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
March 27, 2015 (March 26, 2015)
Date of Report (date of Earliest Event Reported)
NEWTEK BUSINESS SERVICES CORP.
(Exact Name of Company as Specified in its Charter)
| MARYLAND | 814-01035 | 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. 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. |
Newtek Business Services Corp. (the “Company”) held a conference call on March 26, 2015 to discuss the matters set forth in the press release entitled “Newtek Business Services Corp. Reports Full Year 2014 Financial Results; Newtek to Discuss Financial Results and Conversion to a BDC on Today’s Conference Call” (the “Press Release”), a copy of which was furnished as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 26, 2015 and is incorporated by reference herein. In conjunction with the call, the Company distributed an investor presentation, a copy of which is furnished as Exhibit 99.1 to this Current Report on Form 8-K. The presentation is also available on the Company’s investor relations website at http://investor.newtekbusinessservices.com.
The information contained in this Current Report, including the Press Release and Exhibit 99.1 attached hereto, 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 | Investor Presentation for Conference Call on March 26, 2015. | |
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: March 27, 2015 | /s/ Barry Sloane | |||
| Barry Sloane | ||||
| Chairman of the Board and Chief Executive Officer | ||||
EXHIBIT INDEX
| Exhibit Number |
Description | |
| 99.1 | Investor Presentation for Conference Call on March 26, 2015. | |
 www.thesba.com
Newtek Business Services Corp.
“The Small Business Authority®”
NASDAQ: NEWT
Hosted by:
Barry Sloane, President & CEO Jennifer
Eddelson, EVP & CAO Investor Relations
Public Relations
Newtek Investor Relations
Newtek Public Relations
Jayne Cavuoto
Director of Investor Relations
jcavuoto@thesba.com
(212) 273-8179
Simrita Singh
Director of Marketing
ssingh@thesba.com
(212) 356-9566
Full Year 2014
Financial Results Conference Call
March 26, 2015 4:15pm ET |
 www.thesba.com
1
Safe Harbor Statement
Statements in this presentation including statements regarding Newtek's beliefs, expectations,
intentions or strategies for the future, and discussion of our financial condition and
results of operations, is intended to assist in the understanding and assessment of
significant changes and trends related to the results of operations and financial
position of the Company together with its subsidiaries, and may be
"forward-looking statements".
This discussion and analysis should be read in conjunction with
the consolidated financial statements and
the accompanying notes which will be contained in the Company’s
Form 10-K for the year ended December 31, 2014.
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/ |
 www.thesba.com
2
Company Highlights
Conversion to a BDC on November 12, 2014
NEWT closing price 3/25/2014: $19.64
Market capitalization at 3/25/2014: $200.3 million
Dividend declared
Since conversion, institutional ownership increased by over 40% from September 30,
2014 to December 31, 2014
Lower cost of capital
Management hopeful to be able to grow NAV, dividend and business
enterprise
11/12/2014
3/25/2015
NEWT Close
$12.65
$19.64
Market Capitalization
$129.0 million
$200.3 million |
 www.thesba.com
3
BDC Conversion –
Financial Comparison Note
On
November
12,
2014,
Newtek
Business
Services
Inc.
successfully
completed
its
conversion
from
an
operating
company
to
an
internally
managed
BDC
and
merged
with
and
into
Newtek
Business
Services
Corp.
(the
“Company”).
As
a
result
of
this
conversion,
the
Company
is
reporting
GAAP
financial
results
as
an
operating
company
from
January
1,
2014
through
November
11,
2014,
and
GAAP
financial
results
as
a
BDC
from
November
12,
2014
through
December
31,
2014.
Due
to
the
conversion,
and
the
required
adoption
of
new
accounting
methodologies
under
the
BDC
structure,
there
are
no
prior-
period
results
to
allow
for
a
year-over-year
comparison
of
the
Company’s
financial
results. |
 www.thesba.com
4
BDC Conversion
October
22,
2014:
NEWT
effected
a
1
for
5
reverse
stock
split
and
all
share
data
has
been
adjusted
to
reflect
the
reverse
stock
split;
closing
stock
price
as
of
03/25/15:
$19.64
November
12,
2014:
successfully
completed
conversion
from
an
operating
company
to
an
internally
managed
BDC
and
merged
with
and
into
Newtek
Business
Services
Corp.
