NKBS Newtek Business Services

Highlights of first six months: NEW YORK, Aug. 14 /PRNewswire-FirstCall/ -- Newtek Business Services, Inc. (NASDAQ:NKBS) (http://www.newtekbusinessservices.com/), a provider of business services and financial products to the small business market, announced today that it has reported earnings for the second quarter in line with previously announced guidance. Newtek reported revenues of $20.0 million and after tax loss of $2.3 million or ($.07) per share. Newtek's three primary operating segments of merchant processing, web hosting, & small business lending generated $1.6 million in pretax net income and $3.8 million of EBITDA for the second quarter. These segments also generated $31.1 million in revenues in the first two quarters of 2006 up 23% from $25.4 million in the first two quarters of 2005. Our web hosting business generated $3.6 million of EBITDA during the first two quarters of 2006, a 20% increase over $3.0 million of EBITDA generated during the same period in 2005. We closed out our second quarter with $1.38 per share in cash, cash equivalents and treasuries. CEO and Chairman Barry Sloane said, "We are extremely pleased at the way the company has performed during a transition period in its history as we continue to deemphasize our Capco business in favor of growing our operating businesses. We strongly believe the capital markets will catch up with the success we are having with our clients and strategic alliance partners." Mr. Sloane continued: "Our client base is growing quickly with customers responding to our high level of customer service and their ability to contract with Newtek effortlessly across all product lines. We will unveil additional marketing initiatives in the third and fourth quarter which we believe will enable us to continue to sustain our growth rates. With $1.38 per share in cash, cash equivalents, and treasuries as well the growing EBITDA performance forecasted for 2006 ($15.8 million to $17 million) we are financially and operationally positioning the company to become the leading brand of business and financial services for the small to medium sized business market. We continue to forecast cash flow positive results from our operating businesses in 2006. A first in our history." Newtek also confirmed its previous forecast for the next two quarters and all of 2006. It is forecasting EBITDA of $15.8 million to $17 million for its three primary operating segments for 2006. Newtek has posted a PowerPoint presentation on its website, http://www.newtekbusinessservices.com/ which will help investors follow along at the shareholder conference call scheduled for 4:15 p.m. on August 14, 2006. The conference call will be accessible via a toll free number by dialing 1-866-356-3095 and providing the pass code 45334740. Listeners are encouraged to ask any questions that they may have during the call. The conference call will also be broadcast over the Internet through Newtek's website at http://www.newtekbusinessservices.com/. To listen to the call live please go to Newtek's website approximately 15 minutes prior to the call to download any audio software which may be necessary. For those who miss the live broadcast, a replay will be available on the website approximately one hour after the call. The online archive of the web cast will be available for ninety days following the call. About Newtek Business Services, Inc. Newtek Business Services, Inc. is a direct distributor of business services and financial products to the small to medium-sized business market. According to the SBA, there are over 23 million small businesses in the United States which in total represent 99.7% of all employers, generate 60 - 80 percent of all new jobs annually and generate more than 50% of non-farm GDP. Since 1999, Newtek has helped these business owners realize their potential by providing them with the essential tools needed to manage and grow their