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
August 3, 2015 (July 30, 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 7.01 | Regulation FD Disclosure. |
Newtek Business Services Corp. (the “Company”) held a conference call on July 30, 2015 to discuss the matters set forth in the press release entitled “Newtek Business Services Corp. Reports Second Quarter 2015 Financial Results; Second Quarter Adjusted Net Investment Income of $0.49 Per Share” (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 July 29, 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 July 30, 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: August 3, 2015 | /s/ Barry Sloane | |
| Barry Sloane | ||
| Chairman of the Board and Chief Executive Officer | ||
EXHIBIT INDEX
| Exhibit |
Description | |
| 99.1 | Investor Presentation for Conference Call on July 30, 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 Second Quarter 2015 Financial Results Conference Call July 30, 2015 8:30 am ET Exhibit 99.1 |
 www.thesba.com
1 Note Regarding Forward Looking Statements This presentation contains certain forward-looking statements. Words such as “believes,”
“expects,” “plans,” “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/ |
 www.thesba.com
2 Second Quarter Financial Highlights Second full quarter reporting as a BDC Net asset value (“NAV”) equaled $169.6 million, or $16.62 per share, at June 30, 2015, compared with NAV of
$169.6 million, or $16.61 per share, at March 31, 2015
– Increase of 1.9% from NAV of $166.4 million, or $16.31 per share, at December 31, 2014
Adjusted net investment income*
was $5.0 million, or $0.49 per share
For the six months ended June 30, 2015 Adjusted net investment income* was
$10.3 million, or $1.01 per share Total investment income was $5.6
million Newtek Small Business Finance, LLC restructured its $50.0
million revolving line of credit with Capital One, N.A., to
remove the guarantees of the Company’s portfolio companies and extended
the term by one year Newtek Small Business Finance,
LLC, signed a lease for approximately 34,000 square feet of office space in Lake Success, New York (Long Island), which will commence in early 2016 – Anticipate that moving portfolio companies into one location will facilitate cross selling
Revised loan funding forecast to between $230 million and $270 million of SBA
7(a) loans in 2015, which represents an approximate 24% increase
over 2014 *See Slide 25 for definition of Adjusted net investment
income |
 www.thesba.com
3 Portfolio and Investment Company Highlights Goldman Sachs – In June 2015, Newtek Merchant Solutions and Newtek Technology Solutions, two of The Company's wholly
owned portfolio companies, closed a $38.0 million four-year multi-draw
term loan with Goldman Sachs Premier Payments LLC
– In July 2015, Newtek Business Services Corp. acquired Premier Payments LLC, one of the Country’s leading
electronic payment processors with double-digit revenue and EBITDA
year-over-year percentage growth, as a new wholly owned
portfolio company, for approximately $16.5 million in cash and restricted newly issued shares of Newtek Common Stock Electronic Payment Processing – Q2 2015 revenue was $25.5 million; an increase of 10% over $23.2 million in Q2 2014
– Q2 2015 adjusted EBITDA was $2.5 million; an increase of 10% over $2.2 million in Q2 2014
Newtek Business Credit
– Anticipate securing $50.0 million warehouse line of credit *See Slide 25 for definition of Adjusted net investment income |
 www.thesba.com
4 Acquisition of Portfolio Company – Premier Payments LLC *Includes processing volume from both Newtek Merchant Solutions and Premier Payments LLC
**Year-over-year revenue and EBITDA growth are unaudited pro forma
estimations Acquired Premier Payments LLC on July 23,
2015 Total purchase price was approximately $16.5 million, of
which $14.0 million was paid in cash and the remainder was paid
in $2.5 million newly issued restricted shares of Newtek Common Stock Premier Payments LLC is one of the Country’s leading electronic payment processors, which powers billions of
dollars of credit card and debit card transactions on an annual
