Newtek Business Services Corp.
Mar 6, 2017
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Newtek Business Services Corp. Reports Full Year 2016 Financial Results

Achieved 27.5% Year-Over-Year Growth in SBA 7(a) Loan Fundings in 2016

LAKE SUCCESS, N.Y., March 06, 2017 (GLOBE NEWSWIRE) -- Newtek Business Services Corp. ("Newtek" or the "Company"), (NASDAQ:NEWT), an internally managed business development company ("BDC"), announced today its financial results for the year ended December 31, 2016.  

Full Year 2016 Highlights:

Loan Funding Highlights:

2016 and 2017 Dividend Forecast and Payments:

January 2017 Highlights:

Barry Sloane, Chairman, President and Chief Executive Officer said, "We are extremely pleased to report strong full year 2016 results, which were in line with our expectations and previous forecasts.  We continued to grow our NAV, which at December 31, 2016 realized a 2.6% year-over-year increase to $209.1 million, or $14.30 per share.  At the December 31, 2016 market close, our stock generated a total one-year return, based on market value, to our shareholders of approximately 27.7%3.  We met our full year 2016 dividend forecast of $1.53 per share, which was equivalent to approximately 94% of our estimated taxable income in 2016.  It is important to note, that approximately 47% of our total quarterly cash dividends paid in 2016 qualify for preferential tax treatment.  We believe this is one of the distinct advantages of our business model in which our portfolio companies' reoccurring stream of income is taxed at the portfolio-company level prior to being distributed to the Company.  Equally important is that we believe this reoccurring stream of income to be less sensitive to credit risk, interest rates and inflation, and could potentially benefit with such increases. We are also pleased to reaffirm our dividend forecast for 2017 of $1.57 per share, which represents a 2.6% increase over our 2016 annual dividend.  We expect the 2017 annual dividend to maintain similar tax attributes as in 2016 in accordance with the structure of our business model."

Mr. Sloane continued, "We continued to capitalize on our cost-effective client-acquisition model utilizing our proprietary web-based technology, NewTracker®, and our ever-growing network of alliance partnerships and, as a result, have experienced an increase in our business referrals across all business lines.  In 2016, we added several new brand-recognized entities as alliance partners including Raymond James, Meineke and True Value stores.  In addition, we continued to seek synergistic investment opportunities that we believe will expand and complement our current business solutions footprint.  We currently have several investment opportunities in the pipeline including companies that focus on cloud computing, information technology, payment processing, accounts receivable financing, human resources and benefits solutions, as well as an SBIC fund. As we move through 2017, we look forward to continuing to expand our business and deliver strong returns to our shareholders."

Investor Conference Call and Webcast

A conference call to discuss the full year 2016 results will be hosted by Barry Sloane, Chairman, Chief Executive Officer, and Jennifer Eddelson, Executive Vice President and Chief Accounting Officer, Tuesday, March 7, 2017 at 8:30 a.m. ET.  The live conference call can be accessed by dialing (877) 303-6993 or (760) 666-3611.

In addition, a live audio webcast of the call with the corresponding presentation will be available in the ‘Events & Presentations' section of the Investor Relations portion of Newtek's website at http://investor.newtekbusinessservices.com/events.cfm. A replay of the webcast with the corresponding presentation will be available on Newtek's website shortly following the live presentation and will remain available for 90 days following the live presentation.

Use of Non-GAAP Financial Measures - Newtek Business Services Corp. and Subsidiaries:

In evaluating its business, Newtek considers and uses adjusted net investment income as a measure of its operating performance.  Adjusted net investment income includes short-term capital gains from the sale of the guaranteed portions of SBA 7(a) loans, and beginning in 2016, capital gain distributions from controlled portfolio companies, which are reoccurring events. The Company defines Adjusted net investment income (loss) as Net investment income (loss) plus Net realized gains (losses) recognized from the sale of guaranteed portions of SBA 7(a) loan investments, plus Loss on lease expense, plus stock-based compensation expense (added back in third quarter of 2016 only and will not be included prospectively as it is anticipated to be a reoccurring expense), plus the net realized gains on controlled investments (beginning in 2016 as it is anticipated this will be reocurring income).

The term Adjusted net investment income is not defined under U.S. generally accepted accounting principles, or U.S. GAAP, and is not a measure of operating income, operating performance or liquidity presented in accordance with U.S. GAAP.  Adjusted net investment income has limitations as an analytical tool and, when assessing the Company's operating performance, investors should not consider Adjusted net investment income in isolation, or as a substitute for net investment income (loss), or other consolidated income statement data prepared in accordance with U.S. GAAP.  Among other things, Adjusted net investment income does not reflect the Company's actual cash expenditures.  Other companies may calculate similar measures differently than Newtek, limiting their usefulness as comparative tools.  The Company compensates for these limitations by relying primarily on its GAAP results supplemented by Adjusted net investment income.

