UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
November 14, 2014 (November 14, 2014)
Date of Report (date of Earliest Event Reported)
NEWTEK BUSINESS SERVICES CORP.
(Exact Name of Company as Specified in its Charter)
| MARYLAND | 001-36742 | 46-3755188 | ||
| (State or Other Jurisdiction of Incorporation or Organization) |
(Commission File No.) |
(I.R.S. Employer Identification No.) |
212 West 35th Street, Second Floor, New York, NY 10001
(Address of principal executive offices and zip code)
(212) 356-9500
(Company’s telephone number, including area code)
(Former name or former address, if changed from last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Forward-Looking Statements
Statements in this Current Report on Form 8-K (including the exhibits), including statements regarding Newtek Business Services Corp.’s (“Newtek” or the “Company”) beliefs, expectations, intentions or strategies for the future, may be “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. 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. Newtek undertakes no obligation to update any forward-looking statement to reflect events or circumstances that may arise after the date of this filing.
| Item 2.02. | Results of Operations and Financial Condition. |
On November 14, 2014 Newtek Business Services Corp. issued a press release entitled “Newtek Reports 41.7% Increase in Third Quarter 2014 Diluted Earnings Per Share to $0.34” (the “Press Release”). A copy of the Press Release is furnished as Exhibit 99.1 to this Current Report on Form 8-K. The information in this report shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section, and shall not be incorporated by reference into any registration statement pursuant to the Securities Act of 1933, as amended.
| Item 9.01. | Financial Statements and Exhibits. |
| (d) | Exhibits. |
| Exhibit |
Description | |
| 99.1 | Press Release, dated November 14, 2014, entitled “Newtek Reports 41.7% Increase in Third Quarter 2014 Diluted Earnings Per Share to $0.34.” | |
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| NEWTEK BUSINESS SERVICES CORP. | ||||
| Date: November 14, 2014 | /s/ Barry Sloane | |||
| Barry Sloane | ||||
| Chairman of the Board and Chief Executive Officer | ||||
EXHIBIT INDEX
| Exhibit |
Description | |
| 99.1 | Press Release, dated November 14, 2014, entitled “Newtek Reports 41.7% Increase in Third Quarter 2014 Diluted Earnings Per Share to $0.34.” | |
Exhibit 99.1
FOR IMMEDIATE RELEASE
Newtek Reports 41.7% Increase in Third Quarter 2014 Diluted Earnings Per Share to $0.34
New York, N.Y. - November 14, 2014 - Newtek Business Services Corp. (NASDAQ: NEWT), announced today its financial results for the three and nine months ended September 30, 2014.
As part of the conversion to a business development company (a “BDC”), Newtek Business Services, Inc. (the “Company” or “Newtek”) merged with and into Newtek Business Services Corp. (the “Successor Company”) effective as of November 12, 2014 (the “Effective Date”). The financial results and related disclosures presented herein are for Newtek which ceased its existence as of the Effective Date.
At the Special Meeting of Shareholders held on October 22, 2014, the Company’s shareholders approved a reverse split of the Company’s shares. Following the Special Meeting, the Company’s Board of Directors approved the reverse split ratio of one new share for each five (1:5) of the Company’s current common shares. The reverse stock split was effective as of the close of business on October 22, 2014. All share data has been adjusted to reflect the reverse stock split.
