TALX Reports Record First-Quarter Revenues of $66.2 Million; Earnings from Continuing Operations of $7.3 Million, or $0.22 Per

TALX Corporation (NASDAQ:TALX) today reported that
fiscal first-quarter earnings from continuing operations increased 14
percent to $7.3 million, or $0.22 per diluted share, from the year-ago
$6.4 million, or $0.19 per diluted share. The earnings improvement
primarily reflects the contribution from recent acquisitions, strong
revenue gains in The Work Number services, and ongoing emphasis on
cross-selling.
   The 2007 first quarter benefited from $6.7 million in revenues
from the company's April 6, 2006 acquisition of Performance Assessment
Network, Inc., or pan, a provider of secure, electronic-based
psychometric testing and assessments, as well as comprehensive talent
management services. pan's results are presented in a new segment,
talent management services.
   Effective April 1, 2006, the company adopted Statement of
Financial Accounting Standards No. 123r, "Share-Based Payment" (SFAS
123r). Included in fiscal 2007 first-quarter results was approximately
$813,000, net of taxes, or $0.02 per diluted share, related to
share-based compensation expense. For the full year, this expense,
originally projected at $0.06 per share, is now expected to be
approximately $0.08 per share, divided evenly over the four fiscal
quarters.
   First-quarter revenues increased 41 percent to $66.2 million from
$46.8 million the year before. The Work Number services' revenues rose
27 percent, and revenues for the tax management services business
increased 28 percent from year-ago levels.
   Gross profit for the first quarter expanded 40 percent to $40.9
million from $29.2 million. Gross margin was 61.9 percent, compared to
62.4 percent the year before. Fiscal 2007 first-quarter results were
impacted by two items: the inclusion of expenses related to
share-based compensation, which negatively affected gross margin by 67
basis points, and the acquisition of pan, which had a lower gross
margin than the company's other segments. Gross profit for The Work
Number services increased 29 percent to $20.3 million from $15.7
million, with gross margin climbing 150 basis points to 78.5 percent
from 77.0 percent the year before. Gross profit for the tax management
services business rose 29 percent to $16.9 million from $13.1 million,
with gross margin improving 30 basis points to 50.9 percent from 50.6
percent the year before. Gross profit for talent management services
was $3.3 million, and gross margin was 49.6 percent.
   William W. Canfield, president and chief executive officer,
commented, "First-quarter results were very encouraging and were ahead
of our expectations. The results reflect our highly scalable business
model, as The Work Number continued to grow at double-digit rates and
we continued to benefit from cross-selling initiatives. We were
particularly pleased with the growth in our mortgage-related
verification business, despite the soft mortgage environment. In our
tax management services businesses, our revenues grew from our fiscal
2006 acquisitions in both the unemployment tax services and the tax
credits and incentives businesses. Additionally, in the unemployment
tax management business, we realized 7 percent organic growth, marking
our third consecutive quarterly organic gain.
   "We are pleased with pan's solid contribution and look forward to
cross-selling these valuable services to our extensive client base. We
see outstanding growth potential as we assist our clients in
identifying and selecting the right talent and implementing an
effective hiring process.
   "We continue to monitor the status of the Work Opportunity, or
WOTC, and Welfare to Work, or WtW, federal tax credits, which have
been in hiatus since January 1. As a result of this hiatus, our
first-quarter revenues were impacted by approximately $860,000 and we
expect our second-quarter revenues to be adversely affected by
approximately $2 million."
   L. Keith Graves, senior vice president and chief financial
officer, pointed out, "Our financial results yielded cash flows from
operating activities of $7.0 million this quarter. As a result of this
strong cash flow, this quarter we repurchased 347,400 shares of our
common stock in accordance with our share repurchase plan. Further, in
July we repurchased an additional 164,000 shares. We are also pleased
with the $75 million private placement of debt we completed in the
quarter, which allowed us to convert a substantial portion of debt
from a variable to a fixed rate, at a time when interest rates are
generally expected to rise. At the same time, we also renegotiated our
existing credit agreement, and, as a result, all of our debt is now
unsecured."
   Graves also reported, "Fiscal 2007 first-quarter results reflected
costs of approximately $0.01 per share for additional infrastructure
costs primarily related to relocating our corporate offices." He added
that similar costs would continue into the second quarter.
   The company's effective income tax rate was slightly higher in the
fiscal first quarter primarily as a result of the implementation of
SFAS 123r. The corresponding income tax benefit of certain elements of
share-based compensation can only be recognized if, and to the extent
that certain future events occur.
   The total number of employment records on The Work Number services
database increased to 133.1 million at June 30, 2006, from 109.4
million a year ago, representing a 22 percent gain. The company added
4.1 million employment records during the quarter, representing a 3
percent increase in total records over the previous sequential
quarter. Total employment records under contract, including those in
the contract backlog to be added to the database, increased 23 percent
to 143.0 million at June 30, 2006, from 116.1 million a year earlier
and 5 percent over the previous sequential quarter total of 136.3
million. Of the 133.1 million records on the database at June 30, 28
percent represented current employees, while the remainder represented
former employees.
