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Newtek Business Services Corp. Reports First Quarter 2021 Financial Results
First Quarter 2021 Financial Highlights
- Net investment income of
$15 .2 million, or$0.68 per share, for the three months endedMarch 31, 2021 ; a$0.69 per share increase compared to net investment loss of$(0.3) million , or$(0.01) per share, for the three months endedMarch 31, 2020 . - Adjusted net investment income (“ANII”)1 of
$23 .5 million, or$1.05 per share, for the three months endedMarch 31, 2021 ; an increase of 400.0%, on a per share basis, compared to ANII of$4 .3 million, or$0.21 per share, for the three months endedMarch 31, 2020 . - Total investment income of
$34 .7 million for the three months endedMarch 31, 2021 ; an increase of 119.5% over total investment income of$15 .8 million for the three months endedMarch 31, 2020 . - Debt-to-equity ratio of 1.27x at
March 31, 2021 ; proforma debt-to-equity ratio was 1.23x after taking into account the sales of government-guaranteed portions of SBA 7(a) loans prior toMarch 31, 2021 , which sales settled subsequent to the balance sheet date. - Total investment portfolio increased by 9.6% to
$726 .1 million atMarch 31, 2021 , from$662 .4 million atMarch 31, 2020 . - Net asset value (“NAV”) of
$366 .9 million, or$16.28 per share, atMarch 31, 2021 ; an increase of 5.4%, on a per share basis, compared to NAV of$15.45 per share atDecember 31, 2020 . - The Company closed on a
$115 million public offering of 5.50% Notes due 2026, which trade on the Nasdaq Global Market under the symbol "NEWTZ." Newtek Business Lending, LLC (“NBL”), Newtek’s wholly owned portfolio company that originates and funds SBA 504 loans, closed a$100 million credit facility with Deutsche Bank AG.
Subsequent First Quarter 2021 Highlights
- In
April 2021 , the Company signed a joint-venture agreement with a leadingU.S. -based middle-market investment firm with over$1.0 billion is assets under management. The intended purpose of the joint venture is to originate commercial loans to middle-market companies as well as small businesses. - The Company is currently negotiating an additional joint-venture agreement with a global investment management firm with over
$500 billion in assets under management.
2021 Dividend Payments & Forecast
- The Company paid a first quarter 2021 cash dividend of
$0.50 per share onMarch 31, 2021 to shareholders of record as ofMarch 22, 2021 . - The Company's board of directors declared a second quarter 2021 cash dividend of
$0.70 per share2 payable onJune 30, 2021 to shareholders of record as ofJune 15, 2021 . - The second quarter 2021 dividend represent a 25% increase over the second quarter 2020 dividend of
$0.56 per share, and a 52.2% increase over the second quarter 2019 dividend of$0.46 per share. - With the payment of the second quarter 2021 dividend, the Company will have paid
$1.20 per share in dividends for the first and second quarters of 2021, which would represent a 20% increase over dividends paid for the first and second quarters of 2020. - The Company revised its 2021 annual dividend forecast upwards to a range of
$3.00 per share to$3.30 per share2; an increase from the previous range of$2.40 per share to$2.90 per share. The midpoint of the 2021 annual dividend forecast range would represent a 53.7% increase over the 2020 annual dividend.
Lending Highlights
Newtek Small Business Finance, LLC (“NSBF”) funded$424.9 million of Paycheck Protection Program ("PPP") loans, totaling approximately 6,255 loan units, for the three months endedMarch 31, 2021 .- Year-to-date (through
May 11, 2021 ), NSBF funded a total of$593.6 million PPP loans, totaling approximately 12,600 units. - NSBF funded
$104.4 million of SBA 7(a) loans during the three months endedMarch 31, 2021 ; compared to$52.8 million of SBA 7(a) loans funded for the three months endedMarch 31, 2020 , and$97.8 million of SBA 7(a) loans funded for the three months endedMarch 31, 2019 . - NSBF forecasts full year 2021 SBA 7(a) loan fundings between
$580 million to$600 million . - NBL funded and/or closed
$20.7 million SBA 504 loans during the three months endedMarch 31, 2021 . - NBL funded and/or closed
$31.3 million SBA 504 loans during the month ofApril 2021 . - NBL forecasts closing and/or funding approximately
$125.0 million SBA 504 loans for the full year 2021.
For the three months ended
Investor Conference Call and Webcast
A conference call to discuss first quarter 2021 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.
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 conventional 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 loss on extinguishment of debt.