Internally
managed
BDC
with
no
base
or
incentive
fees
paid
to
an
external
manager
Predominantly
wholly
own
and
manage
portfolio
companies,
which
provide
recurring
revenue
that
is
not
traditionally
credit
sensitive
November
18,
2014:
closed
equity
offering
of
2.53
million
shares
(100%
primary
shares
plus
underwriter
option)
of
common
stock
at
public
offering
price
of
$12.50
per
share
and
received
total
gross
proceeds
of
$31.625
million
January
1,
2015:
Elected
to
be
treated,
and
intend
to
qualify
annually
thereafter,
as
a
regulated
investment
company
(“RIC”).
As
a
RIC,
the
Company
generally
will
not
be
required,
for
federal
tax
purposes,
to
pay
corporate-
level
U.S.
federal
income
taxes
on
any
income
that
is
distributed
to
stockholders
January
31,
2015:
Added
to
the
Wells
Fargo
Business
Development
Company
Index
(Symbol:
WFBDC)
*As of March 23, 2015. Based on the following public comparable companies: HTGC, KCAP, MAIN,
TCAP –
Internally managed BDC public comparables currently trade at a median price to NAV of
approximately 1.4x* –
Plan to use proceeds to expand financing activities and primarily increase activity in SBA
7(a) lending, as well as make direct investments in portfolio
companies –
Joint
Book-Runners:
JMP
Securities
LLC,
Ladenburg
Thalmann;
Co-Manager:
Lebenthal
&
Co.,
LLC |
 www.thesba.com
5
BDC Conversion –
Unlocking Shareholder Value
Net Asset Value (“NAV”) of $16.31 per share at December 31, 2014; higher than
previously announced June 30, 2014 pro forma NAV of $15.50 per share
Currently forecasting annual cash dividend of $1.81 in 2015, subject to Board approval
Expect significant loan funding and balance sheet growth in 2015
Significant uptick in dollar-based trading volume of NEWT; increased liquidity and market
capitalization –
Dollar-based
average
daily
trading
volume
increased
from
$161K
for
September
2014
to
$2.2
million
thus
far
for
March 2015
Increased recognition from investment community
–
Considerably greater institutional ownership
–
Initiation of additional research coverage by JMP Securities, LLC; hopeful for additional
research coverage –
Added to the Wells Fargo Business Development Company Index (Symbol: WFBDC)
Access to lower cost debt and equity capital
Our new-found ability to acquire and finance portfolio companies within our known market
segments will enhance shareholder value
Institutional ownership of approximately 35%
Founders, Board, senior management and institutional ownership combined is 50% at a
minimum .
. |
 www.thesba.com
6
CapitalOne, N.A., Bank Line
Restructured $50 million CapitalOne, N.A., bank line of credit (subject to approval by the
Small Business Administration)
–
Holding-company only guarantee
–
Ability to distribute dividend
Prior line of credit collateralized by:
–
Newtek Merchant Solutions
–
Newtek Managed Technology Solutions
–
Newtek Insurance Agency
–
Newtek Payroll Solutions
All assets under Newtek Business Services Corp.
All other assets will now be available to re-lever up, subject to $9 million of other
Capital One, N.A., bank line debt |
 www.thesba.com
7
Net Asset Value
NAV of $16.31 per share at December 31, 2014
–
An increase from previously reported June 30, 2014 pro forma NAV of $15.50 per share
–
An increase of approximately 50% over book value at December 31, 2013 of $10.88 per
share –
Over 2x the book value at December 31, 2010 of $7.79 per share
$7.79
$8.28
$9.79
$10.88
$16.31
$0.00
$3.00
$6.00
$9.00
$12.00
$15.00
$18.00
2010
2011
2012
1013
2014
Growth of Book Value/NAV
Newtek Business Services Corp.