   TALX is raising guidance for the fiscal year ending March 31,
2007, with diluted earnings per share from continuing operations
estimated in a range of $1.06 to $1.12, compared with $1.04 to $1.10
previously. Revenue is projected to be between $275 million and $280
million, compared with prior guidance of $273 million to $278 million.
Canfield noted, "We are pleased that our strong first-quarter
financial performance and expected outlook for the rest of the year
have allowed us to raise our guidance in spite of the increased impact
of share-based compensation expense and infrastructure costs and the
absence of WOTC and WtW federal tax credits while these programs
remain in hiatus."
   TALX also provided initial guidance for the second fiscal quarter
ending September 30, 2006. The company expects revenues ranging from
$66 million to $68 million and diluted earnings per share from
continuing operations of $0.22 to $0.24. Second-quarter diluted
earnings per share from continuing operations in fiscal 2006 were
$0.21 and revenues totaled $48.3 million. Results for fiscal year 2006
included no impact from SFAS 123r.
   A conference call to discuss the company's fiscal 2007
first-quarter performance and its outlook is scheduled for Thursday,
July 27, at 9:00 a.m. Central Time. To participate in this call, dial
[phone]. A slide presentation will accompany the call on the
Web at www.talx.com/2007. Other information of investor interest can
be found at www.talx.com/investor, and the company's corporate
governance website is located at www.talx.com/governance. A digitized
replay of the call will be available from 2:30 p.m. CDT on Thursday,
July 27, through October 26, 2006. The replay number is [phone]
and the access code is 836287.
   Statements in this news release expressing or indicating the
beliefs and expectations of management regarding future performance
are forward-looking statements including, without limitation,
favorable operating trends, anticipated revenue and earnings in the
second quarter of fiscal 2007 and for the fiscal year ending March 31,
2007, and any other plans, objectives, expectations and intentions
contained in this release that are not historical facts. These
statements reflect our current views with respect to future events and
are based on assumptions and subject to risks and uncertainties. These
risks and uncertainties include, without limitation, the preliminary
nature of our estimates, which are subject to change as we collect
additional information and they are reviewed internally and by our
external auditors, as well as the risks detailed in the company's Form
10-K for the fiscal year ended March 31, 2006, under the caption "Risk
Factors" in "Part I - Item 1A. - Risk Factors," as well as (1) the
risk that our revenues from The Work Number may fluctuate in response
to changes in certain economic conditions such as interest rates and
employment trends; (2) risks associated with our ability to prevent
breaches of confidentiality or inappropriate use of data as we perform
large-scale processing of verifications; (3) risks associated with our
ability to maintain the accuracy, privacy and confidentiality of our
clients' employee data; (4) risks related to our ability to increase
the size and range of applications for The Work Number database and to
successfully market current and future services and related to our
dependence on third party providers to do so; (5) proceedings by
Federal and state regulators related to our business, including the
inquiry by the Federal Trade Commission related to our acquisitions in
the unemployment compensation and Work Number businesses; (6) the risk
of interruption of our computer network and telephone operations,
including potential slow-down or loss of business as potential clients
review our operations; (7) risks associated with potential challenges
regarding the applicability of the Fair Credit Reporting Act or
similar law; (8) risks relating to the dependence of the market for
The Work Number on mortgage documentation requirements in the
secondary market and the risk that our revenues and profitability
would be significantly harmed if those requirements were relaxed or
eliminated; (9) risks related to the applicability of any new privacy
legislation or interpretation of existing laws; (10) the risk that our
revenues from unemployment tax management services may fluctuate in
response to changes in economic conditions; (11) risks related to
changes in tax laws, including work opportunity, or WOTC, and welfare
to work, or WtW, tax credits; (12) the risk to our future growth due
to our dependence on our ability to effectively integrate acquired
companies and capitalize on cross-selling opportunities; and (13)
risks relating to doing business with the federal government following
our April 2006 acquisition of pan. These risks, uncertainties and
other factors may cause our actual results, performance or
achievements to be materially different from those expressed or
implied by our forward-looking statements. We do not undertake any
obligation or plan to update these forward-looking statements, even
though our situation may change.
   TALX Corporation, based in St. Louis, Missouri, is a leading
provider of human resource and payroll-related services and holds a
leadership position in automated employment and income verification as
well as unemployment tax management. TALX provides over 9,000 clients,
including three-fourths of Fortune 500 companies, with Web-based
services focused in three employment-related areas: hiring, pay
reporting, and compliance. Hiring services include assessments and
talent management, paperless new hires, and tax credits and
incentives. Pay reporting services include electronic time tracking,
paperless pay, and W-2 management. Compliance services include
employment and income verifications through The Work Number,
unemployment tax management, and I-9 management. The company's common
stock trades in The NASDAQ Global Select Market under the symbol TALX.
For more information about TALX Corporation, call 314-214-7000 or
access the company's Web site at www.talx.com.
-0-
*T

