NKBS Newtek Business Services

NEW YORK, April 4 /PRNewswire-FirstCall/ -- Newtek Business Services, Inc. (NASDAQ:NKBS) (http://www.newtekbusinessservices.com/), a provider of business services and financial products to the small to medium-sized business market, today announced earnings of $0.22 per diluted share for the year ended December 31, 2005 and after tax net income of $7.4 million on revenues of $96 million. The company previously announced that it anticipates filing its 10K with the SEC on or before April 17, 2006. The company will also give guidance for its 2006 operating segments during its shareholder conference call this afternoon at 4:15 p.m. EDT. For 2005 the company will report 3 primary segments as it has done historically for merchant payment processing, web hosting, and small business lending. Our merchant payment processing segment on $33 million of revenues earned $2.3 million pretax and $3.4 million of EBITDA for 2005. Our web hosting segment on $10.7 million of revenues earned $3.6 million pretax and $6 million of EBITDA. Our small business lending segment on $10.7 million of revenues lost $30,000 pretax with EBITDA of $ 2.1 million. Going forward the company will break out the traditional CAPCO and other segment into three components, a CAPCO segment, an All Other segment, and a Corporate Activities cost center. The company in giving its 2006 guidance will forecast its business in these 6 components. Barry Sloane, Chairman and CEO stated, "Newtek continues to successfully transition out of our CAPCO dominated business model, balance sheet, and income statement. Our core businesses of merchant processing, web hosting, and small business lending are growing at high rates and in aggregate throw off $11.7 million of EBITDA in 2005. We anticipate that these 3 businesses will create in excess of $15.7 million in EBITDA for 2006. We are optimistic about the company's ability to pay down debt, (recently paid off $4 million in notes from Technology Investment Capitol Corp.) increase its cash flow from operations, and grow dominant companies that market to the small to medium- sized business market. We have great technology that forms a basis for our current client base now in excess of 60,000 and which we expect to continue to grow rapidly and we will use our proprietary technology to build the quality brand of financial and business services in to small to medium-sized business space." The shareholder conference call this afternoon at 4:15 p.m. EST is accessible by dialing 1-866-277-1182 and providing the pass code 42474843. Listeners are encouraged to ask any questions that they may have during the call. A PowerPoint presentation has been added to the company's homepage. The conference call will also be broadcast over the Internet through our website at http://www.newtekbusinessservices.com/. To listen to the webcast 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. 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 60,000 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: * Newtek Small Business Finance: U.S. government-guaranteed small business lending services; * Newtek Merchant Solutions: electronic merchant payment processing solutions; * Newtek Insurance Agency: commercial and personal insurance; * Newtek Web Hosting: domain registration, hosting, web design and development; * Newtek Data Storage Services: data backup, archival and retrieval services; * Newtek Financial Information Systems: outsourced digital bookkeeping; and * Newtek Tax Services: tax filing, preparation and advisory services. The statements in this release may contain forward looking statements relating to such matters as anticipated future business strategies and financial performance, anticipated future number of customers, business prospects, legislative developments and similar matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward looking statements. In order to comply with the terms of the safe harbor, Newtek Business Services, Inc. notes that a variety of factors could cause its actual results to differ materially from the anticipated results expressed in the Company's forward looking statements such as intensified competition and/or operating problems and their impact on revenues and profit margins or additional factors as described in Newtek Business Services' 2004 annual report on Form 10-K. NEWTEK BUSINESS SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2005, 2004, AND 2003 (In Thousands except for Per Share Data) 2005 2004 