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
May 4, 2016 (May 4, 2016)
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.
On May 4, 2016, Newtek Business Services Corp. issued a press release entitled “Newtek Business Services Corp. Reports First Quarter 2016 Adjusted Net Investment Income of $0.34 Per Share; Company Raises Full Year 2016 Dividend Forecast to $1.52 Per Share from Previous Forecast of $1.50 Per Share” (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 Number | Description | |
99.1 | Press Release, dated May 4, 2016, entitled “Newtek Business Services Corp. Reports First Quarter 2016 Adjusted Net Investment Income of $0.34 Per Share; Company Raises Full Year 2016 Dividend Forecast to $1.52 Per Share from Previous Forecast of $1.50 Per Share.” | |
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: May 4, 2016 | By: | /S/ BARRY SLOANE |
Barry Sloane | ||
Chairman of the Board and Chief Executive Officer | ||
EXHIBIT INDEX
Exhibit Number | Description | |
99.1 | Press Release, dated May 4, 2016, entitled “Newtek Business Services Corp. Reports First Quarter 2016 Adjusted Net Investment Income of $0.34 Per Share; Company Raises Full Year 2016 Dividend Forecast to $1.52 Per Share from Previous Forecast of $1.50 Per Share.” | |
 | Exhibit 99.1 |
Newtek Business Services Corp. Reports First Quarter 2016 Adjusted Net Investment Income of $0.34 Per Share
Company Raises Full Year 2016 Dividend Forecast to $1.52 Per Share From Previous Forecast of $1.50 Per Share
New York, N.Y. - May 4, 2016 - Newtek Business Services Corp. (“Newtek” or the “Company”), (NASDAQ: NEWT), an internally managed business development company (“BDC”), announced today its financial results for the three months ended March 31, 2016.
First Quarter 2016 Highlights:
• | Adjusted net investment income1 was $4.9 million, or $0.34 per share, compared to $5.2 million, or $0.51 per share, for the three months ended March 31, 2015. |
• | Net asset value (“NAV”) was $203.8 million, or $14.10 per share, at March 31, 2016, compared to NAV of $203.9 million, or $14.06 per share, at December 31, 2015. |
• | Total investment income was $6.8 million; a 43.0% increase over $4.8 million for the three months ended March 31, 2015. |
• | Funded $56.1 million of SBA 7(a) loans in the first quarter of 2016; an increase of 13% over the same period last year. |
• | Reaffirmed loan funding forecast of approximately $320 million in SBA 7(a) and SBA 504 loans (note: SBA 504 loans are originated by one of Newtek’s controlled portfolio companies), which would represent an approximate 32% increase over 2015. |
• | Total investment portfolio was $278.0 million at March 31, 2016, compared to $266.9 million at December 31, 2015. |
•Debt-to-equity ratio was approximately 66.0% at March 31, 2016.