Third Quarter 2014 Consolidated Financial Highlights:
| • | Pretax income was $4.5 million; an increase of 132.0% over $2.0 million in the third quarter of 2013. |
| • | Net income attributable to Newtek Business Services, Inc. was $2.6 million; an increase of 45.3% over $1.8 million in the third quarter of 2013. |
| • | Diluted earnings per share (“EPS”) were $0.34; an increase of 41.7% over diluted EPS of $0.24 in the third quarter of 2013. |
| • | Operating revenue was $38.2 million; an increase of 9.8% over $34.8 million in the third quarter of 2013. |
| • | Adjusted EBITDA was $6.7 million; an increase of 52.3% over $4.4 million in the third quarter of 2013. |
| • | For the nine months ended September 30, 2014, adjusted* diluted EPS were $0.86; an increase of 26.5% over GAAP diluted EPS of $0.68 for the nine months ended September 30, 2013. |
| • | For the nine months ended September 30, 2014, GAAP diluted EPS were $0.71; an increase of 4.4% over GAAP diluted EPS of $0.68 for the nine months ended September 30, 2013. |
Third Quarter 2014 Operational Highlights:
| • | Small business finance segment pretax income was $4.2 million; an increase of 145.6% over $1.7 million in the third quarter of 2013. |
| • | Small business finance segment revenue was $10.9 million; an increase of 44.5% over $7.6 million in the third quarter of 2013. |
| • | The Company originated $48.7 million in loans; an increase of 15.1% over $42.3 million in the third quarter of 2013. |
| • | The Company funded approximately $25.0 million in loans during October 2014; an increase of approximately 47% over $16.9 million in October 2013. |
| • | Small business finance segment closed an additional $23 million in financing with Capital One, N.A., which increases its existing revolving credit facility to $50 million and the Company’s total financing to $70 million through Capital One, N.A. |
| • | Newtek Small Business Finance, Inc. maintained its position as the largest non-bank SBA 7(a) lender by dollar volume of approved loans for the 12-month period ended September 30, 2014, according to data published by the U.S. Small Business Administration. |
| * | GAAP financial results for the nine months ended September 30, 2014 include the impact of a one-time non-cash charge of $1.9 million, which occurred in the second quarter of 2014, related to the extinguishment of the Company’s mezzanine debt with Summit Partners Credit Advisors, L.P. This charge represents the total of remaining deferred financing costs and unamortized debt discount attributable to the early repayment of the Summit debt. The nine-month adjusted results reflect the reversal of the one-time non-cash charge of $1.9 million. The Company believes the use of these adjusted amounts for the nine months ended September 30, 2014 provide a more accurate depiction of the Company’s operating performance and year-over-year comparison with the prior year’s nine-month GAAP results. For a further explanation of these non-GAAP earnings adjustments, see the Reconciliation of GAAP to Adjusted Earnings and the Use of Non-GAAP Financial Measures sections later in this press release. |
Cautionary Statement
2014 Guidance information and statements regarding future intentions contained in this press release are based on management’s current expectations. These statements are forward looking and actual results may differ materially. See “Note Regarding Forward-Looking Statements” below.
Use of Non-GAAP Financial Measures
In evaluating its business, Newtek considers and uses Adjusted EBITDA as a supplemental measure of its operating performance. The Company defines Adjusted EBITDA as earnings before income from tax credits, interest expense, taxes, depreciation and amortization, stock compensation expense, other than temporary decline in value of investments, Capco fair value change and the amortization of the 2011 accrued loss on the lease restructure. The Company also presents Adjusted EBITDA because it believes it is frequently used by securities analysts, investors and other interested parties as a measure of financial performance.
Beginning in the second quarter of 2014, the Company included two new non-GAAP financial measures, Adjusted Pretax Income and Adjusted Diluted EPS, to reflect the Company’s pretax earnings and diluted EPS as adjusted for a non-recurring charge to income related to the refinancing of debt. In the second quarter of 2014, the Company incurred a one-time, non-cash charge to income of $1.9 million which represented the remaining deferred financing costs and debt discount.
The terms Adjusted EBITDA, Adjusted Pretax Income and Adjusted Diluted EPS are 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 EBITDA, Adjusted Pretax Income and Adjusted Diluted EPS have limitations as analytical tools and, when assessing the Company’s operating performance, investors should not consider Adjusted EBITDA, Adjusted Pretax Income and Adjusted Diluted EPS in isolation, or as a substitute for net income (loss) or other consolidated income statement data prepared in accordance with U.S. GAAP. Among other things, Adjusted EBITDA, 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 EBITDA, Adjusted Pretax Income and Adjusted Diluted EPS.
About Newtek Business Services Corp.
Newtek Business Services Corp., The Small Business Authority®, is the Authority for the small- and medium-sized business (SMB) market providing a wide range of business services and financial products under the Newtek® brand. Since 1999, Newtek has provided state-of-the-art, cost-efficient products and services and efficient business strategies to over 100,000 business accounts across all 50 States to help them grow their sales, control their expenses and reduce their risk.
Newtek’s products and services include: The Newtek Advantage™, Electronic Payment Processing, Managed Technology Solutions (Cloud Computing), eCommerce, Business Lending, Insurance Services, Web Services, Data Backup, Storage and Retrieval, Accounts Receivable Financing and Payroll.
The Small Business Authority® is a registered trade mark of Newtek Business Services Corp., and neither are a part of or endorsed by the U.S. Small Business Administration.
Note Regarding Forward Looking Statements
Statements in this press release including statements regarding Newtek’s beliefs, expectations, intentions or strategies for the future, may be “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. 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.
SOURCE: Newtek Business Services Corp.