basis Anticipate this acquisition will expand The Company’s
presence in the merchant processing space, and is expected to be
accretive to earnings beginning in Q3 2015 Anticipate $5.5 billion
in electronic payment processing volume* by end of 2015 The
following is the estimated** year-over-year Revenue and EBITDA growth of Premier Payments LLC $ in millions Q1 2014 Q1 2015 % Increase Revenue 1.292 $
1.670
$
29.3% EBITDA 0.421 $
0.670
$
59.0% Q2 2014 Q2 2015 % Increase Revenue 1.493 $
1.817
$
21.8% EBITDA 0.500 $
0.760
$
51.9% |
 www.thesba.com
5 Dividend Distributions On July 15, 2015, paid second quarterly dividend of $0.47 per share in cash
Paid a total of $0.86 in cash dividends to date in 2015, which represents
approximately 85% of the adjusted net investment income of $1.01
per share for the six months ended June 30, 2015 Maintain 2015
annual cash dividend forecast of approximately $1.82* per share
Based on final earnings and profits analysis through 2014, management has
revised its forecast and anticipates paying a one-time
special dividend of $3.29* per share by the end of 2015
– It is expected that between 24% and 27% of the special dividend will be paid in cash, with the balance paid in
newly issued shares of Newtek Common Stock
The special dividend will be reported to shareholders as a qualified
dividend * Amount and timing of dividends, if any, remain subject
to the discretion of the Company’s board of directors. Amounts based on current share count of approximately 10.3 million. |
 www.thesba.com
6 Newtek Small Business Finance Currently the largest non-bank institution licensed by the U.S. Small Business Administration (SBA) under the
federal Section 7(a) loan program based on annual origination volume (national
PLP status) One of 14 Non-Bank SBA Government-Guaranteed
Lender Licenses (these licenses are presently no longer being
issued) 9 th largest SBA 7(a) lender including banks (1) ROI in SBA 7(a) lending in excess of 30% National SBA 7(a) lender to small business since 2003; 12-year history of loan default frequency and severity
statistics Issued 5 S&P Rated AA & A Securitizations since 2010 Small balance, industry and geographically diversified portfolio of 853 loans
– Average loan size is $173K of average Newtek uninsured retained loan balance
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
(1) As of March 31, 2015 |
 www.thesba.com
7 Comparable Company Statistics Live Oak Bancshares, Inc. (NASDAQ: LOB)
– Online platform for small business lending – $551 million market capitalization – Raised $81.6 million in IPO on 7/23/15 – Transaction priced at 4.8x tangible book value 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
8 Current SBA 7(a) Loan Pipeline Loans in pipeline totaled approximately $491.5 million at June 30, 2015 Expect to fund between $230 million and $270 million of SBA 7 (a) loans in 2015, which represents an approximate
24% increase over 2014
SBA 7(a) Loan Pipeline at June
30, 2015 Prequalified Loans $40,921,692 Loans In Underwriting $40,599,318 Approved Pending Closing $29,490,400 Open Referrals $366,053,580 Total Loan Pipeline $491,451,916 |
 www.thesba.com
9 SBA 7(a) 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 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 Realized Gains 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 Net Cash Created in SBA 7(a) Loan Sale Transaction – An Example |
 www.thesba.com
10 SBA 7(a) 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 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 Realized Gain $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 Direct Revenue / Expense of an SBA 7(a) Loan Sale Transaction – An Example |
 www.thesba.com
11 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 114.87 112.44 18.82 112.73 111.37 116.35 113.18 Q2 2015 114.91 112.46 17.13 113.45 111.73 117.19 113.59 YTD 2015 114.89 112.45 17.98 113.10 111.55 116.71 113.30 *The above prices are solely indicative of where our SBA government-guaranteed participation certificates have historically been
bought and sold in the secondary market. Other factors include loan seasoning, loan size, weighted average maturity and collateral securing the loan.
