Newtek Business Services Corp.
Aug 2, 2017
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Newtek Business Services Corp. Reports Second Quarter 2017 Financial Results

Increases 2017 SBA Loan Origination Guidance to Approximately $415 Million

LAKE SUCCESS, N.Y., Aug. 02, 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 three and six months ended June 30, 2017.  

Second Quarter 2017 Financial Highlights

Financial Highlights - Six Months Ended June 30, 2017

Additional Second Quarter 2017 Highlights

SBA Loan Origination Highlights

2017 Dividend Forecast and Payments

Barry Sloane, Chairman and Chief Executive Officer said, "We are extremely pleased with our financial performance, completing the first half of 2017 with double-digit percentage growth across multiple key metrics. Of note, our Adjusted Net Investment Income and investment income for the first six months of 2017 increased approximately 39% and 35%, respectively, compared to the same period last year. Additionally, we have raised our total SBA loan origination guidance for 2017 by approximately 4% to $415 million, which would represent an approximate 31% increase over total SBA loan originations in 2016. We remain positive about our continued growth and expect the second half of the year to follow our historical trend of yielding stronger results than the first half of the year."

Mr. Sloane continued, "We are also proud to report that we have been able to continue to secure capital with more attractive financing terms, a testament to the market's recognition of our strong track record and continued growth.  Certain of our portfolio companies were able to increase the aggregate principal amount of the term loan facility with Goldman Sachs Bank USA to $50.0 million from $38.0 million with a reduction in the interest rate of between 1.0% and 2.0%.  Additionally, NSBF increased its existing revolving credit facility through Capital One, from $50.0 million to $100.0 million, and received a reduction in the interest rate of 1.125% to fund the unguaranteed portion of SBA 7(a) loans and 1.25% to fund the guaranteed portion of SBA 7(a) loans. Together with our use of at-the-money (ATM) equity offerings during the second quarter, which allows us to access equity capital at a significantly lower underwriting cost than with a typical equity offering, we believe we are well capitalized as of the date of this release."

Mr. Sloane concluded, "It remains our goal to grow our company organically as well through strategic investments within the business services footprint in order to capitalize on the tremendous opportunities the market has to offer. Specifically, our recent investment in our new wholly owned controlled portfolio company IPM (www.ipm.com), an information technology consulting company, positions Newtek's portfolio companies to offer end-to-end technology solutions to small- and medium-sized businesses, commercial business and larger institutional clients.  We will outline our portfolio company strategy for growth in the technology space on our conference call tomorrow morning as well as discuss our current investment pipeline."

Investor Conference Call and Webcast

A conference call to discuss second quarter 2017 results will be hosted by Barry Sloane, Chairman and Chief Executive Officer, and Jennifer Eddelson, Executive Vice President and Chief Accounting Officer, tomorrow, Thursday, August 3, 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.

1Use of Non-GAAP Financial Measures - Newtek Business Services Corp. and Subsidiaries

In evaluating its business, Newtek considers and uses ANII as a measure of its operating performance.  ANII 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 ANII as Net investment income (loss) plus Net realized gains recognized from the sale of guaranteed portions of SBA 7(a) loan investments less realized losses on non-affiliate investments, plus or minus loss on lease adjustment, plus the net realized gains on controlled investments.

The term ANII 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.  ANII has limitations as an analytical tool and, when assessing the Company's operating performance, investors should not consider ANII in isolation, or as a substitute for net investment income, or other consolidated income statement data prepared in accordance with U.S. GAAP.  Among other things, ANII 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 ANII.

