Billing Services : Interim Results for Six Months Ended June 30, 2017

For Immediate Release

Billing Services Group Limited ("BSG" or the "Company") Unaudited interim results for the six months ended June 30, 2017 STRATEGIC REVIEW CONTINUING REVENUE AND EBITDA IN LINE WITH REDUCED FORECAST (September 13, 2017) San Antonio, Texas, USA and Aldermaston, United Kingdom - BSG, a leading provider of telecommunications clearing and financial settlement products, Wi-Fi data solutions and verification services, today announces its unaudited interim results for the six months ended June 30, 2017. Financial Highlights (All amounts in US$) Six Months Ended June 30

2017	2016
Revenue	$ 11.0 million	$ 16.2 million
EBITDA(1)	$ 0.8 million	$ 3.0 million
Net income	$ 4.4 million	$ 3.4 million
Net income per
basic and diluted share	$ 0.02 per share	$ 0.01 per share
Net cash provided by (used in) operating activities	$ 0.5 million	$ (2.9) million
Cash balance at end of period	$ 16.0 million	$ 8.8 million

(1) EBITDA (a non-GAAP measure) is computed as earnings before interest, income taxes, depreciation, amortization and other non-cash and non-recurring items

• Generated $0.8 million of EBITDA (2016: $3.0 million)

• Recorded net income of $0.02 per share (2016: $0.01 per share)

• Improved gross margin by 5.7 percentage points (58.2% vs. 52.5% in the first six months of 2016)

• Increased cash balance by $7.2 million over the trailing 12 months ($16.0 million vs. $8.8 million at June 30, 2016)

  BSG Wireless and TPV Operational Highlights

• Completed the delivery of the new Wi-Fi Location Data Service (WLDS) product to AT&T, Boingo and Telus.

• Signed a new contract with XLN (a UK-based business telecom provider) to provide Wi-Fi hub services.

• Extended our hotspot finder and connection product suite with delivery to VAST Networks (a Wi-Fi network infrastructure provider based in South Africa).

• Enhanced the hub service product suite to include Alerting, and delivered to AT&T.

• Signed three new Third Party Verification (TPV) service agreements with Park Power, Pivot Health and National Health Plans and Benefits.

• Deployed TPV services to eight states on behalf of Direct Energy.

  Current Trading

• In 2016, the Company initiated a strategic review to assist the Board in determining the future composition of the group, including its capital structure and business lines. This review is ongoing, and no decisions have been made at this time.

• Trading for the six months ended June 30, 2017 was in line with the Board's expectations and consistent with the recent trading conditions experienced by the Company.

• The Company expects that revenues in the second half of 2017 will compare unfavorably with the second half of 2016 due to AT&T's discontinuation of third-party billing in December 2016, as described in the Company's announcements dated August 9, 2016, September 12, 2016 and March 29, 2017, together with the secular decline in billable long distance and operator service calls initiated on wireline phones.

• The Company's direct billing initiative has developed solid traction, and we expect this to continue over the course of 2017. However, as evidenced by our year-to-date financial performance, this initiative does not offset AT&T's discontinuation of third-party billing described above.

• The Company performed a qualitative analysis for goodwill impairment and determined that it was more likely than not that there was no impairment at June 30, 2017. The declining revenue of the wireline business, along with an associated decrease in operating income, could have a negative impact on the annual impairment testing of goodwill to be performed in October 2017, which may result in a material impairment of goodwill carried as an asset in this calendar year. Such a non-cash impairment loss would result in a lower level of income in the period during which it is recognized, and it would reduce shareholders' equity. Please see "Chief Executive's Statement" for further discussion.

• In light of the strategic review that is underway, we will not be providing financial performance guidance at this time.

  Commenting on the results, Norman M. Phipps, Chief Executive Officer, said:

  "The first half results demonstrate the Company's ability to generate income and cash flow despite the substantial decline in revenue from third-party billing transactions. That said, there is no doubt we have challenging times ahead. Our focus through the remainder of this year is to complete the strategic review and determine how best to provide a return to our shareholders."

  INQUIRIES: Billing Services Group Limited [phone]

  Norman M. Phipps

  finnCap Limited [phone]

  Stuart Andrews/Scott Mathieson

  BSG Media Relations [phone]

  Leslie Komet Ausburn

  About BSG: BSG has locations in San Antonio, Texas, USA and Aldermaston, United Kingdom. The Company's shares are traded on the London Stock Exchange (AIM: BILL). For more information on BSG, visit (www.bsgclearing.com).

  CHIEF EXECUTIVE'S STATEMENT

  During the first half of 2017, BSG generated $0.8 million of EBITDA and $0.9 million of cash. Both figures compare unfavorably to results in the first half of 2016, but they demonstrate two important aspects of the business:

  • The challenges precipitated by AT&T's withdrawal from third-party billing in December 2016; and

  • The adaptability of BSG's business plan to anticipate and react effectively to rapid changes affecting the wireline phone industry.

    The challenges are significant. AT&T's withdrawal from third-party billing is largely responsible for the 32% decline in revenue during the first half of 2017 compared to the same period in 2016. We face a growing challenge in 2018 from the scheduled absence of third-party billing by Verizon.

    To counter the loss of third-party billing conduits, we have successfully introduced direct billing to end-user consumers as discussed in detail in our announcement dated March 29, 2017. Many of our customers who historically relied upon third-party billing services have converted to BSG's direct billing service for transactions no longer eligible for third-party billing through AT&T. The effect of such conversions is not fully discernible when comparing revenue figures for 2017 and 2016, because revenue recognized under GAAP for a direct billing transaction is much lower than for a third-party billing transaction.

    We continue to improve gross margin, with a 5.7 percentage point increase compared to the first half of 2016. The increase in gross margin is largely attributable to a higher percentage of revenue derived from our wireless business, as discussed below, which carries a higher gross margin. Cash operating expenses are basically level with last year.

    As discussed on several prior occasions, we have focused resources on expanding the portfolio of services offered to the wireless market to mitigate the unfavorable trends in the wireline market. The strategy is working, with solid revenue gains from services delivered to the wireless market. The wireless-derived revenues are on a promising trajectory, but the gains to date have been insufficient to offset the revenue decline in the wireline business.

    Despite the challenges cited above, we achieved net income of $0.02 per share in the first half of 2017, largely as the result of multiple nonrecurring income items. Our sustained ability to generate income and cash flow has resulted in a strong balance sheet, evidenced by the following at June 30, 2017:

  • $16.0 million of cash

  • $9.5 million of working capital

  • $10.3 million of tangible net worth

  • $0.2 million of debt