Newtek Business Services Corp. Reports First Quarter 2019 Financial Results
First Quarter 2019 Financial Highlights
- Net investment loss of
$(0.99) million, or $(0.05)per share, for the three months ended March 31, 2019; an improvement of 66.7%, on a per share basis, over net investment loss of $(2.8) million, or $(0.15)per share, for the three months ended March 31, 2018.
- Adjusted net investment income (“ANII”)1 of
$8.3 million, or $0.44per share, for the three months ended March 31, 2019; compared to ANII of $8.1 million, or $0.44per share, for the three months ended March 31, 2018.
- Total investment income of
$13.8 millionfor the three months ended March 31, 2019; an increase of 24.4% over total investment income of $11.1 millionfor the three months ended March 31, 2018.
- Net asset value (“NAV”) of
$292.0 million, or $15.31per share, at March 31, 2019; compared to NAV of $15.19per share at December 31, 2018, and an increase of 1.7% on a per share basis over NAV of $15.05per share at March 31, 2018.
- Debt-to-equity ratio of 122.6% at
March 31, 2019.
March 31, 2019, proforma debt-to-equity ratio was 110.0% as a result of the sales of government-guaranteed portions of SBA 7(a) loans prior to March 31, 2019, which sales settled subsequent to the balance sheet date.
- Total investment portfolio increased by 3.1% to
$557.7 millionat March 31, 2019, from $541.1 millionat December 31, 2018.
- Loan referral volume was
$5.3 billionfor the three months ended March 31, 2019; a 12.5% increase over $4.7 billionfor the three months ended March 31, 2018.
March 29, 2019, Standard and Poor’s Global Ratings raised its rating from A+ to AA on the Class A Notes issued by Newtek Small Business Loan Trust2014-1
First Quarter 2019: Subsequent Event
April 29, 2019, Newtek Conventional Lending, LLC, a joint venture between a Newtek subsidiary and a subsidiary of BlackRock TCP Capital Corp., closed a $100 millionsenior-secured revolving credit facility with Deutsche Bank.
- The JV facility includes a
$100 millionaccordion feature, allowing the JV to increase the borrowing available under the facility to $200 million.
SBA Loan Highlights
- NSBF funded
$97.8 millionof SBA 7(a) loans during the three months ended March 31, 2019; an increase of 7.0% over $91.4 millionof SBA 7(a) loans funded for the three months ended March 31, 2018.
- NSBF forecasts full year 2019 SBA 7(a) loan fundings of between
$580 million and $620 million, which would represent a 27.9% increase, at the midpoint of the range, over SBA 7(a) loan fundings for the year ended December 31, 2018.
- Newtek Business Lending, forecasts full year 2019 SBA 504 loan fundings of
- The Company paid a first quarter 2019 cash dividend of
$0.40per share on March 29, 2019to shareholders of record as of March 15, 2019
May 1, 2019, Newtek’s Board of Directors declared a second quarter 2019 cash dividend of $0.46per share, which represents a 9.5% increase over the second quarter 2018 cash dividend of $0.42per share.
- The Company forecasts paying an annual cash dividend in a range of
$1.852 per share to $1.862 per share in 2019, which would represent a 3.3% increase over the 2018 cash dividend of $1.80per share at the top end of the range.
Mr. Sloane continued, “We are experiencing strong business trends and continued growth in our loan referral volume. Loan referrals for the first quarter of 2019 totaled
Mr. Sloane concluded, “We are extremely excited about future initiatives, specifically the launching of
Investor Conference Call and Webcast
A conference call to discuss first quarter 2019 results will be hosted by
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-and-presentations. 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 -
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 conventional 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, plus or minus the change in fair value of contingent consideration liabilities, plus loss on extinguishment of debt.
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.
