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Newtek Business Services Corp. Reports Full Year 2017 Financial Results
Full Year 2017 Financial Highlights
- Net asset value (“NAV”) of
$278.3 million , or$15.08 per share, atDecember 31, 2017 ; an increase of 5.5% over NAV of$14.30 per share atDecember 31, 2016 . - Net investment loss of
$(7.9) million , or$(0.45) per share, for the twelve months endedDecember 31, 2017 , an improvement of 29.7% on a per share basis, over a net investment loss of$(9.3) million , or$(0.64) per share, for the twelve months endedDecember 31, 2016 . - Adjusted net investment income (“ANII”)1 of
$30.8 million , or$1.77 per share, for the twelve months endedDecember 31, 2017 ; an increase of 10.6% on a per share basis compared to ANII of$23.2 million , or$1.60 per share, for the twelve months endedDecember 31, 2016 . - Debt-to-equity ratio of 78.0% at
December 31, 2017 . - Total investment portfolio increased by 32.3% to
$456.7 million atDecember 31, 2017 , from$345.2 million atDecember 31, 2016 . - Total investment income of
$38.9 million for the twelve months endedDecember 31, 2017 ; an increase of 25.7% over total investment income of$31.0 million for the twelve months endedDecember 31, 2016 . - Newtek closed on its eighth and largest small business loan securitization, with the sale of
$75.4 million of Unguaranteed SBA 7(a) Loan-Backed Notes, Series 2017-1.
SBA Loan Highlights
Newtek Small Business Finance, LLC (“NSBF”) funded$385.9 million of SBA 7(a) loans during the twelve months endedDecember 31, 2017 ; an increase of 24.8% compared to$309.1 million of SBA 7(a) loans funded for the twelve months endedDecember 31, 2016 .- NSBF forecasts full year 2018 SBA 7(a) loan fundings of between
$465 million and $485 million , which would represent an approximate 23% increase, at the midpoint of the range, over SBA 7(a) loan fundings for the twelve months endedDecember 31, 2017 . - Newtek Business Credit Solutions (“NBC”), a controlled portfolio company, closed
$21.8 million and funded$18.0 million of SBA 504 loans for the twelve months endedDecember 31, 2017 . NBC forecasts full year 2018 SBA 504 loan closings of between$75 million and $100 million .
2017 Dividend Payments & 2018 Dividend Payments and Forecast
- The Company paid cash dividends totaling
$1.64 per share during 2017, an increase of 7.2% over 2016 cash dividends of$1.53 per share. - The Company forecasts paying an annual cash dividend of
$1.70 2 per share in 2018, a 3.7% increase over the 2017 cash dividend of$1.64 per share. January 18, 2018 : Newtek’s Board of Directors declared a first quarter 2018 cash dividend of$0.40 per share, payable onMarch 30, 2018 to shareholders of record as ofMarch 20, 2018 .
First Quarter 2018 Note Offering
- In
February 2018 , the Company closed an underwritten public offering of$57.5 million in aggregate principal amount of its 6.25% Notes Due 2023.- The Company and the unsecured Notes have been assigned a rating of “A-” from
Egan-Jones Ratings Co. and trade on theNasdaq Global Market under the trading symbol “NEWTI.”
- The Company and the unsecured Notes have been assigned a rating of “A-” from
Mr. Sloane continued, “We are pleased to highlight that approximately 33.6% of our 2017 quarterly cash dividends qualified for preferential tax treatment. This is a direct function of our business model where, historically, certain of our controlled portfolio companies have provided a reoccurring stream of income which is taxed before being paid to the Company. Furthermore, for the past three years as a BDC, our annual dividend payout has exceeded our initial annual dividend forecast. Currently we are forecasting paying an annual cash dividend of
Mr. Sloane concluded, “We ended 2017 with a debt-to-equity ratio of 78%, and intend to continue to focus on delivering strong financial results without the use of excessive leverage or investments in risky debt instruments frequently utilized across the BDC sector. We look forward to discussing our financial results in greater detail and our outlook for 2018 during our conference call tomorrow morning,
Investor Conference Call and Webcast
A conference call to discuss fourth quarter and full year 2017 results will be hosted by
In addition, a live audio webcast of the call with the corresponding presentation will be available in the ‘Events & Presentations’ section of the Investor Relations portion of Newtek’s website at http://investor.newtekbusinessservices.com/events-and-presentations. 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.
