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Newtek Business Services Corp. Reports Third Quarter 2016 Financial Results
Achieves Record Loan Fundings of
Forecasts 2017 Annual Cash Dividend of
Third Quarter 2016 Highlights:
- Net asset value ("NAV") of
$208.2 million , or$14.26 per share, atSeptember 30, 2016 ; an increase of 1.9% over NAV of$204.4 million , or$14.11 per share, atJune 30, 2016 and an increase of 2.1% over NAV of$203.9 million , or$14.06 per share, atDecember 31, 2015 . - Total investment income of
$7.9 million ; an 11.6% increase over$7.0 million for the quarter endedSeptember 30, 2015 . - Total investment portfolio increased by 22.5% to
$326.9 million atSeptember 30, 2016 , from$266.9 million atDecember 31, 2015 . - Net investment loss of
$(2.1) million , or$(0.15) per share, compared to$(1.5) million , or$(0.14) per share, for the three months endedSeptember 30, 2015 . - Adjusted
net investment income1 of
$6.7 million , or$0.46 per share; a 31.4% increase over$5.1 million , or$0.49 per share, for the three months endedSeptember 30, 2015 . - Debt-to-equity ratio was approximately 85.3% at
September 30, 2016 .
Loan Funding Highlights:
- Funded
$85.9 million of SBA 7(a) loans in the third quarter of 2016; an increase of a 33.7% over the same period one year ago. - For the nine months ended
September 30, 2016 , SBA 7(a) loan fundings increased by 29.8% to$217.8 million compared to$167.8 million for the same period one year ago. - Reaffirmed 2016
loan funding forecast of approximately
$320 million in SBA 7(a) and SBA 504 loans (note: SBA 504 loans are funded by Newtek Business Credit Solutions ("NBC"), one of Newtek's controlled portfolio companies), which would represent an approximate 32% increase over 2015. - As of
October 31, 2016 , there were approximately$20 million of SBA 504 loans in the pipeline.
2016 and 2017 Dividend Forecast and Payments:
- Paid third quarter 2016 dividend of
$0.43 2 per share, onSeptember 30, 2016 to shareholders of record as ofSeptember 20, 2016 . - Reaffirmed 2016 annual cash dividend forecast of approximately
$22.2 million , or 1.532 per share. - The Company forecasts paying an annual cash dividend of
$1.57 2 per share in 2017, a 2.6% increase over the 2016 annual dividend forecast of$1.53 per share.
"Our history of growing dividends and NAV is predicated on our unique and strategic business model which has consistently demonstrated strong growth and increases in referral volume across all of our businesses. In particular, continued demand for our loan products coupled with increased efficiencies in our lending business operations have materialized into robust year-over-year funding growth of nearly 34% in the third quarter of 2016, without sacrificing our focus on the credit quality of the loans we originate. We are currently on track to meet our annual loan funding forecast and are excited about
future growth opportunities. Specifically, we have a full pipeline of business services investment candidates which we believe could be accretive to our 2017 dividend forecast. We will continue to publicly highlight the differences inherent to our BDC model, compared to the typical BDC model, which we strongly believe places us in a competitively advantageous position in the market, as well as supports our goal of continuing to deliver above-market returns to our shareholders," concluded
Investor Conference Call and Webcast
A conference call to discuss the third quarter 2016 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.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 -
In evaluating its business,
The term Adjusted net investment
income is not defined under
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.
2Amount and timing of dividends, if any, remain subject to the discretion of the Company's Board of Directors. The Company's 2016 dividend forecast is based on the number of shares of Company common stock outstanding at
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 at least 90% 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's and its portfolio companies' products and services include: Business Lending, SBA Lending Solutions, Electronic Payment Processing, Technology 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.
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
CONDENSED CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES (In Thousands, except for Per Share Data) | |||||||
ASSETS | (Unaudited) | ||||||
Investments, at fair value | |||||||
SBA unguaranteed non-affiliate investments (cost of | $ | 196,624 | $ | 158,355 | |||
SBA guaranteed non-affiliate investments (cost of | 8,754 | 2,284 | |||||
Controlled investments (cost of | 120,420 | 104,376 | |||||
Non-control/non-affiliate investments (cost of | 1,020 | 1,824 | |||||
Investments in money market funds (cost of | 35 | 35 | |||||
Total investments at fair value | 326,853 | 266,874 | |||||
Cash and cash equivalents | 2,718 | 4,308 | |||||
Restricted cash | 24,781 | 22,869 | |||||
Broker receivable | 21,495 | 32,083 | |||||
Due from related parties | 3,012 | 3,056 | |||||
Servicing assets, at fair value | 15,619 | 13,042 | |||||