• | Repurchased 70,000 shares of Newtek common stock during the quarter at a weighted average price of $12.37 per share. |
Additional Highlights:
• | Funded $80.1 million of SBA 7(a) loans year to date through April 30, 2016; a 49.0% increase over $53.7 million in loan fundings for the same period last year. |
• | In April 2016, completed a $35 million public offering of 7.00% Notes due 2021. |
• | Increased the size of the offering from $25.0 million in aggregate principal amount to $35.0 million in aggregate principal amount (in each case, excluding any overallotment option). |
• | The Notes trade on the Nasdaq Global Market under the trading symbol “NEWTL.” |
• | On April 11, 2016, the Company opened its new office located in Lake Success, NY, in western Long Island, which is approximately 34,000 square feet and will house employees of Newtek and five of Newtek's controlled portfolio companies. |
• | On April 18, 2016, Mr. Nilesh Joshi commenced his role as Executive Vice President and Chief Information Officer of Newtek Business Services Corp. |
2016 Dividend Payments:
• | Increased 2016 annual cash dividend forecast to approximately $22.0 million, or $1.52(2) per share from the previous forecast of $21.8 million, or $1.50 per share based on management’s improved outlook for 2016. |
• | Paid the first quarter 2016 dividend of approximately $5.1 million, or $0.35(2) per share, on March 31, 2016 to shareholders of record as of March 22, 2016. |
Barry Sloane, Chairman, President and Chief Executive Officer said, “We are off to a great start in 2016, having achieved extremely strong results and witnessing several positive trends in our business. As such, we are pleased to announce an increase in our full year 2016 dividend forecast to $1.52 per share from the previous forecast of $1.50 per share, which we anticipate will approximate 90% to 98% of our full year taxable earnings. We continued to be recognized for our quality brand and distinct business model during the first quarter and year to date through April 30, 2016. For the first quarter of 2016, we realized an uptick in the dollar amount in lending referrals, reaching a record $2.0 billion in loan referrals, an almost 80% percent increase over the lending referrals we received for the same period last year and equivalent to approximately 40% of the total amount of loan referrals we received in all of 2015. In addition, year to date as of April 30, 2016, we funded $80.1 million in SBA 7(a) loans, a 49% increase over the same period last year and have reaffirmed our loan funding forecast of over 30% growth in 2016. In April, we opened a new office in Lake Success, NY, which now will serve as the Company’s primary operating location with five of our controlled portfolio companies in a central location. As such, we believe we are well poised to capture additional market opportunity through a well-organized and well-executed cross-marketing and cross-selling program. Our most recent talented hire, Mr. Nilesh Joshi, Newtek’s Chief Information Officer, will support this program and enhance our datamining capabilities. In addition, we are in the process of repositioning our brand to more accurately reflect the cornerstone and competitive advantage of our business model. We will soon be rolling out our new website and domain - NewtekOne™ - in conjunction with our new slogan, ‘Your Business Solutions CompanyTM, catering to the needs of small- and medium-sized businesses.”
Mr. Sloane continued, “In today’s marketplace it is apparent to us that independent business owners desire technology to reach out to and communicate with business service providers to access products and services on demand without on-premise visits. Our clients are able to accomplish this through the use of our patented proprietary web-based customer referral, tracking and processing software, NewTracker®. We are proud to report that to date we have received over 570,000 business referrals through NewTracker® since its development in 2003. We believe our use of cutting-edge technology coupled with our comprehensive line of products and services will lend us a competitive advantage for many years to come. We believe we will continue to be known as the leading acquirer and business service provider for small- and medium-sized businesses in the U.S. across many services from one brand.”
Mr. Sloane concluded, “The capital markets continued to be appreciative of our business model evidenced by the overwhelming investor demand we experienced in our recently completed bond offering. As a result, we upsized our bond deal by approximately 40% to $35 million in aggregate principal amount. Currently, we believe we have sufficient capital available to invest in and further grow our business. In fact, we have four specific investments in the pipeline within our business services footprint, two for which we have signed letters of intent and that we anticipate will be completed in the next three to six months, and two additional investment targets. With the market opportunity of 27 million small- and medium-sized businesses in the U.S., which we believe are underserved, we look forward to continuing to solidify our position as being the one choice for the products and services that will enable these businesses to grow and compete effectively in today’s marketplace.”
Investor Conference Call and Webcast
A conference call to discuss the first quarter 2016 results will be hosted by Barry Sloane, Chairman, President and Chief Executive Officer, and Jennifer Eddelson, Executive Vice President and Chief Accounting Officer, tomorrow, Thursday, May 5, 2015 at 8:30 a.m. ET. The live conference call can be accessed by dialing (877) 303-6993 or (760) 666-3611.
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 - Newtek Business Services Corp. and Subsidiaries:
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 (losses) recognized from the sale of guaranteed portions of SBA 7(a) loan investments.
The term Adjusted net investment income is not defined under U.S. generally accepted accounting principles, or U.S. GAAP, and is not a measure of operating income, operating performance or liquidity presented in accordance with U.S. GAAP. Adjusted net investment income has limitations as an analytical tool and, when assessing the Company’s operating performance, investors should not consider Adjusted net investment income 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 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 net investment income.