1Use of Non-GAAP Financial Measures -
In evaluating its business, Newtek considers and uses ANII as a measure of its operating performance. ANII includes short-term capital gains from the sale of the guaranteed portions of SBA 7(a) loans, and beginning in 2016, capital gain distributions from controlled portfolio companies, which are reoccurring events. The Company defines ANII as Net investment income (loss) plus Net realized gains recognized from the sale of guaranteed portions of SBA 7(a) loan investments, less realized losses on non-affiliate investments, plus or minus loss on lease adjustment, plus the net realized gains on controlled investments, plus or minus the change in fair value of contingent consideration liabilities, plus stock-based compensation expense (added back in third quarter of 2016 only and is not included prospectively as it is anticipated to be a reoccurring expense).
The term ANII 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. ANII has limitations as an analytical tool and, when assessing the Company’s operating performance, investors should not consider ANII in isolation, or as a substitute for net investment income, or other consolidated income statement data prepared in accordance with U.S. GAAP. Among other things, ANII 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 ANII.
2Note Regarding Dividend Payments
Amount and timing of dividends, if any, remain subject to the discretion of the Company’s Board of Directors. The Company's Board of Directors expects to maintain a dividend policy with the objective of making quarterly distributions in an amount that approximates 90 - 100% 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.
3Newtek’s Historical Stock Returns
Total returns as per
About
Newtek’s and its portfolio companies’ products and services include: Business Lending, SBA Lending Solutions, Electronic Payment Processing,
Note Regarding Forward Looking Statements
This press release contains certain forward-looking statements. Words such as “believes,” “intends,” “expects,” “projects,” “anticipates,” “forecasts,” “goal” 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
SOURCE:
Investor Relations & Public Relations
Contact:
Telephone: (212) 273-8179 / jcavuoto@newtekone.com
NEWTEK BUSINESS SERVICES CORP. AND SUBSIDIARIES | |||||||
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES | |||||||
(In Thousands, except for Per Share Data) | |||||||
December 31, | |||||||
2017 | 2016 | ||||||
ASSETS | |||||||
Investments, at fair value | |||||||
SBA unguaranteed non-affiliate investments (cost of $287,690 and $219,784, respectively; includes $265,174 and $197,927, respectively, related to securitization trusts) | $ | 278,034 | $ | 211,471 | |||
SBA guaranteed non-affiliate investments (cost of $22,841 and $10,262, respectively) | 25,490 | 11,512 | |||||
Controlled investments (cost of $59,898 and $41,001, respectively) | 153,156 | 121,302 | |||||
Non-control/non-affiliate investments (cost of $0 and $904, respectively) | — | 904 | |||||
Investments in money market funds (cost of $9 and $35, respectively) | 9 | 35 | |||||
Total investments at fair value | 456,689 | 345,224 | |||||
Cash | 2,464 | 2,051 | |||||
Restricted cash | 18,074 | 20,845 | |||||
Broker receivable | 8,539 | 2,402 | |||||
Due from related parties | 2,255 | 3,748 | |||||
Servicing assets, at fair value | 19,359 | 16,246 | |||||
Other assets | 12,231 | 10,934 | |||||
Total assets | $ | 519,611 | $ | 401,450 | |||
LIABILITIES AND NET ASSETS | |||||||
Liabilities: | |||||||
Bank notes payable | $ | — | $ | 5,100 | |||
Notes due 2022 | 7,936 | 7,853 | |||||
Notes due 2021 | 39,114 | 38,767 | |||||
Notes payable - Securitization trusts | 162,201 | 118,122 | |||||
Notes payable - related parties | 7,001 | 1,400 | |||||
Due to related parties | — | 1,227 | |||||
Deferred tax liabilities | 8,164 | 5,983 | |||||
Accounts payable, accrued expenses and other liabilities | 16,866 | 13,904 | |||||
Total liabilities | 241,282 | 192,356 | |||||
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, 18,457 and 14,624 issued and outstanding, respectively | 369 | 293 | |||||
Additional paid-in capital | 247,363 | 188,472 | |||||
Undistributed net investment income | 14,792 | 8,092 | |||||
Net unrealized appreciation, net of deferred taxes | 20,448 | 13,008 | |||||
