Annual Shareholders Meeting 2004

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Annual Shareholders Meeting2004
360 Degree Service
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Safe Harbor Statement
Safe Harbor Statement Under the Private
Securities Litigation Reform Act of 1995 Any
statements that are not historical facts are
forward-looking statements. Actual results may
differ materially from the forward-looking
statements. Potential risks and uncertainties
include, but are not limited to, such factors as
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, 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.
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Agenda

• Introduction Jody Barry, C.E.O.
• Financial State of the Company Alice Cheung,
  C.F.O., Treasurer
• 360o Payment Processor Patricia Williams,
  E.V.P.
• Alex Seltzer, C.O.O., C.I.O.
• ECHO Through the Eyes of
• Merchant/Agent Bank Jack Wilson, S.V.P.
• VISA POS Bank Steve Hoofring, V.P.
• Collection Agency Jane Keller, Director of NCN
• Where is ECHO going?
• MERCHANTAMERICA/Check Services Kris Winckler,
  S.V.P.
• Risk Management/Guarantee Sharat Shankar, S.V.P.
• Question/Answer Jody Barry, C.E.O.

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State of the Company
Alice Cheung Chief Financial Officer and Treasurer
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State of the Company

• Revenue
• A record 40,636,000, an increase of 22, as
  compared to 33,291,000 in FY02.
• Bankcard Processing and Transaction Revenue
• Increased 18.2 to 32,444,000 from 27,456,000
  in FY02.
• This increase was primarily due to our
  merchants strong organic growth in bankcard
  processing volume and the continued success in
  the companys marketing strategy.
• Check-Related Revenue
• Increased 40.4 to 8,192,000 from 5,835,000 in
  FY02.
• This increase was primarily due to strong
  growth in the ACH and check conversion services
  and the revenue generated from the VISA POS
  program.

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State of the Company

• Gross Margin
• Jumped to 35.1 from 31.8 in FY02.
• The improvement in margins was primarily
  due to a larger proportion of higher-margin
  check-related revenue, which comprises 20.2 of
  total revenue for this fiscal year as compared to
  17.5 for the prior year a rate adjustment
  implemented in August 2003 and substantially
  lower chargeback losses.
• Operating Income
• Rose to 2,425,000 in FY03 from an operating loss
  of 3,669,000 in FY02.
• The year-over-year improvement can be
  primarily attributed to the 22.1 revenue growth
  and the 3 improvement in operating margin.
• Net Income Before Accounting Change
• 1,328,000, or 0.22 per share on a fully diluted
  basis from a net loss of 2,376,000, or a loss of
  0.41 per share in FY02.

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State of the Company

• Diluted EPS
• 0.22 per share compared to a loss of 0.41 per
  share.
• Balance Sheet
• 5,641,000 in cash and cash equivalents,
  3,201,000 in working capital and 10,369,000 in
  stockholders equity as of September 30, 2003.
• Cash Generated From Operations
• 4,551,000, net of merchant settlement, as
  compared to negative 7,000 generated in FY02.

Before cumulative effect of accounting change.
Including cumulative effect, the company lost
0.56 per share in FY03.
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Consistent Revenue Growth
CAGR 16.53
in M
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Business Segments
Check-related products 20.2
Bankcard and transaction processing 79.8
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Bankcard Transaction Processing Revenue Rising
CAGR 12.72
in M
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Check Revenue Increasing
CAGR 36.52
in M
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Outperforming Broader Market
ECHO Price Performance 1/30/03 1/30/04
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Solid Balance Sheet
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Equity Snapshot
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Products and Price
Patricia Williams Executive Vice President
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Products and Price
Electronic Payments Processor
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Products
Electronic Payments Processor
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Credit Cards

• Visa
• MasterCard
• American Express
• Discover
• JCB

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Debit Cards

• NYCE
• Star
• Interlink
• Maestro
• Pulse

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Check Services

• Check Verification
• Check Conversion
• Check Guarantee
• Visa POS Check
• Check Collection
• ACH Web Payments
• ACH TEL Payments
• ACH Batch

