Electronic Clearing House (ECHO) Revenue Increase 11.1% in First Quarter 2005

Monday 14 February 2005 01:04 CET | News

Electronic Clearing House, (ECHO) has reported revenue for the first quarter of fiscal 2005 was $12,760,000, an increase of 11.1%, as compared to $11,483,000 in the prior year quarter.

Bankcard processing and transaction revenue increased 4.9% from $8,752,000 for the prior year quarter to $9,182,000 in Q1 2005. This increase was primarily due to the organic growth in bankcard processing volume from ECHO’s existing and new merchants. Check-related revenues increased 31.0% to $3,578,000, or 28.0% of total revenue, for the three months ended December 31, 2004, compared with $2,731,000, or 23.8% of total revenue, in the prior-year quarter. This increase was primarily due to the increase in ACH processing revenue, which grew as a result of the continued organic and external growth of our check-related products, as well as strong growth in both the Visa POS Check program and in check verification revenue. Gross margin from processing and transaction revenue was 35.4% in Q1 2005, down from 36.8% in Q4 2004 and 38.5% in Q1 2004. This decrease was mainly due to higher commissions paid to the Company’s independent sales organizations. Other operating costs such as personnel costs, telephone and depreciation expenses decreased slightly, from $1,340,000, or 11.7% of total revenues, in Q1 2004, to $1,333,000, or 10.4% of total revenues, for the current fiscal quarter. Research and development expense increased 17.0% from $383,000, or 3.3% of revenues, in the prior year quarter to $448,000, or 3.5% of revenues, in Q1 2005, as the Company continued investing in several major software development projects. Several of these projects are in the final phase of development, and ECHO anticipates that this level of investment will continue throughout the remainder of this fiscal year. Selling, general and administrative (SG&A) expenses jumped 57.5% to $2,721,000, or 21.3% of revenues, for the current fiscal quarter from $1,728,000, or 15.0% of revenues, in Q1 2004. This significant increase was primarily attributable to: 1) an additional $400,000 of litigation expense arising as a result of an arbitration award granted in January 2005 by the arbitration panel overseeing a dispute with an independent sales organization. ECHO previously accrued $300,000 of litigation expense related to this matter in the fourth fiscal quarter of 2004 based on its good faith estimate at that time; 2) approximately $270,000 in legal expenses primarily related to the dispute with the independent sales organization and the defense of a patent infringement lawsuit; 3) an increase in personnel costs due to cost of living adjustments and an increase in the costs of employee benefits, such as health and worker’s compensation insurance; 4) an increase in sales and marketing expenses to implement sales and marketing strategies; and 5) higher professional service expenses and salaries related to ECHO’s Sarbanes-Oxley Act Section 404 Compliance efforts. Operating income decreased to $87,000, or 0.7% of revenue, in Q1 2005, from $656,000, or 5.2% of revenue in the prior quarter, and $1,013,000, or 8.8% of revenue in the same period last year. The decrease was attributable to the increase in selling, general and administrative expenses as previously described. The Company reported net income of $52,000, or $0.01 per share on a fully diluted basis, in the first quarter of fiscal 2005, as compared to $403,000, or $0.06 per share, in the fourth quarter of fiscal 2004 and $589,000, or $0.09 per share in the first quarter of fiscal 2004.

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Categories: Payments & Commerce | Payments General
Countries: World
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Payments & Commerce