1Adjusted net investment income (loss) is a non-GAAP financial measure. Adjusted net investment income (loss) equals Net investment income (loss), plus Net realized gains (losses) recognized from the sale of guaranteed portions of SBA 7(a) loans, plus Loss on lease expense plus stock based compensation (added back in third quarter of 2016 only and will not be included prospectively as it is anticipated to be a reoccurring expense), plus the net realized gains on controlled investments (beginning in 2016 as it is anticipated this will be reoccurring income).

2Amount and timing of dividends, if any, remain subject to the discretion of the Company's Board of Directors.

3As per Bloomberg. Total one-year return includes dividends reinvested in Newtek common stock.

Note regarding Dividend Payments:  The Company's Board of Directors expects to maintain a dividend policy with the objective of making quarterly distributions in an amount that approximates 90 - 100% of the Company's annual taxable income.  The determination of the tax attributes of the Company's distributions is made annually as of the end of the Company's fiscal year based upon its taxable income for the full year and distributions paid for the full year.

About Newtek Business Services Corp.

Newtek Business Services Corp., Your Business Solutions Company ®, is an internally managed BDC, which along with its controlled portfolio companies, provides a wide range of business services and financial products under the Newtek® brand to the small- and medium-sized business ("SMB") market. Since 1999, Newtek has provided state-of-the-art, cost-efficient products and services and efficient business strategies to SMB accounts across all 50 states to help them grow their sales, control their expenses and reduce their risk.

Newtek's and its portfolio companies' products and services include: Business Lending, SBA Lending Solutions, Electronic Payment ProcessingTechnology Solutions (Cloud Computing, Data Backup, Storage and Retrieval), eCommerce, Accounts Receivable Financing & Inventory Financing, The Secure Gateway, The Newtek Advantage, Insurance Solutions, Web Services, and Payroll and Benefits Solutions.

Newtek® and Your Business Solutions Company® are registered trademarks of Newtek Business Services Corp.

Note Regarding Forward Looking Statements

This press release contains certain forward-looking statements. Words such as "believes," "intends," "expects," "projects," "anticipates," "forecasts," and "future" or similar expressions are intended to identify forward-looking statements. All forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from the plans, intentions and expectations reflected in or suggested by the forward-looking statements. Such risks and uncertainties include, among others, intensified competition, operating problems and their impact on revenues and profit margins, anticipated future business strategies and financial performance, anticipated future number of customers, business prospects, legislative developments and similar matters. Risk factors, cautionary statements and other conditions, which could cause Newtek's actual results to differ from management's current expectations, are contained in Newtek's filings with the Securities and Exchange Commission and available through http://www.sec.gov/. Newtek cautions you that forward-looking statements are not guarantees of future performance and that actual results or developments may differ materially from those projected or implied in these statements.


NEWTEK BUSINESS SERVICES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(In Thousands, except for Per Share Data)
 December 31,
 2016 2015
ASSETS   
Investments, at fair value   
SBA unguaranteed non-affiliate investments (cost of $219,784 and $166,752, respectively; includes $197,927 and $146,463, respectively, related to securitization trusts) $211,471  $158,355 
SBA guaranteed non-affiliate investments (cost of $10,262 and $2,069, respectively)11,512  2,284 
Controlled investments (cost of $41,001 and $35,781, respectively)121,302  104,376 
Non-control/non-affiliate investments (cost of $904 and $1,847, respectively)904  1,824 
Investments in money market funds (cost of $35 and $35, respectively)35  35 
Total investments at fair value345,224  266,874 
Cash and cash equivalents2,051  4,308 
Restricted cash20,845   22,869 
Broker receivable2,402  32,083 
Due from related parties3,748  3,056 
Servicing assets, at fair value16,246  13,042 
Credits in lieu of cash, at fair value  860 
Other assets10,934  9,338 
Total assets$401,450  $ 352,430 
LIABILITIES AND NET ASSETS   
Liabilities:   
Bank notes payable$5,100  $29,100 
Notes due 20227,853  7,770 
Notes due 202138,767   
Notes payable - Securitization trusts118,122  89,244 
Dividends payable  5,802 
Note payable - related parties1,400  5,647 
Due to related parties1,227  256  
Notes payable in credits in lieu of cash, at fair value  860 
Deferred tax liabilities5,983  857 
Accounts payable, accrued expenses and other liabilities13,904  8,945 
Total liabilities192,356  148,481 
Commitments and contingencies   
Net Assets:   
Preferred stock (par value $0.02 per share; authorized 1,000 shares, no shares issued and outstanding)   
Common stock (par value $0.02 per share; authorized 200,000 shares, 14,624 and 14,509 issued and outstanding, respectively)293  290 
Additional paid-in capital188,472  189,031 
Undistributed net investment income8,092  4,437 
Net unrealized appreciation, net of deferred taxes13,008  8,062 
Net realized (losses) gains(771) 2,129 
Total net assets209,094  203,949 
Total liabilities and net assets$401,450  $352,430 
Net asset value per common share$14.30  $14.06 