Book Value/NAV |
 www.thesba.com
8
Dividend Highlights
March 19, 2015, declared first cash dividend of $0.39 per share;
$0.01 higher than previously announced
–
Q1 2015 dividend payable on April 13, 2015 to shareholders of record on March 30, 2015
Currently forecast paying an annual cash dividend of approximately $1.81 in 2015, subject to
Board approval
In connection with the BDC conversion, Newtek will declare and pay a one-time special
dividend during 2015
–
Special dividend will distribute prior C-corp earnings and profits
–
Newtek’s Board of Directors will take into consideration the timing, amount and
composition of this distribution once the Company has filed its 2014 tax returns
–
Special
dividend
anticipated
to
be
treated
as
a
“Qualified
Dividend”
for
tax
purposes |
 www.thesba.com
9
Financial Highlights -
Newtek Small Business Finance (“NSBF”)
For the full year ended December 31, 2014, originated $202.3 million of loans; an increase of
approximately 13.7% over December 31, 2013
Originated $65.2 million in loans in Q4 2014; an increase of 12.4% over $58.0 million in Q4
2013 Originated a record $30.3 million in loans during December 2014
Expect to originate $53.0 million of loans in Q1 2015; an increase of approximately 16% over
Q1 2014 Expect to originate between $240 million and $280 million of loans in 2015,
which represents an approximate 29% increase over 2014
December 2014: completed 5
th
and largest securitization of $31.7 million of S&P A-rated unguaranteed SBA 7(a)
loan-backed notes
Anticipate total loan servicing portfolio, through NSBF and Small Business Lending (a wholly
owned portfolio company), to exceed approximately $1.1 billion over the next 30 days
based on confirmation of an anticipated transfer of an existing portfolio during Q1
2015 Estimate significant loan funding and balance sheet growth in 2015, in conjunction
with the conversion to a BDC and recent capital raise |
 www.thesba.com
10
Net
asset
value
(“NAV”):
$16.31
per
share
at
December
31,
2014
–
Above the Company's previously reported June 30, 2014 pro forma NAV of $15.50 per share
–
An
increase
of
approximately
50%
over
book
value
at
December
31,
2013
of
$10.88
per
share
Adjusted Net Investment Income (Loss)
–
Adjusted
Net
Investment
Income
(Loss)
=
Net
Investment
Income
(Loss)
+
Net
Realized
Gain
on
Investments
–
For
the
period
of
November
12,
2014
through
December
31,
2014:
Adjusted
Net
Investment
Loss
of
$1.9
million,
or
$0.25
per
share,
which
includes
net
realized
gain
on
investments
of
$595,000
Note:
In
December
2014,
the
Company
decided
to
hold
approximately
$30
million
in
loans
that
were
originated in December
If
these
loans
were
sold
in
2014,
they
would
have
generated
approximately
$3.3
million
of
premium
income,
which
would
have
positively
impacted
adjusted
net
investment
income
o
With
the
addition
of
$3.3
million
of
premium
income,
Adjusted
Net
Investment
Income
would
have
been
$1.3
million,
or
0.18
per
share
Valuation Metrics
.
.
. |
 www.thesba.com
11
NEWT has outperformed the S&P 500 and NASDAQ Composite Indices over the 5-year period
from December 31, 2009 through December 31, 2014
NEWT:
–
December 31, 2014 closing price: $14.76
–
March 25, 2015 closing price: $19.64
NEWT Historical Stock Performance Comparison
Newtek Business Services Corp. Indexed Price Performance
12/31/2009-12/31/2014
Prices indexed to 100 |
 www.thesba.com
12
Gain-on-Sale Premium Trend
In December 2014, Company decided to hold approximately $30 million in loans originated in
December 2014 If these loans were sold in 2014, they would have generated approximately
$3.3 million of additional premium income, and the premium income for the full year of
2014 would have been approximately $22.8 million vs. the reported $19.5 million
For the 12-month period ended December 31, 2014, sale prices on guaranteed loan sale
averaged 112.49%, net to the Company
Loan Sale Premium Income Trend
$ in millions
2010
2011
2012
2013
2014
$2,428
$12,468
$12,367
$19,456
$19,493
.
