eFunds Reports Fourth Quarter and Full Year 2003 Results

Operating income was $13.0 million, or 9.6 percent of net revenue, compared to operating income of $2.0 million, or 1.5 percent of net revenue reported in the fourth quarter of 2002. Results for the fourth quarter of 2003 included a $1.6 million charge, primarily related to the write-off of in-process research and development following the Companys acquisition of Oasis Technologies Ltd. and a $1.4 million benefit from a reduction of the reserve for estimated future losses on government services contracts. Net revenue increased $3.8 million to $135.4 million in the fourth quarter of 2003 compared to net revenue of $131.6 million reported in the fourth quarter of 2002. The improvement in the fourth quarter earnings compared to the prior year period was driven by cost reductions from ongoing operational improvements, a reduction in professional fees and a lower tax rate. Full-Year Financial Highlights For the year ended December 31, 2003, net income increased to $28.9 million, or $0.61 per diluted share, compared to net income of $24.6 million, or $0.53 per diluted share reported in 2002. Reported operating income increased $3.3 million to $38.7 million, or 7.3 percent of net revenue in 2003, as compared to operating income of $35.4 million, or 6.5 percent of net revenue, reported in 2002. Results for the full year of 2003 included $4.2 million in restructuring and other charges and a $3.7 million benefit from a reduction of the reserve for estimated future losses on government services contracts. 2003 results were also positively impacted by a decrease in the Companys estimated annual effective tax rate from approximately 32 percent to just under 28 percent, primarily due to the recognition of certain tax deductions available to the Company, some of which related to prior tax years. Results for the full year of 2002 included $16.5 million in restructuring and other charges and a $2.0 million benefit from a reduction of the reserve for estimated future losses on government services contracts. eFunds recorded net revenue of $532.1 million for the year ended December 31, 2003, compared to net revenue of $543.1 million recorded in 2002. This revenue decline is largely attributable to the loss of the STAR and EMEVS contracts during 2002 and a decline in revenues from IT consulting services during 2003 compared to last year. The effect of the revenue declines was somewhat offset by increased revenue from ATM acquisitions completed in 2002 and new EBT contracts. 2004 Financial Outlook eFunds presently anticipates full year net revenues for 2004 will increase approximately 5 to 10 percent over the net revenues recorded in 2003. Additionally, the Company expects diluted earnings per share to increase 25 to 30 percent in 2004 over the diluted earnings per share of $0.61 reported in 2003, which is in line with the current consensus of analyst estimates published on FirstCall. The Company expects to generate operating cash flows in 2004 in line with the level achieved in 2003.