NEWTEK BUSINESS SERVICES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, except for Per Share Data)
 As a Business Development Company Prior to becoming a Business Development Company
 Year ended December 31, 2016 Year ended December 31, 2015 November 12, 2014 to December 31, 2014 January 1, 2014 to November 11, 2014
Investment income:       
From non-affiliate investments:       
Interest income$11,158  $8,924  $1,076  $ 
Servicing income6,160  4,611  562   
Other income2,714  1,929  270   
Total investment income from non-affiliate investments20,032  15,464  1,908   
From controlled investments:       
Interest income360  277  27   
Dividend income10,573  10,218  37   
Other income  111  4   
Total investment income from controlled investments10,933  10,606  68   
Total investment income30,965  26,070  1,976   
Operating revenues:       
Electronic payment processing$  $  $  $79,527 
Web hosting and design      13,730 
Premium income      18,623 
Interest income      5,663  
Servicing fee income - NSBF portfolio      3,111 
Servicing fee income - external portfolios      6,142 
Income from tax credits      48 
Insurance commissions      1,480 
Other income      3,523 
Total operating revenues      131,847 
Net change in fair value of:       
SBA loans      (3,663)
Credits in lieu of cash and notes payable in credits in lieu of cash      (5)
Total net change in fair value       (3,668)
Expenses:       
Electronic payment processing costs      67,011 
Salaries and benefits15,234   12,753  1,458  23,373 
Interest8,440  6,479  568  7,323 
Depreciation and amortization296  326  43  3,140 
Goodwill impairment      1,706 
Provision for loan losses      (53)
Other general and administrative costs16,255  12,697  2,236  18,536 
Total expenses40,225  32,255  4,305  121,036 
Net investment loss before income tax(9,260) (6,185) (2,329)  
Provision for income tax - post BDC    194   
Net investment loss(9,260) (6,185) (2,523)  
Net realized and unrealized gains (losses):       
Net realized gains on non-affiliate investments31,512  28,386  595   
Net realized gains on controlled investments108  5,473     
Net unrealized (depreciation) appreciation on SBA guaranteed non-affiliate investments1,035  (3,215) 3,007   
Net unrealized appreciation (depreciation) on SBA unguaranteed non-affiliate investments18  1,183   (274)  
Net unrealized appreciation on controlled investments11,337  12,250     
Provision for deferred taxes on unrealized appreciation on investments(5,128) (857)    
Net unrealized depreciation on non-control/non-affiliate investments(43) (24)    
Net unrealized depreciation on servicing assets(2,269) (1,268) (120)   
Net unrealized depreciation on credits in lieu of cash and notes payable in credits in lieu of cash(5) (7) (4)  
Net realized and unrealized gains36,565  41,921  3,204   
Income before income taxes       7,143 
Net increase in net assets$27,305  $35,736   $681  $ 
Provision for income taxes      3,935 
Net income      3,208 
Net loss attributable to non-controlling interests      85 
Net income attributable to Newtek Business Services Corp.$  $  $  $3,293 
Weighted average common shares outstanding:       
Basic      7,315 
Diluted      7,315 
Basic income per share$  $  $  $0.45 
Diluted income per share$  $   $  $0.45 
Net increase in net assets per share$1.88  $3.32  $(0.33) $ 
Net investment loss per share$(0.64) $(0.57) $0.09  $ 
Dividends and distributions declared per share$1.53  $4.45  $  $ 
Weighted average shares outstanding14,541  10,770  7,620   


NEWTEK BUSINESS SERVICES CORP. AND SUBSIDIARIES
ADJUSTED NET INVESTMENT INCOME RECONCILIATION:
 

(in thousands, except per share amounts)
Year ended
December 31, 2016
 Per share
    
Net investment loss$(9,260) $(0.64)
Net realized gain on non-affiliate debt investments 31,512   2.17 
Loss on lease 604   0.04 
Stock-based compensation 226   0.02 
Net realized gains on controlled investments 108   0.01 
Adjusted Net investment income$23,190  $1.60 
    

 

Investor Relations & Public Relations

Contact: Jayne Cavuoto

Telephone: (212) 273-8179 / jcavuoto@newtekone.com

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Source: Newtek Business Services Corp.

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