2Note Regarding Dividend Payments 

Amount and timing of dividends, if any, remain subject to the discretion of the Company's Board of Directors.  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, IT Consulting), 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
CONDENSED CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(In Thousands, except for Per Share Data)
 June 30, 2017 December 31, 2016
ASSETS(Unaudited)  
Investments, at fair value   
SBA unguaranteed non-affiliate investments (cost of $246,728 and $219,784, respectively; includes $181,568 and $197,927, respectively, related to securitization trusts)$239,757  $211,471 
SBA guaranteed non-affiliate investments (cost of $10,925 and $10,262, respectively)12,224  11,512 
Controlled investments (cost of $58,447 and $41,001, respectively)137,005  121,302 
Non-control/non-affiliate investments (cost of $3,255 and $904, respectively)3,255  904 
Investments in money market funds (cost of $35 and $35, respectively)35  35 
Total investments at fair value392,276  345,224 
Cash and cash equivalents3,550  2,051 
Restricted cash23,594  20,845 
Broker receivable23,815  2,402 
Due from related parties3,345  3,748 
Servicing assets, at fair value18,124  16,246 
Other assets10,191  10,934 
Total assets$474,895  $401,450 
LIABILITIES AND NET ASSETS   
Liabilities:   
Bank notes payable$40,045  $5,100 
Notes due 20227,895  7,853 
Notes due 202138,939  38,767 
Notes payable - Securitization trusts101,108  118,122 
Notes payable - related parties15,741  1,400 
Due to related parties275  1,227 
Deferred tax liabilities5,575  5,983 
Accounts payable, accrued expenses and other liabilities15,073   13,904 
Total liabilities224,651  192,356 
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, 17,432 and 14,624 issued and outstanding, respectively)349  293 
Additional paid-in capital229,891  188,472 
(Distributions in excess of)/undistributed net investment income(1,877) 8,092 
Net unrealized appreciation, net of deferred taxes12,017  13,008 
Net realized gains/(losses)9,864  (771)
Total net assets250,244  209,094 
Total liabilities and net assets$474,895  $401,450 
Net asset value per common share$14.36  $14.30 


NEWTEK BUSINESS SERVICES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In Thousands, except for Per Share Data)
 
 Three Months Ended June 30, 2017 Three Months Ended June 30, 2016 Six Months Ended June 30, 2017 Six Months Ended June 30, 2016
Investment income:       
From non-affiliate investments:       
Interest income$4,635  $2,370  $8,870  $4,821 
Servicing income1,723  1,659  3,369  3,030 
Other income896  624  1,561  1,221 
Total investment income from non-affiliate investments7,254  4,653  13,800  9,072 
From controlled investments:       
Interest income121  77  268  159 
Dividend income2,475  2,493  4,775  4,786 
Other income54    54   
Total investment income from controlled investments2,650  2,570  5,097  4,945 
Total investment income9,904  7,223  18,897  14,017 
Expenses:       
Salaries and benefits4,980  3,629  9,631  6,973 
Interest2,617  1,975  5,147  3,463 
Depreciation and amortization96  85  185  125 
Professional fees602  954  1,449  1,712 
Origination and servicing1,269  1,392  2,653  2,653 
Other general and administrative costs2,020   3,269  3,605  4,552 
Total expenses11,584   11,304  22,670  19,478 
Net investment loss(1,680) (4,081) (3,773) (5,461)
Net realized and unrealized gains (losses):       
Net realized gain on non-affiliate investments8,914  7,534  17,599  13,820 
Net unrealized (depreciation) appreciation on SBA guaranteed non-affiliate investments(63) 706  50  768 
Net unrealized appreciation (depreciation) on SBA unguaranteed non-affiliate investments1,817  478  1,261  (549)
Net unrealized (depreciation) appreciation on controlled investments(2,674) 2,034  (1,743) 5,724 
Provision for deferred taxes on unrealized appreciation on controlled investments976  (833) 410  (2,441)
Net unrealized depreciation on non-control/non-affiliate investments  (27)   (43)
Net unrealized depreciation on servicing assets(360) (438) (969) (841)
Net unrealized depreciation on credits in lieu of cash and notes payable in credits in lieu of cash  (1)   (1)
Net realized and unrealized gains8,610  9,453  16,608  16,437 
Net increase in net assets$6,930  $5,372  $12,835  $10,976 
Net increase in net assets per share$0.40  $0.37  $0.76  $0.76 
Net investment loss per share$(0.10) $(0.28) $(0.22) $(0.38)
Dividends declared per common share$0.40  $0.35  $0.76  $0.70 
Weighted average shares outstanding17,345  14,481  16,867  14,495 


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

(in thousands, except per share amounts)
Three months ended June 30, 2017 Per share Three months ended June 30, 2016 Per share
        
Net investment loss$(1,680) $(0.10) $(4,081)  $(0.28)
Net realized gain on non-affiliate debt investments 8,914   0.51   7,534   0.52 
Loss on lease (74)  (0.00)  1,487   0.10 
Adjusted Net investment income$7,160  $0.41  $4,940  $0.34 



(in thousands, except per share amounts)
Six months ended June 30, 2017 Per share Six months ended June 30, 2016 Per share
        
Net investment loss$(3,773) $(0.22) $(5,461) $(0.38)
Net realized gain on non-affiliate debt investments 17,599   1.04   13,820   0.95 
Loss on lease (175)  (0.01)  1,487   0.10 
Adjusted Net investment income$13,651  $0.81  $9,846  $0.68 
        
Note: Amounts may not foot due to rounding       
         

 

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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