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Price
Electronic Payments Processor
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Price/Merchants

• 19.95 All-inclusive monthly fee
• No hidden fees
• Free services
• Competitive pricing
• All products/support included

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Internet Merchant Account Price Comparison
Monthly Feeson 3,500 in sales 70 transactions
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Price/Agent Banks

• Cost plus-based pricing
• All products/support included
• Turns expense into income generator for bank

Brought to you by
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Price/Visa Banks

• Lowest cost 3rd party processor
• Volume discounts
• Includes access to NCN database
• Includes collection services

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Price/NCN Collection Agencies

• Low sign-up fee
• Low monthly fee
• Low per item fee
• Mark up capability on services

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Support
Alex Seltzer Chief Operating Officer Chief
Information Officer
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Support
Electronic Payments Processor
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Support Resources

• 24/7/365 merchant support
• 24/7/365 checkwriter support
• Expert NCN agency support
• Bank support specialists
• Support resources
• Web site FAQs
• Documentation
• Tutorials
• Monthly newsletter

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Systems Support

• Redundant call centers

• EMC2 SAN Technology

• Redundant data centers

• Oracle-based databases

• Oasis platform

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Who is ECHO?
Electronic Payments Processor
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Who is ECHO?
Electronic Payments Processor

• Through the eyes of a merchant Jack Wilson,
  S.V.P.
• Through the eyes of an Agent Bank Jack Wilson,
  S.V.P.
• Through the eyes of a Visa Bank Steve
  Hoofring, V.P.
• Through the eyes of a Collection Agency Jane
  Keller, NCN Director

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Merchant/Agent Banks
Jack Wilson Senior Vice President
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How ECHO Merchants See Us

• One-stop shop for services

• High search engine placement

• Full online reporting

• National directory listing

• Marketing exposure in-store and on Internet

• Web site automatic

• Web store option with shopping cart

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How Agent Banks See Us

• Turnkey provider

• Competitive advantage

• Portfolio ownership

Brought to you by

• Risk free

• Co-branding with MERCHANTAMERICA

• Control of merchant relationship

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Visa Banks
Steve Hoofring Vice PresidentVisa POS
Check/Client Services
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Statistics and Transaction Flow
VISA Bank (Acquirer) sells VISA POS Check to its
merchants

• Participating Bank

Non-Participating Bank Transactions
Merchant
AcquirerProcessor(5 Currently)
Customer
Visa
Third Party Processor
for Approval/Settlement (ECHO or EnCircle
(BankServ)

• 1 Billion processed since inception in 3/2001
• Currently processing 2.8 million transactions a
  month

XPRESSCHEX
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How Visa Banks See Us

• Competitive service to TeleCheck/Certegy

• Turnkey service from sales viewpoint

• Check conversion

• Check conversion with verification

• Merchant retention

• Check conversion with guarantee

• Uses existing Visa national network

• Potential of 14,000 Visa member banks

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How Visa Banks See Us
Participating Banks and Planned Participating
Banks for 2004 (Banks who have connected their
DDA information to Visa)
  Estimated Total DDA Share 26 by end of 2004
 
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How Visa Banks See Us
Growing Acquirer Banks and Planned Acquirer
Banks for 2004 (Banks who are actively selling
Visa POS Check to their Merchants)
9 of 13 Live Banks use ECHO as 3rd Party
Processor
 
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Collection Agencies
Jane Keller Director National Check Network (NCN)
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How Collection Agencies See Us

• National coverage for local agency

• Referral program

• Data collection services

• Seamless integrationto ACH processing

NCN

• Working database

• Reselling opportunity

• Enhanced risk management with 91 risk parameters

• Terminal cash register connectivity

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How Collection Agencies See Us
NCN Association

• 260 contributing members and growing
• National coverage through agencies, banks,
  national merchants and check processing companies
• National merchant representation/local collection
• Support server invoicing, risk management,
  compliance, etc.