Credits in lieu of cash, at fair value | 216 | 860 | |||||
Other assets | 10,155 | 9,338 | |||||
Total assets | $ | 404,849 | $ | 352,430 | |||
LIABILITIES AND | |||||||
Liabilities: | |||||||
Bank notes payable | $ | 49,919 | $ | 29,100 | |||
Notes due 2022 | 7,832 | 7,770 | |||||
Notes due 2021 | 38,680 | — | |||||
Notes payable - Securitization trusts | 73,471 | 89,244 | |||||
Dividends payable | — | 5,802 | |||||
Notes payable - related parties | 7,400 | 5,647 | |||||
Due to related parties | 1,191 | 256 | |||||
Notes payable in credits in lieu of cash, at fair value | 216 | 860 | |||||
Deferred tax liability | 5,327 | 857 | |||||
Accounts payable, accrued expenses and other liabilities | 12,641 | 8,945 | |||||
Total liabilities | 196,677 | 148,481 | |||||
Commitments and contingencies | |||||||
Net Assets: | |||||||
Preferred stock (par value | — | — | |||||
Common stock (par value | 292 | 290 | |||||
Additional paid-in capital | 188,647 | 189,031 | |||||
Undistributed net investment income | (3,150 | ) | 4,437 | ||||
Net unrealized appreciation, net of deferred taxes | 14,128 | 8,062 | |||||
Net realized gains | 8,255 | 2,129 | |||||
Total net assets | 208,172 | 203,949 | |||||
Total liabilities and net assets | $ | 404,849 | $ | 352,430 | |||
Net asset value per common share | $ | 14.26 | $ | 14.06 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (In Thousands, except for Per Share Data) | |||||||||||||||
Three Months Ended | Three Months Ended | Nine Months Ended | Nine Months
Ended | ||||||||||||
Investment income: | |||||||||||||||
From non-affiliate investments: | |||||||||||||||
Interest income | $ | 2,583 | $ | 2,153 | $ | 7,404 | $ | 6,509 | |||||||
Servicing income | 1,551 | 1,262 | 4,581 | 3,373 | |||||||||||
Other income | 692 | 472 | 1,913 | 1,331 | |||||||||||
Total investment income from non-affiliate investments | 4,826 | 3,887 | 13,898 | 11,213 | |||||||||||
From controlled investments: | |||||||||||||||
Interest income | 92 | 58 | 251 | 202 | |||||||||||
Dividend income | 2,933 | 3,093 | 7,719 | 5,967 | |||||||||||
Other income | — | — | — | 12 | |||||||||||
Total investment income from controlled investments | 3,025 | 3,151 | 7,970 | 6,181 | |||||||||||
Total investment income | 7,851 | 7,038 | 21,868 | 17,394 | |||||||||||
Expenses: | |||||||||||||||
Salaries and benefits | 3,439 | 3,444 | 10,412 | 9,600 | |||||||||||
Stock-based compensation | 226 | — | 226 | — | |||||||||||
Interest | 2,341 | 1,864 | 5,804 | 4,948 | |||||||||||
Depreciation and amortization | 84 | 87 | 209 | 257 | |||||||||||
Loss on lease | (152 | ) | (74 | ) | 1,335 | (218 | ) | ||||||||
Other general and administrative costs | 4,038 | 3,208 | 11,468 | 9,069 | |||||||||||
Total expenses | 9,976 | 8,529 | 29,454 | 23,656 | |||||||||||
Net investment loss | (2,125 | ) | (1,491 | ) | (7,586 | ) | (6,262 | ) | |||||||
Net realized and unrealized gains (losses): | |||||||||||||||
Net realized gain on non-affiliate investments | 8,716 | 6,620 | 22,536 | 21,659 | |||||||||||
Net unrealized (depreciation) appreciation on SBA guaranteed non-affiliate investments | (78 | ) | (48 | ) | 690 | (3,210 | ) | ||||||||
Net unrealized appreciation (depreciation) on SBA unguaranteed non-affiliate investments | 1,418 | (531 | ) | 869 | (1,667 | ) | |||||||||
Net unrealized appreciation on controlled investments | 4,638 | 770 | 10,362 | 10,289 | |||||||||||
Provision for deferred taxes on unrealized appreciation on controlled investments | (2,028 | ) | — | (4,469 | ) | — | |||||||||
Net unrealized depreciation on non-control/non-affiliate investments | — | — | (43 | ) | — | ||||||||||
Net unrealized depreciation on servicing assets | (500 | ) | (565 | ) | (1,341 | ) | (1,177 | ) | |||||||
Net unrealized depreciation on credits in lieu of cash and notes payable in credits in lieu of cash | (1 | ) | (6 | ) | (2 | ) | (4 | ) | |||||||
Net realized and unrealized gains | 12,165 | 6,240 | 28,602 | 25,890 | |||||||||||
Net increase in net assets | $ | 10,040 | $ | 4,749 | $ | 21,016 | $ | 19,628 | |||||||
Net increase in net assets per share | $ | 0.69 | $ | 0.46 | $ | 1.45 | $ | 1.92 | |||||||
Net investment loss per share | $ | (0.15 | ) | $ | (0.14 | ) | $ | (0.52 | ) | $ | (0.61 | ) | |||
Dividends declared per common share | $ | 0.43 | $ | — | $ | 1.13 | $ | 0.86 | |||||||
Weighted average shares outstanding | 14,556 | 10,318 | 14,515 | 10,244 |
ADJUSTED NET INVESTMENT INCOME RECONCILIATION: | ||||||||||||||||
(in thousands, except per share amounts) | Three months ended 2016 | Per share | Three months ended 2015 | Per share | ||||||||||||
Net investment loss | $ | (2,125 | ) | $ | (0.15 | ) | $ | (1,491 | ) | $ | (0.15 | ) | ||||
Net realized gain on non-affiliate debt investments | 8,712 | 0.60 | 6,620 | 0.65 | ||||||||||||
Loss on lease | (152 | ) | (0.01 | ) | (74 | ) | (0.01 | ) | ||||||||
Stock-based compensation | 226 | 0.02 | - | - | ||||||||||||
Adjusted Net investment income | $ | 6,661 | $ | 0.46 | $ | 5,055 | $ | 0.49 | ||||||||
Investor Relations & Public Relations Contact:Source:Jayne Cavuoto Telephone: (212) 273-8179 / jcavuoto@newtekone.com
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