|
 www.thesba.com
12 Gain-on-Sale Premium Trend Loan Sale Premium Income Trend $ in millions 2010 2011 2012 2013 2014 1 half 2015 $2,428 $12,468 $12,367 $19,456 $19,493 $15,438* *Net realized gain on non-affiliate investments. st |
 www.thesba.com
13 Comparative Loan Portfolio Data 12/31/2010 vs. 06/30/2015 Since 2010, the credit quality and diversification of the loan portfolio has steadily improved
Loan Characteristic
As of 12/31/10 As of 06/30/15 Business Type: Existing Business 53.9% 77.6% Business Acquisition 25.9% 16.5% Start-Ups 20.2% 6.0% Primary Collateral: Commercial RE 45.3% 56.9% Machinery & Equipment 22.8% 19.1% Residential RE 22.3% 9.9% Other 9.6% 7.0% Percentage First Lien on RE: Commercial RE 84.8% 95.2% Residential RE 9.9% 21.1% Loan Characteristic As of 12/31/10 Loan Characteristic As of 06/30/15 Industry: Restaurant 10.6% Restaurant 8.9% Hotels & Motels 7.6% Amusement & Recreation 6.8% State Concentration: Florida 21.6% Florida 12.3% New York 12.7% New York 11.0% Georgia 14.1% Pennsylvania 6.3% Other: Total Portfolio at Cost ($mm) $31 $150 Avg. Balance ($mm) $0.076 $0.173 Wtd. Avg. Mean FICO 675 703 Wtd. Avg. Current LTV 78.2% 79.9% |
 www.thesba.com
14 SBA 504 Loans: A New Focus for Newtek Provide financing for major fixed assets such as equipment or real estate
Loans cannot be used for working capital or purchasing inventory (allowed uses
under the 7(a) program) The CDC/504 Loan Program is a
long-term financing tool that provides growing businesses with fixed-rate financing to acquire assets such as land, buildings, and sizeable purchases of equipment
Loan-to-value (“LTV”) ratio for the borrower of 90%;
borrowers contribute 10% equity Newtek has exposure on only 50%
of the LTV U.S. Government has exposure on 40% of the
LTV Newtek will sell the senior loan participation at an
anticipated 3-5 point premium SBA 504 loans give borrowers a
fixed-rate alternative Newtek services the senior
loan |
 www.thesba.com
15 Sample SBA 504 Loan Structure An example of a typical SBA 504 loan structure is detailed below Real Estate Acquisition Loan $ Amount $ Amount Percent of Total Purchase Price $800,000 1st Mortgage Originated by Newtek $500,000 50% Renovations $150,000 Bridge Loan Originally Funded by Newtek* $400,000 40% Soft & Closing Costs $50,000 Borrower Equity Injection $100,000 10% Total $1,000,000 Total $1,000,000 100% Up to 50% first mortgage Up to 40% second mortgage provided by Certified Development Company ($250,000 to $4.0 million)
At least 10% equity contribution
*Taken out by Certified Development Company (“CDC”) funded second
mortgage of $400,00 within 60-90 days of Newtek’s funding |
 www.thesba.com
16 Loan Sale Transaction- SBA 504 Loan Key Variables in Loan Sale Transaction Total Projected Financing $2,000,000 Senior Loan Balance $1,000,000 Junior Bridge Loan Balance (1) $800,000 Borrower Equity $200,000 Premium (2) 3.20% Rate Fixed Term 25 Years Net Cash Created Pretax Total Senior & Junior Debt $1,800,000 Funded Under Bank Facility $1,620,000 Newtek Equity $180,000 Net Premium Earned (3) $32,000 Net Interest Earned Before Sale (4) $44,000 Interest Expense ($20,475) Origination Fees $14,000 Servicing Fee Income (5) $2,500 Total $1,872,025 Net Cash Created (6) $72,025 Return on Investment (Gross Operating Profit/ Equity) (7) 40% (1) Initially funded by Newtek to be taken out in 90 days by a junior lender through SBA guaranteed debentures (2) Assumes 4.00% gross premium with 20% paid to referral source
(3)
Assumes 3.20% net premium paid on Senior Loan Balance (4) Assumes Senior and Junior Bridge loans are outstanding for six months and three months, respectively (5) Servicing fee generated over six months
(6)
Net cash created per $1.0 million of loan originations. Net cash created
equals the addition of Net Premium Earned, Net Interest Earned Before Sale, Origination Fees, Servicing Fee Income less Interest Expense (7) The first year return on investment is based on net cash created of $72,025 divided by Newtek equity of $180,000. The holding
period for the loan is actually 6 months but the return is based on the full year Net Cash Created in SBA 504 Loan Sale Transaction – An Example |
 www.thesba.com
17 Portfolio Company – Newtek Merchant Solutions (1) Estimates via Bloomberg *See page 25 for definition of Adjusted EBITDA. Publicly Traded Comparable Companies Name (Symbol) Enterprise Value / 2015E EBITDA (1) Heartland Payment Systems (HPY) 9.10x Vantiv, Inc. (VNTV) 10.24x Enterprise Valuation & Financial Performance Valued at 5.3x EBITDA Valued at $50 million Electronic payment processing business, which we have wholly owned and managed for 10+ years
Over 13,000 business accounts; realized over $4.6 billion in electronic payment
processing volume in 2014
Q2 2015 Revenue
of $25.5 million; an increase of 10% over $23.2 million in Q2
2014 Q2 2015 Adjusted EBITDA of $2.5 million; an increase of 10%