Investor Relations
Contact: Jayne Cavuoto
Telephone: (212) 273-8179 / jcavuoto@thesba.com
Contact: Brett Maas
Telephone: (646) 536-7331 / brett@haydenir.com
Public Relations
Contact: Simrita Singh
Telephone: (212) 356-9566 / ssingh@thesba.com
NEWTEK BUSINESS SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013
(In Thousands, except for Per Share Data)
| Three Months Ended September 30, |
Nine Months Ended September 30, |
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| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| Operating revenues |
||||||||||||||||
| Electronic payment processing |
$ | 22,777 | $ | 22,176 | $ | 67,467 | $ | 67,299 | ||||||||
| Web hosting and design |
3,739 | 4,394 | 11,840 | 13,312 | ||||||||||||
| Premium income |
5,801 | 4,104 | 15,930 | 13,301 | ||||||||||||
| Interest income |
1,689 | 1,244 | 4,818 | 3,440 | ||||||||||||
| Servicing fee income – NSBF portfolio |
915 | 730 | 2,661 | 2,007 | ||||||||||||
| Servicing fee income – external portfolios |
1,711 | 604 | 5,248 | 2,346 | ||||||||||||
| Income from tax credits |
11 | 31 | 39 | 86 | ||||||||||||
| Insurance commissions |
471 | 433 | 1,272 | 1,347 | ||||||||||||
| Other income |
1,052 | 1,058 | 3,106 | 2,791 | ||||||||||||
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| Total operating revenues |
$ | 38,166 | $ | 34,774 | $ | 112,381 | $ | 105,929 | ||||||||
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| Net change in fair value of: |
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| SBA loans |
(493 | ) | (426 | ) | (1,640 | ) | (1,574 | ) | ||||||||
| Credits in lieu of cash and notes payable in credits in lieu of cash |
(2 | ) | — | (2 | ) | 26 | ||||||||||
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| Total net change in fair value |
(495 | ) | (426 | ) | (1,642 | ) | (1,548 | ) | ||||||||
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| Operating expenses: |
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| Electronic payment processing costs |
19,147 | 18,951 | 57,084 | 56,863 | ||||||||||||
| Salaries and benefits |
6,481 | 5,690 | 19,782 | 18,069 | ||||||||||||
| Interest |
1,330 | 1,478 | 6,555 | 4,162 | ||||||||||||
| Depreciation and amortization |
917 | 831 | 2,668 | 2,454 | ||||||||||||
| Provision for loan losses |
14 | 57 | (52 | ) | 384 | |||||||||||
| Other general and administrative costs |
5,259 | 5,388 | 15,674 | 15,413 | ||||||||||||
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| Total operating expenses |
33,148 | 32,395 | 101,711 | 97,345 | ||||||||||||
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| Income before income taxes |
4,523 | 1,953 | 9,028 | 7,036 | ||||||||||||
| Provision for income taxes |
1,934 | 137 | 3,694 | 2,214 | ||||||||||||
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| Net income |
2,589 | 1,816 | 5,334 | 4,822 | ||||||||||||
| Net income attributable to non-controlling interests |
55 | 4 | 95 | 292 | ||||||||||||
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| Net income attributable to Newtek Business Services, Inc. |
$ | 2,644 | $ | 1,820 | $ | 5,429 | $ | 5,114 | ||||||||
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| Weighted average common shares outstanding - basic |
7,463 | 7,064 | 7,220 | 7,055 | ||||||||||||
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| Weighted average common shares outstanding - diluted |
7,699 | 7,604 | 7,688 | 7,569 | ||||||||||||
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| Earnings per share – basic |
$ | 0.35 | $ | 0.26 | $ | 0.75 | $ | 0.72 | ||||||||
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| Earnings per share – diluted |
$ | 0.34 | $ | 0.24 | $ | 0.71 | $ | 0.68 | ||||||||
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NEWTEK BUSINESS SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS AS OF
SEPTEMBER 30, 2014 AND DECEMBER 31, 2013
(In Thousands, except for Per Share Data)
| September 30, 2014 |
December 31, 2013 |
|||||||
| Unaudited | ||||||||
| ASSETS |
||||||||
| Cash and cash equivalents |
$ | 4,402 | $ | 12,508 | ||||
| Restricted cash |
15,465 | 16,877 | ||||||
| Broker receivable |
10,727 | 13,606 | ||||||
| SBA loans held for investment, net (includes $9,117 and $10,894, respectively, related to securitization trust VIE; net of allowance for loan losses of $1,029 and $1,811, respectively) |
8,944 | 10,689 | ||||||
| SBA loans held for investment, at fair value (includes $76,336 and $74,387, respectively, related to securitization trust VIE) |
102,828 | 78,951 | ||||||
| Accounts receivable (net of allowance of $1,307 and $871, respectively) |
10,776 | 11,602 | ||||||
| SBA loans held for sale, at fair value |
3,426 | 4,734 | ||||||
| Prepaid expenses and other assets, net (includes $1,872 and $2,187, respectively, related to securitization trust VIE) |
14,417 | 18,549 | ||||||