2003 Revenue: Income from tax credits $35,647 $33,565 $44,933 Electronic payment processing 31,128 18,131 6,297 Servicing fee 1,950 1,717 1,418 Web hosting 10,627 4,428 - Interest income 4,844 3,834 4,059 Premium fee income 4,409 4,533 1,284 Insurance commissions 1,203 560 - Other income 5,969 3,412 2,502 Total revenue 95,777 70,180 60,493 Expenses: Interest 15,649 14,039 13,879 Payroll and consulting fees 16,236 10,843 8,407 Electronic payment processing costs 23,065 12,842 4,513 Professional fees 6,929 5,183 4,500 Insurance 3,144 2,818 2,469 Other than temporary decline in value of investments 518 - 1,996 Provision for loan losses 2,258 205 473 Goodwill impairment 878 - 1,435 Depreciation and amortization 4,521 2,459 504 Other 8,722 5,599 4,247 Total expenses 81,920 53,988 42,423 Income before minority interest, provision for income taxes and extraordinary items 13,857 16,192 18,070 Minority interest 743 890 (1,598) Income before provision for income taxes and extraordinary items 14,600 17,082 16,472 Provision for income taxes (7,164) (6,467) (7,090) Income before extraordinary items 7,436 10,615 9,382 Extraordinary gain on acquisition of minority interests - - - Extraordinary gain on acquisition of a business - 187 Net income $7,436 $10,615 $9,569 NEWTEK BUSINESS SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2005, 2004, AND 2003 (In Thousands except for Per Share Data) 2005 2004 2003 Weighted average common shares outstanding Basic 34,241,444 30,067,737 25,777,147 Diluted 34,280,300 30,378,697 26,177,274 Income per share after extraordinary gain Basic $.22 $.35 $.37 Diluted $.22 $.35 $.37 Income per share before extraordinary gain Basic $.22 $.35 $.36 Diluted $.22 $.35 $.36 NEWTEK BUSINESS SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2005 AND 2004 (In Thousands except for Share Data) 2005 2004 ASSETS Cash and cash equivalents $40,244 $50,922 Restricted cash 4,038 2,182 U.S. treasury notes 4,449 - Short term investments 13,950 - Credits in lieu of cash 108,453 88,883 SBA loans receivable, net 32,028 34,186 Accounts receivable, net 2,109 1,561 Receivable from bank - 1,800 SBA loans held for sale 1,155 2,262 Accrued interest receivable 416 375 Investments in qualified businesses -- cost method investments 100 300 Investments in qualified businesses -- held to maturity debt investments 3,523 2,909 Structured insurance product 3,378 3,216 Prepaid insurance 16,946 15,505 Prepaid expenses and other assets, net 8,269 4,709 Servicing asset, net 3,197 2,085 Furniture, fixtures and equipment 6,587 1,959 Customer accounts, net 5,818 4,394 Goodwill 8,343 11,150 Total assets $263,003 $228,398 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Accounts payable and accrued expenses $9,755 $9,726 Notes payable -- certified investors 3,947 3,926 Notes payable -- insurance 9,250 7,877 Notes payable -- other 9,880 520 Bank notes payable 21,287 27,988 Deferred revenue 1,459 1,160 Notes payable in credits in lieu of cash 91,354 76,259 Mandatorily redeemable preferred stock - 1,500 Deferred tax liability 23,817 16,626 Total liabilities 170,749 145,582 Minority interest 5,020 5,721 Commitments and contingencies Shareholders' equity: Preferred stock (par value $0.02 per share; authorized 1,000,000 shares, no shares issued and outstanding) -- -- Common stock (par value $0.02 per share; authorized 54,000,000 shares, issued and outstanding 34,808,919 and 33,873,333 not including 582,980 shares held in escrow) 6697 6677 Additional paid-in capital 54,889 52,858 Unearned compensation (1,645) (2,297) Retained earnings 33,293 25,857 Total shareholders' equity 87,234 77,095 Total liabilities and shareholders' equity $263,003 $228,398 SEGMENT DISCLOSURE DECEMBER 31, 2005 AND 2004 (In Thousands except for Share Data) For the year ended December 31, 2005 2004 Revenue from External Customers SBA lending $10,684 $10,337 Electronic payment processing 32,761 19,131 Web hosting 10,677 4,428 Capco and other 41,655 36,284 Total $95,777 $70,180 Inter-Segment Revenue SBA lending $- $- Electronic payment processing 297 11 Web hosting 90 - Capco and other 5,561 2,063 Total $5,948 $2,074 (Loss) income before benefit (provision) for income taxes SBA lending $(30) $2,616 Electronic payment processing 2,347 1,239 Web hosting 3,559 2,077 Capco and other 8,724 11,150 Total $14,600 $17,082 Contacts: Newtek Business Services Barry Sloane Chairman of the Board & CEO 212-356-9500 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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