.
. |
 www.thesba.com
13
Guaranteed Loan Pricing Comparison
All Loans
10-Year Term Loans
25-Year Term Loans
Qtr
Weighted
Average Sale
Price
Weighted
Average Net
Price to NSBF
Weighted
Average Loan
Term (Yrs)
Weighted
Average Sale
Price
Weighted
Average Net
Price to NSBF
Weighted
Average Sale
Price
Weighted
Average Net
Price to NSBF
Q1 2014
114.49
112.24
15.95
112.19
111.10
118.49
114.25
Q2 2014
115.15
112.57
18.60
112.47
111.23
117.33
113.66
Q3 2014
116.37
113.19
22.32
113.66
111.83
116.89
113.45
Q4 2014
113.62
111.73
17.87
111.40
110.54
115.62
112.81
YTD 2014
115.01
112.49
18.79
112.25
111.09
117.05
113.53
All Loans
10-Year Term Loans
25-Year Term Loans
Qtr
Weighted
Average Sale
Price
Weighted
Average Net
Price to NSBF
Weighted
Average Loan
Term (Yrs)
Weighted
Average Sale
Price
Weighted
Average Net
Price to NSBF
Weighted
Average Sale
Price
Weighted
Average Net
Price to NSBF
Q1 2015
114.78
112.39
18.70
112.91
111.45
116.11
113.05
YTD 2015
114.78
112.39
18.70
112.91
111.45
116.11
113.05 |
 www.thesba.com
14
Current Loan Pipeline
Current Loan Pipeline
Prequalified Loans
$32,975,192
Loans In Underwriting
$39,625,149
Approved Pending Closing
$43,434,400
Open Referrals
$203,938,380
Total Loan Pipeline
$319,973,129 |
 www.thesba.com
15
Lower Cost of Debt and Equity Capital
Improved terms on warehouse lines of credit
–
CapitalOne, N.A. $50 million line of credit to finance SBA 7(a) business
–
Releases significant amount of other collateral in the form of portfolio companies on a
go-forward basis Subject to approval by the Small Business Administration
Refinanced mezzanine debt with Summit Partners Credit Advisors, L.P.
–
Capital One N.A. $10 million term loan used to refinance $10 million of mezzanine debt, which
reduced cash interest expense on an annual basis by more than $1.0 million, or 1000
basis points, for a total of approximately $4.2 million over the remaining term of the
retired mezzanine debt Receiving higher yield and advance rates in securitization
transactions –
Completed 5
th
and largest securitization of $31.7 million of S&P A-rated unguaranteed SBA 7(a)
loan-backed notes in December 2014
–
Received more favorable terms than in past securitizations
Received a 3.0% improvement on the advance rate and 40 basis point improvement in the quality
spread since the Company's December 2013 securitization
.
. |
 www.thesba.com
16
Newtek Small Business Finance
One of 14 Non-Bank SBA Government-Guaranteed Lender Licenses (these licenses are no
longer being issued) Small
balance,
industry
and
geographically
diversified
portfolio
of
768
loans
–
Average loan size is $171K of average Newtek uninsured retained loan balance
Typical $1 million loan is:
–
75% ($750,000) Full Faith and Credit Government Guaranteed Loan Participation
Liquid market netting a 113% premium to par
–
25% ($250,000) Uninsured but not subordinate to government participations
Currently financing at 3.75% through securitization
Floating
rate
at
Prime
plus
2.75%
with
no
caps;
equivalent
to
6%
cost
to
borrower
No origination fees with 7-
to 25-year amortization schedules and are receiving high-quality loan product
Secondary market established for SBA 7(a) government-guaranteed lending for over 61 years
and Newtek establishes liquidity for uninsured portions through securitizations
After
securitization
of
uninsured
portion
and
sale
of
government
insured
portion,
principal
in
the
loan
is
returned
.