Newtek’s and its portfolio companies’ products and services include: Business Lending, SBA Lending Solutions, Electronic Payment Processing,
Note Regarding Forward Looking Statements
This press release contains certain forward-looking statements. Words such as “believes,” “intends,” “expects,” “projects,” “anticipates,” “forecasts,” “goal” 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
Investor Relations & Public Relations
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|NEWTEK BUSINESS SERVICES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(In Thousands, except for Per Share Data)
|March 31, 2019||December 31, 2018|
|Investments, at fair value|
|SBA unguaranteed non-affiliate investments (cost of $370,328 and $355,589, respectively; includes $323,388 and $323,388, respectively, related to securitization trusts)||$||366,769||$||349,402|
|SBA guaranteed non-affiliate investments (cost of $16,634 and $17,217, respectively)||18,586||19,100|
|Controlled investments (cost of $75,935 and $74,279, respectively)||171,294||171,585|
|Non-control/affiliate investments (cost of $1,000 and $1,000, respectively)||1,000||1,000|
|Investments in money market funds (cost of $9 and $9, respectively)||9||9|
|Total investments at fair value||557,658||541,096|
|Due from related parties||3,596||3,232|
|Servicing assets, at fair value||22,339||21,360|
|Right of use assets||8,768||—|
|LIABILITIES AND NET ASSETS|
|Bank notes payable||$||64,500||$||34,700|
|Notes due 2022 (par: $8,324 as of March 31, 2019 and December 31, 2018)||8,039||8,019|
|Notes due 2023 (par: $57,500 as of March 31, 2019 and December 31, 2018)||55,681||55,564|
|Notes payable - Securitization trusts (par: $201,859 and $220,137 as of March 31, 2019 and December 31, 2018)||198,592||216,507|
|Notes payable - related parties||25,890||16,840|
|Due to related parties||2||4|
|Deferred tax liabilities||8,712||9,241|
|Accounts payable, accrued expenses and other liabilities||17,537||25,021|
|Commitment and contingencies|
|Preferred stock (par value $0.02 per share; authorized 1,000 shares, no shares issued and outstanding)||—||—|
|Common stock (par value $0.02 per share; authorized 200,000 shares, 19,073 and 18,919 issued and outstanding, respectively)||382||379|
|Additional paid-in capital||257,597||254,498|
|Accumulated undistributed earnings||34,027||32,568|
|Total net assets||292,006||287,445|
|Total liabilities and net assets||$||681,734||$||653,341|
|Net asset value per common share||$||15.31||$||15.19|
|NEWTEK BUSINESS SERVICES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In Thousands, except for Per Share Data)
Ended March 31,
Ended March 31,
|From non-affiliate investments:|
|Total investment income from non-affiliate investments||10,366||8,294|
|From Non-control/affiliate investments:|
|From controlled investments:|
|Total investment income from controlled investments||3,367||2,774|
|Total investment income||13,764||11,068|
|Salaries and benefits||3,588||4,878|
|Depreciation and amortization||129||120|
|Origination and servicing||1,653||1,605|
|Origination and servicing - related party||2,188||—|
|Change in fair value of contingent consideration liabilities||46||10|
|Loss on extinguishment of debt||—||1,059|
|Other general and administrative costs||1,427||1,717|
|Net investment loss||(986||)||(2,773||)|
|Net realized and unrealized gains (losses):|
|Net realized gain on non-affiliate investments - SBA 7(a) loans||9,344||9,881|
|Net unrealized appreciation (depreciation) on SBA guaranteed non-affiliate investments||70||(280||)|
|Net unrealized appreciation on SBA unguaranteed non-affiliate investments||2,629||992|
|Net unrealized (depreciation) appreciation on controlled investments||(1,947||)||1,170|
|Change in deferred taxes||529||(299||)|
|Net unrealized depreciation on servicing assets||(556||)||(579||)|
|Net realized and unrealized gains||$||10,069||$||10,885|
|Net increase in net assets resulting from operations||$||9,083||$||8,112|
|Net increase in net assets resulting from operations per share||$||0.48||$||0.44|
|Net investment loss per share||$||(0.05||)||$||(0.15||)|
|Dividends and distributions declared per common share||$||0.40||$||0.40|
|Weighted average number of shares outstanding||19,003||18,495|
|NEWTEK BUSINESS SERVICES CORP. AND SUBSIDIARIES|
|NON-GAAP FINANCIAL MEASURES-|
|ADJUSTED NET INVESTMENT INCOME RECONCILIATION:|
(in thousands, except per share amounts)
ended March 31,
|Per share||Three months
ended March 31,
|Net investment loss||$||(986||)||$||(0.05||)||$||(2,773||)||$||(0.15||)|
|Net realized gain on non-affiliate investments - SBA 7(a) loans||9,344||0.49||9,881||0.53|
|Loss on lease||(78||)||(0.00||)||(76||)||(0.00||)|
|Change in fair value of contingent consideration liabilities||46||0.00||10||0.00|
|Loss on debt extinguihsment||-||-||1,059||0.06|
|Adjusted Net investment income||$||8,326||$||0.44||$||8,101||$||0.44|
Source: Newtek Business Services Corp.