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SCOTTSDALE, Ariz., Nov. 1 /PRNewswire-FirstCall/ -- eFunds Corporation (NYSE:EFD), the Company that delivers innovative payment processing and information intelligence solutions, today reported net revenue of $139 million for the quarter ended September 30, 2006. This amount represents an increase of 5% over the net revenue of $133 million reported during the third quarter of 2005. Reported operating income increased 41% to $22 million, or 16% of net revenue, compared to $16 million, or 12% of net revenue, reported in the prior year quarter. Third quarter net income was $15 million, or $0.31 per diluted share, compared to net income of $14 million, or $0.30 per diluted share, reported in the third quarter of 2005, which included a non-recurring $4.7 million benefit from an Advanced Pricing Agreement with the IRS related to our foreign operations. For the nine months ended September 30, 2006, the Company's reported net revenue increased 13% to $412 million compared to net revenue of $364 million reported in the first nine months of 2005. Reported operating income for the first nine months of 2006 was $52 million, or 13% of net revenue, compared to operating income of $49 million, or 14% of net revenue, reported in same period in the prior year. Net income for the first nine months of 2006 was $35 million, or $0.74 per diluted share, as compared to net income of $39 million, or $0.81 per diluted share reported in same period of 2005. "I am very pleased with the performance of our business during the third quarter. Our U.S. Risk business continued to deepen its penetration in the financial institutions market with four new Tier 1 accounts signing on for our Qualifile solution while our EFT processing and Prepaid Solutions business' both delivered double-digit revenue growth," stated Paul Walsh, Chairman and CEO of eFunds. "Our balance sheet and cash flows remain strong as we generated over $50 million in net cash flow from our operating activities during the first nine months of the year and ended the period with over $100 million of cash and short term investments. We also continued to make progress on key strategic projects during the quarter including our technology re-architecture initiative and the integration of our prepaid solutions business," stated Walsh. Forward-looking Statements The Company also reported that it now expects full year net revenues to increase 11 - 13% over 2005 net revenues and diluted earnings per share to be between $1.15 and $1.20 for the full year. The foregoing expectations reflect the following assumptions: * An effective tax rate of approximately 35% in the fourth quarter of 2006, * Cash outlays for capital expenditures and product development activities for the full year will approximate $40 million, and * Revenue in the Prepaid Solutions business will be between $90 and $93 million for 2006, with this unit reporting an operating profit of approximately $4 to $5 million in the fourth quarter of 2006. Conference Call eFunds will hold a one-hour conference call today at 10:00 a.m. ET to discuss the Company's quarterly and year-to-date financial performance. To listen to the conference call, dial 800-399-5351 (International callers dial 706-643-1939) and provide the operator with Conference ID number 9099937. The call will also be broadcast on the Company's Web site at http://www.efunds.com/ under the "Our Company/Investor Relations" tab. Interested parties are encouraged to click on the web cast link 10 to 15 minutes prior to the start of the conference call. Replay Information A replay of the conference call will be available beginning two hours after the call's completion and will play through 11:59 p.m. ET on Nov. 15, 2006. You may access the replay by dialing 800-642-1687 (international callers dial 706-645-9291) and entering the Conference ID number 9099937. Additionally, a replay of the conference call will be available via the eFunds Web site at http://www.efunds.com/. About eFunds With more than 30 years of payment processing and information intelligence expertise, eFunds delivers flexible, innovative solutions to the world's leading businesses. Leveraging mission-critical business insight, we enable financial services companies, retailers and government organizations to grow their businesses while reducing transaction and infrastructure costs, detecting potential fraud and building long-term customer value. Our flexible delivery model means solutions can be run in-house, outsourced or anything in between, helping customers balance the need for control with operational