1Adjusted net investment income (loss) = Net investment income (loss) + Net realized gains recognized from the sale of guaranteed portions of SBA 7(a) loans.
2Amount and timing of dividends, if any, remain subject to the discretion of the Company’s Board of Directors. 2016 dividend forecast based on shares outstanding at March 31, 2016.
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% to 98% 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 Business Services Corp.
Newtek Business Services Corp., Your Business Solutions CompanyTM, is an internally managed BDC, which along with its controlled portfolio companies, provides a wide range of business services and financial products under the Newtek® brand to the small- and medium-sized business (“SMB”) market. Since 1999, Newtek has provided state-of-the-art, cost-efficient products and services and efficient business strategies to over 100,000 SMB accounts across all 50 states to help them grow their sales, control their expenses and reduce their risk.
Newtek’s and its portfolio companies’ products and services include: Business Lending, Electronic Payment Processing, Managed Technology Solutions (Cloud Computing), eCommerce, Accounts Receivable Financing & Inventory, The Secure Gateway, The Newtek Advantage™, Insurance Services, Web Services, Data Backup, Storage and Retrieval and Payroll.
Newtek® and NewTracker® are registered trade marks of Newtek Business Services Corp.
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 Securities and Exchange Commission and available through http://www.sec.gov/. Newtek cautions you that forward-looking statements are not guarantees of future performance and that actual results or developments may differ materially from those projected or implied in these statements.
SOURCE: Newtek Business Services Corp.
Investor Relations & Public Relations
Contact: Jayne Cavuoto
Telephone: (212) 273-8179 / jcavuoto@thesba.com
NEWTEK BUSINESS SERVICES CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES (In Thousands, except for Per Share Data) | |||||||
March 31, 2016 | December 31, 2015 | ||||||
ASSETS | (Unaudited) | ||||||
Investments, at fair value | |||||||
SBA unguaranteed non-affiliate investments (cost of $176,227 and $166,752, respectively; includes $142,997 and $146,463, respectively, related to securitization trusts) | $ | 166,786 | $ | 158,355 | |||
SBA guaranteed non-affiliate investments (cost of $2,259 and $2,069, respectively) | 2,536 | 2,284 | |||||
Controlled investments (cost of $34,481 and $35,781, respectively) | 107,201 | 104,376 | |||||
Non-control/non-affiliate investments (cost of $1,486 and $1,847, respectively) | 1,446 | 1,824 | |||||
Investments in money market funds (cost of $35 and $35, respectively) | 35 | 35 | |||||
Total investments at fair value | 278,004 | 266,874 | |||||
Cash and cash equivalents | 3,614 | 4,308 | |||||
Restricted cash | 18,971 | 22,869 | |||||
Broker receivable | 23,256 | 32,083 | |||||
Due from related parties | 2,819 | 3,056 | |||||
Servicing assets, at fair value | 13,644 | 13,042 | |||||
Credits in lieu of cash, at fair value | 646 | 860 | |||||
Other assets | 9,312 | 9,338 | |||||
Total assets | $ | 350,266 | $ | 352,430 | |||
LIABILITIES AND NET ASSETS | |||||||
Liabilities: | |||||||
Bank notes payable | $ | 32,329 | $ | 29,100 | |||
Notes due 2022 | 7,745 | 7,770 | |||||
Notes payable - Securitization trusts (net of $2,355 and $2,501 of debt issuance costs related to securitization trusts, respectively) | 83,531 | 89,244 | |||||
Dividends payable | — | 5,802 | |||||
Notes payable - related parties | 10,817 | 5,647 | |||||
Due to related parties | 552 | 256 | |||||
