized leases -0- (75,000)
Proceeds from exercise of stock options 314,000 318,000
Excess tax benefit from stock-based
compensation 108,000 52,000
------------ -----------
Net cash provided by financing activities 277,000 158,000
------------ -----------
Net (decrease) increase in cash and cash
equivalents (1,794,000) 1,238,000
Cash and cash equivalents at beginning of
period 11,604,000 6,732,000
------------ -----------
Cash and cash equivalents at end of period $9,810,000 $7,970,000
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Contact:
Electronic Clearing House, Inc.
Donna Rehman, 805-419-8533
E-mail: drehman@echo-inc.com
or
The Abernathy MacGregor Group, Inc.
Moira Conlon, 213-630-6550
E-mail: MHC@abmac.com
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