                   TALX Corporation and Subsidiaries
                  Consolidated Statements of Earnings
         (dollars in thousands, except per share information)
                              (unaudited)

                                        Three Months Ended
                                             June 30,
                                             --------
                                          2006      2005
                                          --------------
Revenues:
  The Work Number services             $25,897     $20,445
  Tax management services               33,158      25,925
  Talent management services             6,717           -
  Maintenance and support                  402         424
                                       -------     -------
    Total revenues                      66,174      46,794
                                       -------     -------
Cost of revenues:
  The Work Number services               5,573       4,704
  Tax management services               16,265      12,806
  Talent management services             3,385           -
  Maintenance and support                   19          86
                                       -------     -------
    Total cost of revenues              25,242      17,596
                                       -------     -------
    Gross profit                        40,932      29,198
                                       -------     -------
Operating expenses:
  Selling and marketing                 11,105       7,730
  General and administrative            14,419      10,084
                                       -------     -------
      Total operating expenses          25,524      17,814
                                       -------     -------
    Operating income                    15,408      11,384
                                       -------     -------
Other income(expense), net:
  Interest income                          160         157
  Interest expense                      (3,187)       (916)
  Other, net                                 5          (5)
                                       -------     -------
    Total other income(expense), net    (3,022)       (764)
                                       -------     -------
    Earnings from continuing
     operations before
     income tax expense                 12,386      10,620
Income tax expense                       5,067       4,195
                                       -------     -------
  Earnings from continuing operations    7,319       6,425
Discontinued operations,
 net of income taxes:
  Earnings from discontinued
    operations, net                          -           7
  Gain on disposal of
   discontinued operations, net              -         195
                                       -------     -------
    Earnings from discontinued
     operations                              -         202
                                       -------     -------
Net earnings                           $ 7,319     $ 6,627
                                       =======     =======
Basic earnings per share:
  Continuing operations                $  0.23     $  0.20
  Discontinued operations                    -        0.01
                                       -------     -------
    Net earnings                       $  0.23     $  0.21
                                       =======     =======
Diluted earnings per share:
  Continuing operations                $  0.22     $  0.19
  Discontinued operations                    -        0.01
                                       -------     -------
    Net earnings                       $  0.22     $  0.20
                                       =======     =======
Weighted average number
   of shares outstanding(basic)     32,085,129  31,388,772
Weighted average number
   of shares outstanding(diluted)   33,947,420  33,405,620


                   TALX Corporation and Subsidiaries
                      Consolidated Balance Sheets
           (dollars in thousands, except share information)

                   Assets               June 30, 2006   March 31, 2006
                   ------               -------------   --------------
                                         (unaudited)
Current assets:
  Cash and cash equivalents                $   4,277        $   5,705
  Short-term investments                       4,105            5,850
  Accounts receivable, less allowance for
   doubtful accounts of $3,659 at June 30,
   2006, and $3,731 at March 31, 2006         40,219           31,527
  Unbilled receivables                         4,778            5,911
  Prepaid expenses and other current assets    7,434            6,576
  Deferred tax assets, net                       714            2,580
                                           ---------        ---------
    Total current assets                      61,527           58,149
Property and equipment, net of accumulated
 depreciation of $27,331 at June 30, 2006,
 and $25,227 at March 31, 2006                18,186           16,037
Capitalized software development costs, net
 of amortization of $6,866 at June 30, 2006,
 and $6,329 at March 31, 2006                  4,830            4,059
Goodwill                                     226,045          190,232
Other intangibles, net                       115,536           77,434
Other assets                                   2,139            1,634
                                           ---------        ---------
                                           $ 428,263        $ 347,545
                                           =========        =========