Net realized losses | (4,643 | ) | (771 | ) | |||
Total net assets | 278,329 | 209,094 | |||||
Total liabilities and net assets | $ | 519,611 | $ | 401,450 | |||
Net asset value per common share | $ | 15.08 | $ | 14.30 | |||
NEWTEK BUSINESS SERVICES CORP. AND SUBSIDIARIES | |||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||
(In Thousands, except for Per Share Data) | |||||||||||
Year ended December 31, 2017 | Year ended December 31, 2016 | Year ended December 31, 2015 | |||||||||
Investment income | |||||||||||
From non-affiliate investments: | |||||||||||
Interest income | $ | 18,018 | $ | 11,158 | $ | 8,924 | |||||
Servicing income | 7,206 | 6,160 | 4,611 | ||||||||
Other income | 3,236 | 2,714 | 1,929 | ||||||||
Total investment income from non-affiliate investments | 28,460 | 20,032 | 15,464 | ||||||||
From controlled investments: | |||||||||||
Interest income | 653 | 360 | 277 | ||||||||
Dividend income | 9,747 | 10,573 | 10,218 | ||||||||
Other income | 54 | — | 111 | ||||||||
Total investment income from controlled investments | 10,454 | 10,933 | 10,606 | ||||||||
Total investment income | 38,914 | 30,965 | 26,070 | ||||||||
Expenses: | |||||||||||
Salaries and benefits | 19,292 | 15,234 | 12,753 | ||||||||
Interest | 11,397 | 8,440 | 6,479 | ||||||||
Depreciation and amortization | 402 | 296 | 326 | ||||||||
Professional fees | 3,009 | 3,274 | 3,053 | ||||||||
Origination and servicing | 5,871 | 6,046 | 4,331 | ||||||||
Change in fair value of contingent consideration liabilities | (455 | ) | — | — | |||||||
Other general and administrative costs | 7,279 | 6,935 | 5,313 | ||||||||
Total expenses | 46,795 | 40,225 | 32,255 | ||||||||
Net investment loss | (7,881 | ) | (9,260 | ) | (6,185 | ) | |||||
Net realized and unrealized gains (losses): | |||||||||||
Net realized gain on non-affiliate investments | 39,617 | 31,512 | 28,386 | ||||||||
Net realized (loss) gain on controlled investments | (200 | ) | 108 | 5,473 | |||||||
Net unrealized appreciation (depreciation) on SBA guaranteed non-affiliate investments | 1,398 | 1,035 | (3,215 | ) | |||||||
Net unrealized (depreciation) appreciation on SBA unguaranteed non-affiliate investments | (1,342 | ) | 18 | 1,183 | |||||||
Net unrealized appreciation on controlled investments | 12,957 | 11,337 | 12,250 | ||||||||
Change in deferred taxes | (2,179 | ) | (5,128 | ) | (857 | ) | |||||
Net unrealized depreciation on non-control/non-affiliate investments | — | (43 | ) | (24 | ) | ||||||
Net unrealized depreciation on servicing assets | (3,394 | ) | (2,269 | ) | (1,268 | ) | |||||
Net unrealized depreciation on credits in lieu of cash and notes payable in credits in lieu of cash | — | (5 | ) | (7 | ) | ||||||
Net realized and unrealized gains | 46,857 | 36,565 | 41,921 | ||||||||
Net increase in net assets resulting from operations | 38,976 | $ | 27,305 | 35,736 | |||||||
Net increase in net assets resulting from operations per share | $ | 2.25 | $ | 1.88 | $ | 3.32 | |||||
Net investment loss per share | $ | (0.45 | ) | $ | (0.64 | ) | $ | (0.57 | ) | ||
Dividends and distributions declared per common share | $ | 1.64 | $ | 1.53 | $ | 4.45 | |||||
Weighted average number of shares outstanding | 17,327 | 14,541 | 10,770 | ||||||||
NEWTEK BUSINESS SERVICES CORP. AND SUBSIDIARIES | |||||||||||||||
NON-GAAP FINANCIAL MEASURES- | |||||||||||||||
ADJUSTED NET INVESTMENT INCOME RECONCILIATION: | |||||||||||||||
(in thousands, except per share amounts) |
Year ended December 31, | Year ended December 31, | |||||||||||||
2017 | Per share | 2016 | Per share | ||||||||||||
Net investment loss | $ | (7,881 | ) | $ | (0.45 | ) | $ | (9,260 | ) | $ | (0.64 | ) | |||
Net realized gain on non-affiliate debt investments | 39,617 | 2.29 | 31,512 | 2.17 | |||||||||||
Net realized (loss) gain on controlled investments | (200 | ) | (0.01 | ) | 108 | 0.01 | |||||||||
Loss on lease | (326 | ) | (0.02 | ) | 604 | 0.04 | |||||||||
Stock-based compensation | - | - | 226 | 0.02 | |||||||||||
Change in fair value of contingent consideration liabilities | (455 | ) | (0.03 | ) | - | - | |||||||||
Adjusted Net investment income | $ | 30,755 | $ | 1.77 | $ | 23,190 | $ | 1.60 | |||||||
Note: Per share amounts may not foot due to rounding |
Source: Newtek Business Services Corp.