over $2.3 million in Q2 2014 2015 Forecast
Revenue: $99.9 million
Adjusted EBITDA:
$9.5 million |
 www.thesba.com
18 Portfolio Company - Newtek Technology Solutions (1) Estimates via Bloomberg. *See page 25 for definition of Adjusted EBITDA. Managed technology & cloud computing business, which we have wholly owned and managed for 10+ years
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 and 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; additional cloud offerings in the pipeline
Restructured IO data center lease, which we anticipate will allow us to save between $200K - $250K per year – Acquired additional space in the U.K., New Jersey and Phoenix, Arizona Q2 2015 Revenue of $3.6 million; a decrease of 14.3% over $4.2 million in Q2 2014
Q2 2015 Adjusted EBITDA of $0.8 million; a decrease of 38.5% over $1.3 million
in Q2 2014 Publicly Traded Comparable Companies
Name (Symbol) Enterprise Value / 2015E EBITDA (1) Endurance (EIGI) 12.07x Rackspace Holdings, Inc. (RAX) 7.12x Enterprise Valuation & Financial Performance Valued at 1.4x revenue Valued at $21 million 2015 Forecast Revenue: $14.8 million Adjusted EBITDA: $3.3 million |
 www.thesba.com
19 Internally Managed vs. Externally Managed BDCs Newtek is an internally managed BDC, and is currently trading at 1.15x* NAV
The following Internally managed BDC public comparables currently trade at a
median price to NAV of approximately 1.20x**
– Hercules Technology Growth Capital (NASDAQ: HTGC) – KCAP Financial (NASDAQ: KCAP) – Main Street Capital (NASDAQ: MAIN) – Triangle Capital (NASDAQ: TCAP) * As of July 27, closing price of $19.17 **As of July 27, 2015. Internally Managed BDCs Externally Managed BDCs No base or incentive fees paid to an external manager Pay expense fees and incentive to a management company Generally a greater percent of revenue becomes dividend income for the shareholder Not required to provide shareholders with compensation information Lower operating expense ratios than externally managed Higher operating expense ratios than internally managed BDCs Typically trade at a premium to NAV/share Typically trade at a discount to NAV/share |
 www.thesba.com
20 Investment Summary NAV of $16.62 per share at June 30, 2015; a 1.9% increase over NAV per share at December 31, 2014
Company is better suited for investors as a BDC vs. an operating company Forecasted dividends – Expect to pay an annual cash dividend of approximately $1.82* in 2015 – Anticipate paying special dividend of $3.29* per share by the end of 2015, of which between 24% and 27% is presently
expected to be paid in cash, with the balance paid in newly issued shares of
Newtek Common Stock Investing in an 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 Proven
Track Record; Established in 1998; publically traded since September 2000 Management’s interests aligned with Shareholders CEO is a major shareholder; Founders, Management and Board combined own approximately 20% of outstanding
shares (1) No derivative securities in BDC No 2 nd lien or mezzanine financing as a business line No direct lending exposure to oil and gas industry (1) As of July 29, 2015 *Amounts based on the Company’s current outstanding shares of approximately 10.3 million |
 www.thesba.com
Financial Review –
Jennifer C. Eddelson, Chief Accounting Officer
|
 www.thesba.com
22 Consolidated Statement of Operations Newtek Business Services Corp. and Subsidiaries Three Months Ended June 30, 2015 Investment income: From non-controlled/non-affiliate investments Interest income 2,231 $
Servicing income
1,068 Other income 464 Total investment income from non-controlled/non-affiliate investments
3,763 From controlled/affiliate investments Interest income 56 Dividend income 1,787 Other income — Total investment income from controlled/affiliate investments 1,843 Total investment income 5,606 Expenses: Salaries and benefits 3,133 Interest 1,728 Depreciation and amortization 85 Other general and administrative costs 2,955 Total expenses 7,901 Net investment loss (2,295) Net realized and unrealized gains (losses): Net realized gain on non-affiliate investments 7,340 Net unrealized depreciation on SBA guaranteed non-affiliate investments
(1,464) Net unrealized depreciation on SBA unguaranteed non-affiliate
investments (470) Net unrealized appreciation on affiliate investments 2,019 Net unrealized loss on servicing assets (256) Net unrealized appreciation on credits in lieu of cash and notes payable
in credits in lieu of
cash 2
Net realized and unrealized gains
7,171 Net increase in net assets resulting from operations 4,876 $
Net investment loss per
share (0.22)
$
Net increase in net assets per share 0.48 $
Weighted average shares
outstanding 10,206
(n thousands) |
 www.thesba.com
23 Change in Net Asset Value (1) Adjusted Net investment income is defined as Net investment income plus Net realized gains.