      Liabilities and Shareholders' Equity
      ------------------------------------
Current liabilities:
  Accounts payable                         $   2,560        $   2,257
  Accrued expenses and other liabilities      14,959           19,219
  Dividends payable                            1,297            1,289
  Deferred revenue                             7,514            6,893
                                           ---------        ---------
    Total current liabilities                 26,330           29,658
Deferred tax liabilities, net                 18,594           17,634
Long-term debt                               192,377          110,802
Other liabilities                              3,180            3,153
                                           ---------        ---------
    Total liabilities                        240,481          161,247
                                           ---------        ---------
Commitments and contingencies
Shareholders' equity:
  Preferred stock, $.01 par value;
    authorized 5,000,000 shares and no
    shares issued or outstanding at
    June 30, 2006, or March 31, 2006               -                -
  Common stock, $.01 par value per share;
    authorized 75,000,000 shares at
    June 30, 2006 and March 31, 2006;
    issued 32,417,630 shares at June 30, 2006,
    and 32,225,321 shares at March 31, 2006      324              322
  Additional paid-in capital                 181,326          177,463
  Deferred compensation                       (7,206)          (5,076)
  Retained earnings                           19,488           13,467
  Accumulated other comprehensive income:
    Unrealized gain on interest rate
     swap contract, net of tax expense of
     $93 at June 30, 2006, and $80 at March
     31, 2006                                    135              122
  Treasury stock, at cost, 267,400 shares
    at June 30, 2006                          (6,285)               -
                                           ---------        ---------
      Total shareholders' equity             187,782          186,298
                                           ---------        ---------
                                           $ 428,263        $ 347,545
                                           =========        =========


                   TALX Corporation and Subsidiaries
                 Consolidated Statements of Cash Flows
                        (dollars in thousands)
                              (unaudited)

                                           Three Months Ended June 30,
                                           ---------------------------
                                                2006          2005
                                                ----          ----
Cash flows from operating activities:
    Net earnings                              $ 7,319       $ 6,627
    Adjustments to reconcile net
      earnings to net cash provided by
      operating activities:
        Depreciation and amortization           4,681         3,059
        Non-cash compensation                     944            22
        Deferred taxes                          1,802         1,215
        Gain on swap agreement                      -           (59)
        Change in assets and liabilities,
          excluding those acquired:
          Accounts receivable, net             (2,775)       (1,601)
          Unbilled receivables                  1,133           689
          Prepaid expenses and other
            current assets                       (784)        1,022
          Other assets                           (566)          (37)
          Accounts payable                       (210)          546
          Accrued expenses and other
            liabilities                        (4,856)       (2,632)
          Deferred revenue                        309          (359)
          Other liabilities                        27            49
                                              -------       -------
            Net cash provided by operating
              activities                        7,024         8,541
                                              -------       -------
Cash flows from investing activities:
  Additions to property and equipment, net     (4,458)       (1,742)
  Acquisitions, net of cash acquired          (78,824)      (27,351)
  Purchases of short-term investments               -        (4,020)
  Proceeds from sale of short-term
    investments                                 1,745             -
  Capitalized software development costs         (699)         (629)
                                              -------       -------
    Net cash used in investing activities     (82,236)      (33,742)
                                              -------       -------
Cash flows from financing activities:
  Issuance of common stock                      1,630         1,994
  Repurchase of common stock                   (8,132)            -
  Borrowings under long-term debt agreements  155,780        84,850
  Repayments under long-term debt agreements  (74,205)      (67,500)
  Dividends paid                               (1,289)         (835)
                                              -------       -------
    Net cash provided by financing
     activities                                73,784        18,509
                                              -------       -------
    Net decrease in cash and cash
     equivalents                               (1,428)       (6,692)
Cash and cash equivalents at beginning
 of period                                      5,705        11,399
                                              -------       -------
Cash and cash equivalents at end of period    $ 4,277       $ 4,707
                                              =======       =======
*T