businesses. Newtek focuses on providing its 65,000 customers with access to financial, management and technological resources that enable them to better grow and compete in today's marketplace. Newtek's products and services include: Business Lending: U.S. government-guaranteed small business lending services Electronic Payment Processing: Electronic merchant payment processing solutions Insurance Products: Nationwide commercial and personal lines of insurance Outsourced Digital Bookkeeping: Bookkeeping and recordkeeping at a fraction of the cost of in-house staff Web Hosting: Full service web host including domain registration and online shopping cart tools Web Design and Development: Customized web development services for a powerful web presence Tax Preparation, Advisory and Services: Expert tax planning and consultation Data Storage: Fast, secure, off-site data backup, storage and retrieval Business Plan Preparation: Professional business plan assistance providing a roadmap for success Statements in this press release including statements regarding Newtek's beliefs, expectations, intentions or strategies for the future, may be "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. All forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from the plans, intentions and expectations reflected in or suggested by the forward- looking statements. Such risks and uncertainties include, among others, intensified competition, operating problems and their impact on revenues and profit margins, anticipated future business strategies and financial performance, anticipated future number of customers, business prospects, legislative developments and similar matters. Risk factors, cautionary statements and other conditions which could cause Newtek's actual results to differ from management's current expectations are contained in Newtek's filings with the Securities and Exchange Commission and available through http://www.sec.gov/. Contacts: Newtek Business Services Barry Sloane Chairman of the Board & CEO 212-356-9500 NEWTEK BUSINESS SERVICES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2006 AND 2005 (In Thousands, except for Per Share Data) Three Months Ended Six Months Ended June 30, June 30, 2006 2005 2006 2005 Revenue: Electronic payment processing $10,694 $7,509 $20,126 $13,520 Web hosting 3,310 2,662 6,474 4,911 Interest income 1,923 1,256 3,336 2,329 Income from tax credits 2,022 10,336 3,280 11,398 Premium income 763 2,156 1,377 2,518 Servicing fee income 487 487 986 937 Insurance commissions 188 497 432 718 Other income 596 1,323 2,134 3,206 Total revenue 19,983 26,226 38,145 39,537 Expenses Electronic payment processing costs 7,555 5,470 14,462 9,951 Interest 4,597 3,880 8,944 7,578 Consulting, payroll and benefits 4,196 4,214 8,335 8,312 Professional fees 1,900 1,801 4,020 3,539 Depreciation and amortization 1,597 1,184 3,012 2,273 Insurance 887 743 1,789 1,463 Provision for loan losses 235 450 354 1,101 Other 2,455 1,594 4,938 3,554 Total expenses 23,422 19,336 45,854 37,771 Income (loss) before minority interest and benefit (provision) for income taxes (3,439) 6,890 (7,709) 1,766 Minority interest 85 112 259 372 Income (Loss) before benefit for income taxes (3,354) 7,002 (7,450) 2,138 Benefit (provision) for income taxes 1,067 (2,539) 2,435 (1,050) Net income (loss) $(2,287) $4,463 $(5,015) 1,088 Weighted average common shares outstanding: Basic 34,696 33,962 34,765 33,927 Diluted 34,696 34,044 34,765 34,075 Net income (loss) per share: Basic $(0.07) $0.13 $(0.14) $0.03 Diluted $(0.07) $0.13 $(0.14) $0.03 NEWTEK BUSINESS SERVICES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS JUNE 30, 2006 AND DECEMBER 31, 2005 (In Thousands, except for Per Share Data) June 30, December 31, 2006 2005 (Unaudited) ASSETS Cash and cash equivalents $27,438 $23,940 Restricted cash 15,541 20,067 Certificates of deposit - 4,000 U.S. Treasury notes 4,797 4,449 Marketable securities - 10,350 Credits in