| Servicing asset (net of accumulated amortization and allowances of $9,049 and $7,909, respectively) |
8,295 | 6,776 | ||||||
| Fixed assets (net of accumulated depreciation and amortization of $11,896 and $10,547, respectively) |
3,437 | 3,741 | ||||||
| Intangible assets (net of accumulated amortization of $2,317 and $2,243, respectively) |
1,330 | 1,240 | ||||||
| Credits in lieu of cash |
2,560 | 3,641 | ||||||
| Goodwill |
12,092 | 12,092 | ||||||
| Deferred tax asset, net |
4,487 | 3,606 | ||||||
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| Total assets |
$ | 203,186 | $ | 198,612 | ||||
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| LIABILITIES AND EQUITY |
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| Liabilities: |
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| Accounts payable, accrued expenses and other liabilities |
$ | 17,670 | $ | 14,688 | ||||
| Notes payable |
45,590 | 41,218 | ||||||
| Note payable – securitization trust VIE |
52,319 | 60,140 | ||||||
| Capital lease obligation |
467 | 642 | ||||||
| Deferred revenue |
1,347 | 1,274 | ||||||
| Notes payable in credits in lieu of cash |
2,560 | 3,641 | ||||||
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| Total liabilities |
119,953 | 121,603 | ||||||
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| Commitments and contingencies |
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| Equity: |
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| Newtek Business Services, Inc. shareholders’ equity: |
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| Preferred shares (par value $0.02 per share; authorized 1,000 shares, no shares issued and outstanding) |
— | — | ||||||
| Common shares (par value $0.02 per share; authorized 54,000 shares, 7,551 and 7,383 issued, respectively; 7,489 and 7,077 outstanding, respectively, not including 17 shares held in escrow) |
151 | 148 | ||||||
| Additional paid-in capital |
61,988 | 61,939 | ||||||
| Retained earnings |
19,967 | 14,536 | ||||||
| Treasury shares, at cost (62 and 306 shares, respectively) |
(410 | ) | (1,279 | ) | ||||
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| Total Newtek Business Services, Inc. shareholders’ equity |
81,696 | 75,344 | ||||||
| Non-controlling interests |
1,537 | 1,665 | ||||||
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| Total equity |
83,233 | 77,009 | ||||||
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| Total liabilities and equity |
$ | 203,186 | $ | 198,612 | ||||
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NEWTEK BUSINESS SERVICES, INC. AND SUBSIDIARIES
ADJUSTED EBITDA RECONCILIATION FROM PRETAX INCOME
(In Millions)
| For the Quarter Ended September 30, |
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| 2014 Actual |
2013 Actual |
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| Net income before income taxes |
$ | 4.5 | $ | 2.0 | ||||
| Interest expense |
1.3 | 1.5 | ||||||
| Depreciation and amortization |
0.9 | 0.8 | ||||||
| Stock compensation expense |
0.1 | 0.2 | ||||||
| Amortization of 2011 accrued loss on lease restructure |
(0.1 | ) | (0.1 | ) | ||||
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| Adjusted EBITDA |
$ | 6.7 | $ | 4.4 | ||||
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NEWTEK BUSINESS SERVICES, INC. AND SUBSIDIARIES
RECONCILIATION OF ADJUSTED PRETAX INCOME AND DILUTED EPS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2014
(In Thousands, except for Per Share Data)
| For the three months ended September 30, 2014 |
For the nine months ended September 30, 2014 |
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| Pretax income reconciliation: |
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| GAAP pretax income |
$ | 4,523 | $ | 9,028 | ||||
| Add: Interest expense charge related to repayment of Summit debt |
— | 1,905 | ||||||
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| Adjusted pretax income |
$ | 4,523 | $ | 10,933 | ||||
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| Diluted EPS reconciliation: |
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| Net income attributable to Newtek |
$ | 2,644 | $ | 5,429 | ||||
| Add: Interest expense charge related to repayment of Summit debt |
— | 1,905 | ||||||
| Deduct: Tax effect of interest expense charge related to repayment of Summit debt |
— | (744 | ) | |||||
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| Adjusted net income attributable to Newtek Business Services, Inc. |
$ | 2,644 | $ | 6,590 | ||||
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| Weighted average common shares outstanding – diluted |
7,699 | 7,688 | ||||||
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| Adjusted EPS – diluted |
$ | 0.34 | $ | 0.86 | ||||
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