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How Collection Agencies See Us
NCN Activity
 
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Where is ECHO Going?
Sharat Shankar S.V.P. Risk Management Products
and Services
Kris Winckler S.V.P. Strategic Product Development
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Merchant Services/Check Services
Kris Winckler Senior Vice President Strategic
Product Development
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Strategic Development
What are ECHOs Competitive Advantages?

• MERCHANTAMERICA (Bankcard Processing)
• Check Services

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Strategic Development
MERCHANTAMERICA
Bankcard Processing is currently 80 of ECHOs
revenue

• All Companies Process bankcards similarly
• Is Credit/Debit a commodity? (Yes and No)

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Strategic Development
MERCHANTAMERICA

• Leverage ECHOs Current and Future Advantages

• Identify Under-Serviced Niche Markets
• Specialize in MLM, non-profit, and non
  face-to-face merchants
• Add Value to Merchants
• Secure E-Commerce enabled web-site
• Negotiated Benefits
• Lower Costs New Software, Oasis, is being
  implemented and will lower processing costs and
  open additional opportunities

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Strategic Development
Check ServicesBillions of checks are still
written each year!

• Leverage ECHOs Advantages
• NCN Members and Databases - large Barrier to
  Entry
• Leading ACH Processor ability to process items
  correctly

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Strategic Development
85
15
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Strategic Development
Conversion
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Strategic Development
Check Services
Leverage ECHOs Advantages

• NCN Members and Databases large Barrier to
  Entry
• Leading ACH Processor
• Leading-Edge ACH Capability results in being the
  Top Visa POS Processor

• Visa POS and Risk Management lowers theNet Cost
  of Check Acceptance

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Strategic Development
Check Services

• Visa POS Example Net Cost of Check Acceptance

Before 1.00 Bad Debt
After 90 _at_ 1.00 (ECHO)
10 _at_ 0.05 (Visa)
0.91
Risk Management is very important
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Strategic Development
Check Services
Continue focusing on Visa POS
Investigating emerging products/areas

• Accounts Receivable Lockbox
• Leverage ECHOs ACH capabilities
• Check 21

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Strategic Development
360 Degree Service
Complete suite of products

• Continue to run a profitable MERCHANTAMERICA
  portfolio
• Continue to be a leading ACH processor
• Leverage advantages and continue to look for
  future growth opportunities

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Collection Services/Risk Management Systems
Sharat Shankar Senior Vice President Risk
ManagementProducts and Services
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Risk Management
Key reasons businesses choose us?

• Price. Net Cost of Payment Acceptance
• Verification
• (Cost of Service Bad Debt Collections) /
  Check Sales
• Guarantee
• (Discount Rate Check Sales Chargebacks) /
  Check Sales
• Product Fit
• Customer Service

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Risk Management
Mission
Maximize sales while minimizing losses thereby
increasing profit for ECHO and its customers
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Risk Management
Types of Risk

• Check Sideour near term focus
• Transaction Risk or Consumer Risk
• Reduce Gross Bad Debt
• Increase Collections
• Maximize sales
• Merchant Risk
• Bank Card Side
• Reduce risk of Merchant Fraud

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Risk Management
Key Drivers to Lowering Net Cost of Payment
Acceptance

• Reducing Gross Bad Debt
• Increasing Collections

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Risk Management
Reducing Gross Bad Debt

• Negative Database Enhancements
• Consumer Database
• Augmented Merchant Database
• Advanced Scoring System
• Precision Analytics

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Risk Management
Improving Collections

• Increase collectable returns through better
  fraud detection
• Reduce time to turn with our forwarding
  agencies
• Undertake more person identification
• Improve service fee collection percentage

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Risk Management
Conclusion

• Continue to enhance our Risk Management System
• Deliver the greatest degree of accuracy on
  approvals
• Continue to drive down the net cost of payment
  acceptance

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Future of ECHO
Joel M. Barry Chairman and Chief Executive
Officer
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360 Degree Service
Check Flow
24/7/365 Operations and Customer Support
Processing Security
Credit Card Flow

ACH
VISA
MC
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Question/Answer