. |
 www.thesba.com
17
Loan Sale Transaction
(1)
Premiums above 10% split 50/50 with SBA. This example assumes guaranteed balance is sold at
15%. The additional 5% (15%-10%) is split with SBA. Newtek nets 12.5% (2)
Assumes 12.5% of the Guaranteed balance
(3)
Assumes 71% advance rate in securitization on unguaranteed balance
(4)
Assuming the loan is sold in a securitization in 12 months
(5)
Net cash created pre-tax per $1 million of loan originations
Net
Cash
Created
in
Loan
Sale
Transaction
–
An
Example
Key Variables in Loan Sale Transaction
Loan Amount
$1,000,000
Guaranteed Balance (75%)
$750,000
Unguaranteed Balance (25%)
$250,000
Premium
(1)
12.5%
Term
25 years
Net Cash Created Pretax
Guaranteed Balance
$750,000
Premium Received on Guaranteed Balance
(2)
$93,750
Cash Received in Securitization
(3)
$177,500
Total
$1,021,250
Net Cash Created Pre-Tax (Post
Securitization)
(4,5)
$21,250 |
 www.thesba.com
18
Loan Sale Transaction
(1)
Premiums above 10% split 50/50 with SBA. This example assumes guaranteed balance is sold at
15%. The additional 5% (15%-10%) is split with SBA. Newtek nets 12.5% (2)
Assumes 12.5% of the Guaranteed balance
(3)
Value determined by GAAP servicing value; a present value of future servicing income
(4)
Net risk-adjusted profit recognized per $1 million of loan originations
(5)
Uninsured piece gets immediately written down at origination to reflect cumulative estimate of
default frequency and severity Direct
Revenue
/
Expense
of
a
Loan
Sale
Transaction
–
An
Example
Key Variables in Loan Sale Transaction
Loan Amount
$1,000,000
Guaranteed Balance (75%)
$750,000
Unguaranteed Balance (25%)
$250,000
Premium
(1)
12.5%
Term
25 years
Resulting Revenue (Expense)
Associated Premium
(2)
$93,750
Servicing Asset
(3)
$18,630
Total Premium Income
$112,380
Packaging Fee Income
$2,500
FV Non-Cash Discount on Uninsured Loan
Participations
$(12,500)
Referral Fees Paid to Alliance Partners
$(7,500)
Total Direct Expenses
$(20,000)
Net Risk-Adjusted Profit Recognized
(4,5)
$94,880 |
 www.thesba.com
19
Comparative Loan Portfolio Data
12/31/2010 vs. 12/31/2014
Since 2010, the credit quality and diversification of the loan portfolio has steadily
improved Loan Characteristic
As of
12/31/10
As of
12/31/14
Business Type:
Existing Business
53.9%
79.9%
Business Acquisition
25.9%
13.7%
Start-Ups
20.2%
6.4%
Primary Collateral:
Commercial RE
45.3%
58.6%
Machinery &
Equipment
22.8%
19.4%
Residential RE
22.3%
10.4%
Other
9.6%
6.5%
Percentage First Lien on RE:
Commercial RE
84.8%
96.1%
Residential RE
9.9%
18.7%
Loan Characteristic
As of
12/31/10
Loan Characteristic
As of
12/31/14
Industry:
Restaurant
10.6%
Restaurant
8.3%
Hotels & Motels
7.6%
Amusement &
Recreation
7.2%
State Concentration:
Florida
21.6%
New York
12.2%
New York
12.7%
Florida
11.0%
Georgia
14.1%
Connecticut
7.6%
Other:
Total Portfolio ($mm)
$31
$132
Avg. Balance ($mm)
$0.076
$0.172
Wtd. Avg. Mean FICO
675
703
Wtd. Avg. Current LTV
78.2%
72.7% |
 www.thesba.com
20
Expanding Senior Management Team
Michael W. Campbell
Chief Credit Officer & Chief Risk
Officer, Newtek Merchant
Solutions
Over 20 years’
experience in merchant bankcard operations with expertise in credit and risk management
Brings extensive and diversified experience in areas of merchant
operations, bankcard credit, risk
management, card scheme rules, policy, fraud, regulatory, data security and portfolio
management Most recently, Mr. Campbell was the Vice President and Head of Risk for
Charge Payment Merchant Services where he managed all phases of the operation with
direct management of all credit, risk, policy, regulatory and operational
matters Prior to that, he was a senior risk consultant at The Strawhacker Group where
he was the business leader for all acquiring and issuing risk projects providing
guidance to investors, issuers and acquirers with respect to portfolio quality and
