Electronic Clearing House (ECHO) Announces Improved Fourth Quarter FY 2003 Results

Fourth Quarter Highlights: - Revenue increases 28.3% to $11 million versus Q4 FY 2002 - Gross margin from processing and transaction revenue improved from 28% to 38% - Operating income of $0.9 million up from a loss of $0.3 million - Diluted earnings per share rise to $0.08 from a loss of $0.03 Revenue for the fourth quarter of fiscal 2003 was a record $10,990,000, an increase of 28.3%, as compared to $8,569,000 in the prior year quarter. Operating income rose to $869,000 in the fourth quarter, as compared to an operating loss of $321,000 in the same period last year. The year-over-year improvement can be primarily attributed to the 28.3% revenue growth and the improvement in gross margin from processing and transaction revenue, from 28% to 38%. The Company reported net income of $518,000, or $0.08 per share on a fully diluted basis, in the fourth quarter of fiscal 2003, as compared to a net loss of $207,000, or $0.03 per share in the fourth quarter of fiscal 2002. For the fiscal year ended September 30, 2003, the Company earned $0.23 per share on revenue of $40,636,000 before the cumulative effect of an accounting change to record the impairment of goodwill. This compares to a loss of $0.41 per share on revenue of $33,291,000 for the fiscal year ended September 30, 2002. Including the cumulative effect of the accounting change, the Company lost $0.58 per share in fiscal 2003. Bankcard processing and transaction revenue increased 20.9% to $8,517,000 for this fiscal quarter, from $7,045,000 in the fourth fiscal quarter 2002. This increase was primarily due to our merchants’ strong organic growth in bankcard processing volume and the continued success in the Company’s marketing strategy. Check-related revenues increased 62.3% to $2,473,000 for the three months ended September 30, 2003, from $1,524,000 from the prior year quarter. This increase was primarily due to strong growth in the ACH and check conversion services and the revenue generated from the Visa POS program. A national retail merchant fully implemented the Visa program in June 2003. Gross margins from processing and transaction services jumped to 38% in the quarter from 28% in the year-ago quarter. The improvement in margins was primarily due to a larger proportion of higher-margin check-related revenue, which comprises 22.5% of total revenue for this fiscal quarter as compared to 17.8% for the prior year quarter; a rate adjustment implemented in August 2003; and substantially lower chargeback losses. The Company generated $1,316,000 of cash from operating activities in the three months ended September 30, 2003, as compared to $369,000 of cash generated in the same period last year.