lieu of cash 102,572 109,475 SBA loans receivable (net of reserve for loan losses of $2,301 and $2,304, respectively) 30,397 32,028 Accounts receivable (net of allowance of $142 and $50, respectively) 2,005 2,109 SBA loans held for sale 3,246 1,155 Accrued interest receivable 524 416 Investments in qualified businesses - cost method investments 439 150 Investments in qualified businesses - held to maturity debt investments 3,253 3,596 Structured insurance product 3,410 3,377 Prepaid insurance 15,459 16,946 Prepaid expenses and other assets (net of accumulated amortization of deferred financing costs of $1,203 and $805, respectively) 7,617 7,036 Servicing assets (net of accumulated amortization of $1,374 and $952, respectively) 3,203 3,197 Fixed assets (net of accumulated depreciation and amortization of $3,323 and $2,302, respectively) 5,874 6,587 Intangible assets (net of accumulated amortization of $4,655 and $3,457, respectively) 8,130 6,697 Goodwill 9,625 9,438 Total assets $243,530 $265,013 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Accounts payable and accrued expenses $7,980 $10,313 Notes payable - certified investors 3,975 3,947 Notes payable - insurance 7,312 9,250 Notes payable - other 2,703 9,880 Bank notes payable 22,009 21,287 Deferred revenue 1,685 1,459 Notes payable in credits in lieu of cash 88,522 92,048 Deferred tax liability 21,691 24,271 Total liabilities 155,877 172,455 Minority interest 4,729 5,033 Commitments and contingencies Shareholders' equity: Preferred stock (par value $0.02 per share; authorized 1,000 shares, no shares issued and outstanding) - - Common stock (par value $0.02 per share; authorized 54,000 shares, issued and outstanding 34,728 and 34,809 not including 583 shares held in escrow) 696 696 Additional paid-in capital 53,665 53,737 Unearned compensation - (492) Retained earnings 28,563 33,584 Total shareholders' equity 82,924 87,525 Total liabilities and shareholders' equity $243,530 $265,013 2006 Segment Actual Results Second Quarter (In millions of dollars except E.P.S.) Revenue Pretax Net Income EBITDA Electronic Payment Processing $10.6 $0.7 $1.1 Web Hosting 3.3 1.0 $1.8 SBA Lending 2.4 (0.1) $0.9 CAPCO 2.4 (3.2) All Other 1.3 (0.6) Corporate Activities 1.2 (1.2) Interco Eliminations (1.2) - Total $20.0 $(3.4) E.P.S. (per share) $(.07) 2006 Segment Guidance Third Quarter (In millions of dollars except E.P.S. guidance) Revenue Pretax Net Income EBITDA Electronic Payment Processing $11.6 - 12.0 $1.0 - 1.1 $1.7 - 1.8 Web Hosting 3.2 - 3.4 0.7 - 0.8 $1.5 - 1.6 SBA Lending 3.3 - 3.5 0 - 0.1 $1.1 - 1.2 CAPCO 3.8 (1.7)-(1.6) All Other 1.0 (0.6)-(0.5) Corporate Activities 1.5 (1.0)-(0.9) Interco Eliminations (1.2) Total $23.2 - 24.0 $(1.6)-(1.0) E.P.S. Guidance (per share) $(.03)-(.02) 2006 Segment Guidance Fourth Quarter (In millions of dollars except E.P.S. guidance) Revenue Pretax Net Income EBITDA Electronic Payment Processing $12.9 - 13.3 $1.3 - 1.4 $2.0 - 2.1 Web Hosting 3.3 - 3.5 0.6 - 0.8 $1.5 - 1.6 SBA Lending 2.3 - 2.5 0.3 - 0.4 $1.3 - 1.4 CAPCO 9.5 4.0 - 4.0 All Other 1.0 (.5)-(.4) Corporate Activities 1.5 (1.0)-(.9) Interco Eliminations (1.2) Total $29.3 - 30.1 $4.7 - 5.3 E.P.S. Guidance (per share) $.08 - .09 2006 Annual Segment Guidance (In millions of dollars except for E.P.S. guidance) Revenue Pretax Net Income EBITDA Electronic Payment Processing $43.9 - 45.5 $3.4 - 3.8 $5.4 - 5.8 Web Hosting 12.7 - 13.5 2.8 - 3.4 $6.1 - 6.5 SBA Lending 9.9 - 10.7 0.2 - 0.6 $4.3 - 4.7 CAPCO 17.0 (5.0)-(4.6) All Other 4.5 (2.0)-(1.6) Corporate Activities 6.0 (3.8)-(3.4) Interco Eliminations (4.8) Total $89.2 - 92.4 $(4.4)-(1.8) After Tax Net Income $(2.6)-(1.1) E.P.S. Guidance (per share) $(.08)-(.03) DATASOURCE: Newtek Business Services, Inc. CONTACT: Barry Sloane, Chairman of the Board & CEO of Newtek Business Services, Inc., +1-212-356-9500, or Web site: http://www.newtekbusinessservices.com/

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