best practices for credit, risk, policy, regulatory, excessive chargebacks, PCI and
EMV matters Mr. Campbell spent 5 years as the Head of Credit US, eCommece and Merchant
PCI at RBS Worldpay where he reported to the CEO in areas of credit, Merchant PCI,
sponsorship bank relationship and internal security
Mr. Campbell spent over 10 years at Chase Paymentech Solutions as Vice President of National
and Credit Partner Risk where he established a department to manage credit and risk
for CPS’ national portfolio and
ISO partner programs while playing a key role in the integration
of the Chase Merchant Services and
Paymentech’s credit cultures
He also was Head of Credit for Chase Merchant Services where his
primary role was to ensure credit
functions provided by FDC were effectively administered on behalf of Chase Merchant
Services Earlier in his career, for over 5 years, he was a Vice President
and Risk Manager for Barnett Merchant
Services Corporation where he was a member of Barnett’s Merchant senior management team
responsible for all areas of risk
Mr. Campbell is a member of Visa and MasterCard Advisor Committees, Merchant Acquirer’s
Committee (MAC), Fraud Advisory Committee (ETA) and the International Association of
Financial Crimes Investigator Mr. Campbell is a graduate of the University of South
Carolina Mr. Campbell is a US Army Veteran
Mr. Campbell will be based in the Company’s West Allis, Wisconsin office
|
 www.thesba.com
21
Expanding Senior Management Team
John Raven
Chief Operating Officer,
Managed Technology Solutions
Over 20 years’
experience in information technology space
Brings a broad array of expertise in areas of cloud technology, information technology and,
security and data center and storage solutions as well as sales and marketing, and
product development Mr. Raven is an operations executive offering deep expertise
and proven performance in leading,
developing, managing and delivering complex solutions in support
of a company’s objectives
Most recently, Mr. Raven offered Chief Technology Officer and Chief Operating Officer
consulting services to Looksmart, LTD. and Clickable
Prior to that, he served as a Chief Technology Officer and Chief
Operating Officer consultant for IBM
Global Services and its elite IBM Export Blue Team where he provided information technology
architect services
Prior to that, Mr. Raven was the President, Chief Technology Officer and Chief Operating
Officer for YP.com & LiveDeal, Inc., where he analyzed priority strategic
challenges, delivered concepts and recommendations for course of action to CEO and
Board Throughout his career he has held various senior positions at technology
companies including Perot Systems, Read-Rite Corporation, Southern Texas PCS
(T-Mobile) and Viacom, Inc. Mr. Raven is a graduate of the California Institute of
Technology with a B.S. in Computer Science Mr. Raven spent 12 active years and 10
reserve years with the United States Army, serving as a soldier and combat veteran in
the Infantry and Special Operations Mr. Raven worked for NASA Jet Propulsion Laboratory
for 3 years as a System and Network Engineer for the 1996 Mission to Mars, Mars
Pathfinder He is an ISC
2
Certified Information Systems Security Professional (C.I.S.S.P)
and Project Management
Institute Project Management Professional (P.M.P)
Has experience with Hypervisor platforms, SQL database environments, network and telecom
environments, datacenter operations, information security systems, storage systems,
compliance standards, leadership and management methodologies, Internet search
systems, Internet marketing, carrier operations and manufacturing systems
Mr. Raven will be based in the Company’s Phoenix, Arizona office
|
 www.thesba.com
22
Portfolio Company -
Electronic Payment Processing
(1)
Estimates via Bloomberg.