(in thousands, except per share data)
NAV NAV/Share NAV % Change NAV at December 31, 2014 166,418 $
16.31 $
Net investment income (loss)
(4,771) (0.47) -2.9% 15,039 1.47 9.0% (4,298) (0.42) -2.6% 9,519 0.93 5.7% (612) (0.06) -0.4% Net unrealized appreciation on credits in lieu of cash and notes payable in credits in lieu of cash 2 0.00 0.0% Net increase in net assets from operations 14,879 1.46 8.9% Dividends declared (8,787) (0.86) -5.3% Net increase in net assets after dividend 6,092 0.60 3.7% NAV after dividend 172,510 16.90 Opening balance adjustment to Deferred tax asset (2,870) (0.28) -1.7% Adjustment to 2014 offering costs 17 0.00 -0.4% Consolidation of Texas Whitestone Group and CCC Real Estate (33) (0.00) -0.2% NAV at June 30, 2015 169,624 $
16.62 $
1.9% Total common shares outstanding: 10,206 Adjusted Net investment income 1 10,268 $
Adjusted Net investment income
1 per share 1.01 $
NAV per share
16.62 $
As of June 30, 2015
Newtek Business Services Corp. and Subsidiaries
Net realized gains - non-affiliate investments Net unrealized
losses - non-affiliate investments Net unrealized loss - Servicing asset Net unrealized gain/loss - Controlled portfolio companies
|
 www.thesba.com
24 Adjusted Net Investment Income Reconciliation For the three months ended March 31, 2015 Per share For the three months ended June Per share For the six months ended June 30, Per share Net investment loss (2,476) $
(0.24)
$
(2,295)
$
(0.22) $ (4,771) $
(0.47)
$
Net realized gain on non-affiliate
investments 7,699
0.75
7,340
0.72
15,039
1.47
Adjusted net investment income
5,223
$
0.51 $ 5,045 $
0.49
$
10,268
$
1.01 $ Adjusted Net Investment Income (ANII) In thousands, except per share data |
 www.thesba.com
25 Non-GAAP Financial Measures In evaluating its business, Newtek considers and uses adjusted net investment income as a measure of its operating
performance. Adjusted net investment income includes short-term
capital gains from the sale of the guaranteed portions of SBA
7(a) loans, which is a reoccurring event. The Company defines Adjusted net investment income (loss) as Net investment income (loss) plus Net realized gains. The Company defines Adjusted EBITDA as earnings before, interest expense, taxes, depreciation and amortization,
corporate overhead allocation and stock compensation expense. Newtek uses Adjusted EBITDA as a supplemental measure to review and assess the operating performance of its portfolio companies. The Company also presents the Adjusted EBITDA of its portfolio companies because it believes it is frequently used by securities analysts, investors
and other interested parties as a measure of financial
performance. The terms Adjusted net investment income and Adjusted
EBITDA, are not defined under U.S. generally accepted accounting
principles, or U.S. GAAP, and are not a measure of operating income, operating performance or liquidity presented in accordance with U.S. GAAP. Adjusted net investment income and Adjusted EBITDA, have limitations as analytical tools and, when assessing the Company’s operating performance, and that of its portfolio companies,
investors should not consider Adjusted net investment income and Adjusted
EBITDA in isolation, or as a substitute for net investment income
(loss), or other consolidated income statement data prepared in accordance with U.S. GAAP. Among other things, Adjusted net investment income and Adjusted EBITDA do not reflect the Company’s, or
its portfolio companies, 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 net investment income and Adjusted EBITDA. |
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26 Adjusted EBITDA Reconciliation For the three months ended June 30, 2015 For the three months ended June 30, 2014 (in millions) Pretax income 0.35 $
0.92
$
Interest expense
0.01 0.01
Depreciation and
amortization 0.32
0.33 Stock compensation expense
- (0.00)
Corporate overhead
allocation 0.13
- Adjusted EBITDA
0.81 $
1.26
$
Managed Technology Solutions
For the three
months ended June 30, 2015 For the three months ended June 30, 2014 (in millions) Pretax income 2.17 $
2.16
$
Interest expense
0.02 -
Depreciation and
amortization 0.07
0.06 Stock compensation expense
- 0.07
Corporate overhead
allocation 0.20
- Adjusted EBITDA
2.46 $
2.29
$
Electronic Payment Processing
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