Notes payable in credits in lieu of cash, at fair value | 646 | 860 | |||||
Deferred tax liability | 2,465 | 857 | |||||
Accounts payable, accrued expenses and other liabilities | 8,419 | 8,945 | |||||
Total liabilities | 146,504 | 148,481 | |||||
Commitments and contingencies | |||||||
Net Assets: | |||||||
Preferred stock (par value $0.02 per share; authorized 1,000 shares, no shares issued and outstanding) | — | — | |||||
Common stock (par value $0.02 per share; authorized 200,000 shares, 14,452 and 14,509 issued and outstanding, respectively) | 289 | 290 | |||||
Additional paid-in capital | 188,311 | 189,031 | |||||
Undistributed net investment income | 3,056 | 4,437 | |||||
Net unrealized appreciation, net of deferred taxes | 8,761 | 8,062 | |||||
Net realized gains | 3,345 | 2,129 | |||||
Total net assets | 203,762 | 203,949 | |||||
Total liabilities and net assets | $ | 350,266 | $ | 352,430 | |||
Net asset value per common share | $ | 14.10 | $ | 14.06 | |||
NEWTEK BUSINESS SERVICES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In Thousands, except for Per Share Data)
Three Months Ended March 31, 2016 | Three Months Ended March 31, 2015 | ||||||
Investment income: | |||||||
From non-affiliate investments: | |||||||
Interest income | $ | 2,451 | $ | 2,125 | |||
Servicing income | 1,371 | 1,043 | |||||
Other income | 597 | 395 | |||||
Total investment income from non-affiliate investments | 4,419 | 3,563 | |||||
From controlled investments: | |||||||
Interest income | 82 | 88 | |||||
Dividend income | 2,293 | 1,087 | |||||
Other income | — | 12 | |||||
Total investment income from controlled investments | 2,375 | 1,187 | |||||
Total investment income | 6,794 | 4,750 | |||||
Expenses: | |||||||
Salaries and benefits | 3,344 | 3,023 | |||||
Interest | 1,488 | 1,356 | |||||
Depreciation and amortization | 40 | 85 | |||||
Other general and administrative costs | 3,302 | 2,762 | |||||
Total expenses | 8,174 | 7,226 | |||||
Net investment loss | (1,380 | ) | (2,476 | ) | |||
Net realized and unrealized gains (losses): | |||||||
Net realized gain on non-affiliate investments | 6,286 | 7,699 | |||||
Net unrealized appreciation (depreciation) on SBA guaranteed non-affiliate investments | 62 | (1,698 | ) | ||||
Net unrealized depreciation on SBA unguaranteed non-affiliate investments | (1,027 | ) | (666 | ) | |||
Net unrealized appreciation on controlled investments | 3,690 | 7,500 | |||||
Provision for deferred taxes on unrealized appreciation on controlled investments | (1,608 | ) | — | ||||
Net unrealized depreciation on non-control/non-affiliate investments | (16 | ) | — | ||||
Net unrealized depreciation on servicing assets | (403 | ) | (356 | ) | |||
Net realized and unrealized gains | 6,984 | 12,479 | |||||
Net increase in net assets | $ | 5,604 | $ | 10,003 | |||
Net increase in net assets per share | $ | 0.39 | $ | 0.98 | |||
Net investment loss per share | $ | (0.10 | ) | $ | (0.24 | ) | |
Dividends and distributions declared per common share | $ | 0.35 | $ | 0.39 | |||
Weighted average shares outstanding | 14,509 | 10,206 | |||||
NEWTEK BUSINESS SERVICES CORP. AND SUBSIDIARIES
ADJUSTED NET INVESTMENT INCOME RECONCILIATION:
Adjusted net investment income reconciliation (in thousands, except per share amounts) | Three months ended March 31, 2016 | Per share | Three months ended March 31, 2015 | Per share | ||||||||||
Net investment loss | $ | (1,380 | ) | $ | (0.10 | ) | $ | (2,476 | ) | $ | (0.24 | ) | ||
Net realized gain on non-affiliate debt investments | 6,276 | 0.43 | 7,699 | 0.75 | ||||||||||
Adjusted net investment income | $ | 4,896 | $ | 0.34 | $ | 5,223 | $ | 0.51 | ||||||
Note: Amounts may not foot due to rounding | ||||||||||||||