Publicly Traded Comparable Companies
Name (Symbol)
Enterprise Value /
2015E EBITDA
(1)
Heartland Payment Systems (HPY)
9.10x
Vantiv, Inc. (VNTV)
10.24x
Valuation & Financial Performance
Valued at 4.75x EBITDA
Valued at $45.5 million
We have wholly owned and managed this business for over 10 years
We are a registered Independent Sales Organization (ISO) with Visa and MasterCard
We are the “State-of-the-Art Merchant Processor”
Point of sale (POS) in the Cloud, Gateway and Switch, CyberScan
15,000 business accounts; realized over $4.6 billion in electronic payment processing volume
in 2014 Entered into new partnership with SEQR, by Seamless (OMX: SEAM) which, according
to Seamless, is one of the world’s largest suppliers of payment systems for mobile
phones Growth and acquisition story
One-of-a-kind eCommerce capability
Secured mobile wallet
Appointed Mr. Michael Campbell as Chief Credit Officer and Chief
Risk Officer of Newtek Merchant
Solutions |
 www.thesba.com
23
Portfolio Company -
Managed Technology Solutions
(1)
Estimates via Bloomberg.
(2)
According
to
Gartner
"...in
the
next
five
years
enterprises
will
spend
$921
billion
on
public
cloud
services
(2013-2017)."
Excerpt
from
Gartner
Presentation:
Cloud
Computing
2014:
ready
for
real
business?
Darryl
Carlton,
October
2013
(3)
"The
use
of
cloud
computing
is
growing,
and
by
2016
this
growth
will
increase
to
become
the
bulk
of
new
IT
spend."
Excerpt
from
Gartner
Press
Release,
Oct.
24,
2013;
We have wholly owned and managed this business for over 10 years
We host and manage SMBs computer hardware, software and their technology solutions in our
Level-4, 5,000 square foot data center in Phoenix, Arizona
Over 106,000 business accounts manage solutions of hardware and software for business clients;
manage over 77,000 domain names
This segment is being transformed to take advantage of shift to cloud-based business
trends including: eCommerce, Payroll and Insurance
According to Gartner
2,3
, cloud computing is expected to have a very promising future and experience significant
growth; enterprises will spend $921 billion on public cloud services over the
five-year period (2013-2017) Implementing cost-reduction measures and new
product introductions as part of repositioning strategy Several changes with MTS senior
management team Appointed Mr. John Raven as Chief Operating Officer of MTS
Publicly Traded Comparable Companies
Name (Symbol)
Enterprise Value /
2015E EBITDA
(1)
Endurance (EIGI)
12.07x
Rackspace Holdings, Inc. (RAX)
7.12x
Valuation & Financial Performance
Valued at 3.75x EBITDA
Valued at $21.5 million
http://www.gartner.com/newsroom/id/2613015 |
 www.thesba.com
24
Internally Managed BDC Public Comparables
Newtek currently trading at 1.20x* NAV
Internally managed BDC public comparables currently trade at a median price to NAV of
approximately 1.4x** –
Hercules Technology Growth Capital (NASDAQ: HTGC)
–
KCAP Financial (NASDAQ: KCAP)
–
Main Street Capital (NASDAQ: MAIN)
–
Triangle Capital (NASDAQ: TCAP)
* As of March 25, 2015 closing price ox $19.64
**As of March 23, 2015. Based on the following public comparable companies: HTGC, KCAP,
MAIN, TCAP |
 www.thesba.com
25
Comparable Company Statistics
On Deck Capital (NYSE: ONDK)
–
Operates an online platform for small business lending
–
Raised $200 million in IPO on 12/17/14
–
$1.3 billion market valuation
Lending Club (NYSE: LC)
–
Operates as an online marketplace that facilitates loans to consumers and businesses in the
U.S. –
Raised over $1.0 billion in IPO 12/11/14
–
$8.9 billion market valuation
BankUnited, Inc. (NYSE: BKU)
–
Acquired Certus’
Small Business Finance Unit in an asset purchase transaction
–
Certus’
loan
portfolio
totaled
approximately
$203
million
as
of
January
31,
2015
–
Purchase
price