efficiency and low cost of ownership. From the point of account opening to the settlement of every transaction -- debit, credit, or prepaid -- eFunds helps businesses win more of the right customers, serve them more efficiently and keep them. http://www.efunds.com/ Statements made in this release concerning the Company's or management's intentions, expectations, or predictions about future results or events are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are necessarily subject to risks and uncertainties that could cause actual results to vary from stated expectations and such variations could be material and adverse. Factors that could result in such a variation include, but are not limited to, the inherent unreliability of earnings and revenue growth predictions due to numerous factors, including many beyond the Company's control, potential difficulties, delays and unanticipated expenses inherent in the development and marketing of new products and services, competitive factors, the unpredictability of merger and acquisition activity, and the numerous risks and potential additional costs, disruptions and delays associated with the establishment of new business initiatives. Additional information concerning these and other factors that could cause actual results to differ materially from the Company's current expectations is contained in the Company's Annual Report on Form 10-K for the period ending December 31, 2005 and subsequent Reports on Form 10-Q. EFUNDS CORPORATION CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended September 30, (in thousands, except per share 2006 2005 amounts) (revised) Net revenue $139,368 100.0% $133,150 100.0% Operating expenses Processing, communication and service costs 34,703 24.9% 32,133 24.1% Employee costs 54,507 39.1% 57,098 42.9% Depreciation and amortization 11,873 8.5% 11,817 8.9% Other operating costs 16,415 11.8% 16,547 12.4% Total operating expenses 117,498 84.3% 117,595 88.3% Income from operations 21,870 15.7% 15,555 11.7% Interest expense (1,713) -1.2% (2,089) -1.6% Other income - net 768 0.6% 974 0.7% Income before income taxes 20,925 15.0% 14,440 10.8% Provision for income taxes (6,324) -4.5% (210) -0.2% Net income $14,601 10.5% $14,230 10.7% Shares outstanding Basic 46,611 45,471 Diluted 47,309 46,741 Earnings per share Basic $0.31 $0.31 Diluted $0.31 $0.30 EFUNDS CORPORATION CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Nine Months Ended September 30, (in thousands, except per 2006 2005 share amounts) (revised) Net revenue $411,503 100.0% $363,682 100.0% Operating expenses Processing, communication and service costs 103,042 25.0% 88,648 24.4% Employee costs 169,284 41.1% 157,978 43.4% Depreciation and amortization 35,505 8.6% 28,041 7.7% Other operating costs 51,450 12.5% 39,929 11.0% Total operating expenses 359,281 87.3% 314,596 86.5% Income from operations 52,222 12.7% 49,086 13.5% Interest expense (4,713) -1.1% (2,340) -0.6% Other income - net 2,754 0.7% 3,786 1.0% Income before income taxes 50,263 12.2% 50,532 13.9% Provision for income taxes (15,292) -3.7% (11,480) -3.2% Net income $34,971 8.5% $39,052 10.7% Shares outstanding Basic 46,444 46,761 Diluted 47,215 48,111 Earnings per share Basic $0.75 $0.84 Diluted $0.74 $0.81 EFUNDS CORPORATION CONSOLIDATED BALANCE SHEETS September 30, December 31, 2006 2005 (in thousands) (Unaudited) (revised) Current assets: Cash and cash equivalents $99,691 $87,414 Short term investments 15,600 -- Restricted cash 3,599 28,183 Settlement assets 20,489 28,438 Accounts receivable - net 96,879 96,115 Deferred income taxes 26,251 27,422 Prepaid expenses and other current assets 20,172 18,341 Total current assets 282,681 285,913 Property and equipment - net 61,268 63,721 Intangibles-net 399,010 398,337 Other non-current assets 17,200 17,638 Total assets $760,159 $765,609 Current liabilities: Accounts payable $19,059 $23,902 Settlement liabilities 20,730 28,519 Accrued liabilities 42,365 57,438 Acquisition Holdbacks 5,991 25,052 Deferred revenue and gains 21,799 23,978 Long-term debt due within one year 4,659 5,030 Total current liabilities 114,603 163,919 Long-term deferred gains 20,468 27,637 Long-term debt 103,274 106,973 Other long-term liabilities 17,339 15,481 Total liabilities 255,684 314,010 Stockholders' equity: Common stock 514 505 Additional paid-in capital 517,372 498,939 Treasury stock at cost (100,000) (100,000) Retained earnings 86,115 51,144 Accumulated other comprehensive income 474 1,011 Stockholders' equity 504,475 451,599 Total liabilities and stockholders' equity $760,159 $765,609 EFUNDS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended September 30, 2006 2005 (in thousands) (revised) Cash flows from operating activities: Net income $34,971 $39,052 Adjustments to reconcile net income to net cash provided by operating activities Depreciation 13,022 11,710 Amortization 22,483 16,331 Stock-based compensation 6,941 7,295 Excess tax benefit from share-based compensation (1,401) (1,445) Deferred income taxes 15,137 3,525 Other - net 101 (274) Changes in assets and liabilities Restricted cash 2,088 830 Accounts receivable (957) (7,019) Accounts payable (4,834) (10,887) Deferred revenue gains (9,081) (4,526) Income taxes receivable/payable (9,856) (28,049) Other assets and liabilities (16,692) (12,744) Net cash provided by operating activities 51,922 13,799 Cash flows from investing activities: Capital expenditures (29,400) (19,325) Acquisitions -- (286,883) Purchases of short-term investments (15,600) (98,925) Proceeds from sale of short-term investments -- 187,065 Proceeds from dispositions 2,356 -- Other - net (6,332) (2,875) Net cash used in investing activities (48,976) (220,943) Cash flows from financing activities: Purchase of common stock -- (100,000) Issuance of common stock 11,924 11,619 Excess tax benefit from share-based compensation 1,401 1,445 Proceeds on long-term debt 92,000 235,000 Payments on long-term debt (96,106) (122,742) Other 112 (348) Net cash provided by financing activities 9,331 24,974 Net increase (decrease) in cash and cash equivalents 12,277 (182,170) Cash and cash equivalents at beginning of period 87,414 274,477 Cash and cash equivalents at end of period $99,691 $92,307 EFUNDS CORPORATION SEGMENT SUMMARY DATA (Unaudited) Three Months Ended September 30, Change 2006 2005 $ % (in thousands) (revised) Net revenue: US Payments $74,306 $72,133 $2,173 3% US Risk Management 48,259 47,857 402 1% International 16,803 13,160 3,643 28% Total net revenue 139,368 133,150 6,218 5% Operating expenses: Processing, employee and other costs - US Payments 60,599 61,943 (1,344) -2% US Risk Management 25,021 29,240 (4,219) -14% International 16,764 12,946 3,818 29% Total processing, employee and other costs 102,384 104,129 (1,745) -2% Allocated overhead - US Payments 3,416 3,694 (278) -8% US Risk Management 4,247 3,027 1,220 40% International 2,330 1,602 728 45% Corporate 5,121 5,143 (22) -- Total allocated overhead 15,114 13,466 1,648 12% Income (loss) from operations: US Payments 10,291 6,496 3,795 58% US Risk Management 18,991 15,590 3,401 22% International (2,291) (1,388) (903) -65% Corporate (5,121) (5,143) 22 -- Total income from operations $21,870 $15,555 $6,315 41% EFUNDS CORPORATION SEGMENT SUMMARY DATA (Unaudited) Nine Months Ended September 30, Change 2006 2005 $ % (in thousands) (revised) Net revenue: US Payments $217,094 $183,345 $33,749 18% US Risk Management 144,504 144,566 (62) -- International 49,905 35,771 14,134 40% Total net revenue 411,503 363,682 47,821 13% Operating expenses: Processing, employee and other costs - US Payments 185,195 144,499 40,696 28% US Risk Management 82,276 92,097 (9,821) -11% International 48,094 36,872 11,222 30% Total processing, employee and other costs 315,565 273,468 42,097 15% Allocated overhead - US Payments 10,971 12,077 (1,106) -9% US Risk Management 10,890 9,643 1,247 13% International 6,446 4,060 2,386 59% Corporate 15,409 15,348 61 -- Total allocated overhead 43,716 41,128 2,588 6% Income (loss) from operations: US Payments 20,928 26,769 (5,841) -22% US Risk Management 51,338 42,826 8,512 20% International (4,635) (5,161) 526 10% Corporate (15,409) (15,348) (61) -- Total income from operations $52,222 $49,086 $3,136 6% EFUNDS CORPORATION SUPPLEMENTAL REVENUE DATA (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, % % 2006 2005 Change 2006 2005 Change (in millions) US Payments EFT processing $37.4 $32.2 16% $108.5 $91.8 18% Prepaid solutions 23.7 19.8 20% 63.4 19.8 * Government 10.3 11.3 -9% 30.6 37.8 -19% Software sales and other services 2.9 8.8 -67% 14.6 33.9 -57% $74.3 $72.1 3% $217.1 $183.3 18% US Risk Management Financial institution products $39.5 $36.3 9% $114.1 $103.5 10% Retail products 4.7 5.4 -13% 14.3 16.0 -11% BPO 4.1 6.2 -34% 16.1 25.1 -36% $48.3 $47.9 1% $144.5 $144.6 -- International Software sales $7.7 $5.9 31% $22.8 $18.4 24% BPO 7.5 6.9 9% 22.4 16.8 33% EFT processing 1.6 0.4 * 4.7 0.6 * $16.8 $13.2 27% $49.9 $35.8 39% DATASOURCE: eFunds Corporation CONTACT: Helen Johnson, Investor Relations, +1-480-629-7607, or George Gresham, Chief Financial Officer, +1-480-629-7662, both of eFunds Corporation Web site: http://www.efunds.com/

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