for
the
transaction
will
be
a
$20
million
premium
to
the
tangible
NAV |
 www.thesba.com
26
Investment Summary
NAV of $16.31 per share at December 31, 2014; higher than the previously announced June 30,
2014 pro forma NAV of $15.50 per share
–
December 31, 2014 NAV over 2x the book value at December 31, 2010 of $7.79 per share
Company is better suited for investors as BDC vs. a C-corp
Forecasted dividends
–
March
19,
2015:
declared
first
cash
dividend
of
$0.39
per
share;
forecast
paying
an
annual
cash
dividend
of
approximately
$1.81
in
2015
–
Newtek will declare and pay a one-time special dividend during 2015
Investing in an operating business without excessive leverage offers attractive returns
without excessive risk Portfolio companies wholly owned and managed, most for over 10
years, by Newtek Business Services Corp. Newtek Business Services Corp. is an
internally managed BDC No derivative securities in BDC
2
nd
lien or mezzanine financing as a business line
Zero direct lending exposure to oil and gas industry
* As of March 25, 2015 closing price ox $19.64
**As of March 23, 2015. Based on the following public comparable companies: HTGC, KCAP,
MAIN, TCAP –
Internally managed BDC public comparables currently trade at a median price to NAV of
approximately 1.4x** |
 www.thesba.com
27
Additional Investment Highlights
(1)
As of December 31, 2014
(2)
As of March 24, 2014.
(3)
As of March 23, 2015. Based on the following public comparable companies: HTGC, KCAP, MAIN,
TCAP Largest Non-Bank
SBA Lender in U.S.
Currently the largest non-bank institution U.S. Small Business Administration (SBA)
licensed lender under the federal Section 7(a) loan program based on annual
origination volume (national PLP status) 9
th
largest SBA 7(a) lender including banks
(1)
ROI in SBA 7(a) lending in excess of 30%
Secondary market established for SBA 7(a) government-guaranteed lending for over 61 years
and Newtek establishes liquidity for uninsured portions through securitizations
All SBA 7(a) loans are floating rate, indexed to Prime and have no caps
Proven
Track Record
Established in 1998; publically traded since September 2000
National SBA 7(a) lender to small business since 2003; 11-year history of loan default
frequency and severity statistics Issued 5 S&P Rated AA & A Securitizations
since 2010 Highly Experienced
Management Team
Management’s interests aligned with shareholders
Attractive
Dividend
Declared initial Q1 2015 dividend of $0.39 / share
Forecast paying an annual cash dividend of approximately $1.81 in 2015, subject to Board
approval Newtek will declare and pay a one-time special dividend during 2015
Internally
Managed
NEWT is internally managed with no base or incentive fees paid to an external manager
Internally
managed
BDC
public
comparables
currently
trade
at
a
median
price
to
NAV
of
approximately
1.4x
(3)
Portfolio
Companies
Wholly
own
and
have
managed
portfolio
companies,
most
for
over
10
years
–
CEO
alone
owns
approximately
10%
of
outstanding
shares
(2)
–
Founders,
Management
and
Board
combined
own
approximately
20%
of
outstanding
shares
(2) |
 www.thesba.com
Financial Review –
Jennifer C. Eddelson, Chief Accounting Officer |
 www.thesba.com
29
GAAP Financial Results
At December 31, 2014:
–
Net
Asset
Value
(“NAV”)
was
$166.4
million,
or
$16.31
per
share
higher
than
previously
announced
–
Investment portfolio of $233.5 million
–
Total liquidity of $30.8 million
–
Asset coverage for borrowed amounts was 222.9%
For the period of November 12, 2014 through December 31, 2014:
–
Total Investment Income was $2.0 million
–
Net investment loss was $2.5 million, or $0.33 per share
For the period from January 1, 2014 through November 11, 2014, diluted earnings per share for
Newtek Business Services, Inc. were $0.45 |