The term ANII is not defined under
2 Note 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.
3 We note that income earned in connection with the PPP for the three months ended
Newtek’s and its portfolio companies’ products and services include: Business Lending, SBA Lending Solutions, Electronic Payment Processing, Technology Solutions (Cloud Computing, Data Backup, Storage and Retrieval,
Newtek® and
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
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES (In Thousands, except for Per Share Data) |
|||||||
ASSETS | (Unaudited) | ||||||
Investments, at fair value | |||||||
SBA unguaranteed non-affiliate investments (cost of |
$ | 412,020 | $ | 407,748 | |||
SBA guaranteed non-affiliate investments (cost of |
52,374 | 17,822 | |||||
Controlled investments (cost of |
254,796 | 239,171 | |||||
Non-control investments (cost of |
6,957 | 6,447 | |||||
Total investments at fair value | 726,147 | 671,188 | |||||
Cash | 3,716 | 2,073 | |||||
Restricted cash | 84,351 | 49,352 | |||||
Broker receivable | 20,095 | 52,730 | |||||
Due from related parties | 6,874 | 6,112 | |||||
Servicing assets, at fair value | 26,733 | 26,061 | |||||
Right of use assets | 6,680 | 6,933 | |||||
Other assets | 28,973 | 26,530 | |||||
Total assets | $ | 903,569 | $ | 840,979 | |||
LIABILITIES AND |
|||||||
Liabilities: | |||||||
Bank notes payable | $ | 57,922 | $ | 86,339 | |||
Notes due 2023 (par: |
— | 56,505 | |||||
Notes due 2024 (par: |
66,835 | 61,774 | |||||
Notes due 2025 (par: |
14,457 | 4,735 | |||||
Notes due 2026 (par: |
111,589 | — | |||||
Notes payable - Securitization trusts (par: |
202,124 | 218,339 | |||||
Notes payable - related parties | 5,150 | 24,090 | |||||
Due to related parties | 2,148 | 2,133 | |||||
Lease liabilities | 8,401 | 8,697 | |||||
Deferred tax liabilities | 12,039 | 11,406 | |||||
Accounts payable, accrued expenses and other liabilities | 56,053 | 27,608 | |||||
Total liabilities | 536,718 | 501,626 | |||||
Commitment and contingencies | |||||||
Net assets: | |||||||
Preferred stock (par value |
— | — | |||||
Common stock (par value |
451 | 439 | |||||
Additional paid-in capital | 325,254 | 316,629 | |||||
Accumulated undistributed earnings | 41,146 | 22,285 | |||||
Total net assets | 366,851 | 339,353 | |||||
Total liabilities and net assets | $ | 903,569 | $ | 840,979 | |||
Net asset value per common share | $ | 16.28 | $ | 15.45 | |||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) | |||||||
(In Thousands, except for Per Share Data) | |||||||
Three Months Ended |
|||||||
2021 | 2020 | ||||||
Investment income | |||||||
From non-affiliate investments: | |||||||
Interest income - PPP loans | $ | 24,208 | $ | — | |||
Interest income - SBA 7(a) loans | 5,949 | 7,322 | |||||
Servicing income | 2,740 | 2,715 | |||||
Other income | 1,114 | 906 | |||||
Total investment income from non-affiliate investments | 34,011 | 10,943 | |||||
From non-control investments: | |||||||
Interest income | 124 | — | |||||
Dividend income | 26 | 20 | |||||
Total investment income from non-control investments | 150 | 20 | |||||
From controlled investments: | |||||||
Interest income | 533 | 457 | |||||
Dividend income | — | 4,382 | |||||
Total investment income from controlled investments | 533 | 4,839 | |||||
Total investment income | 34,694 | 15,802 | |||||
Expenses: | |||||||
Salaries and benefits | 4,450 | 3,447 | |||||
Interest | 5,072 | 5,184 | |||||
Depreciation and amortization | 85 | 115 | |||||
Professional fees | 1,188 | 964 | |||||
Origination and loan processing | 2,971 | 1,824 | |||||
Origination and loan processing - related party | 3,143 | 2,638 | |||||
Change in fair value of contingent consideration liabilities | — | 54 | |||||
Loss on extinguishment of debt | 955 | — | |||||
Other general and administrative costs | 1,635 | 1,858 | |||||
Total expenses | 19,499 | 16,084 | |||||
Net investment income (loss) | 15,195 | (282 | ) | ||||
Net realized and unrealized gains (losses): | |||||||
Net realized gain on non-affiliate investments - SBA 7(a) loans | 7,393 | 4,513 | |||||
Net unrealized appreciation (depreciation) on SBA guaranteed non-affiliate investments | 4,393 | (183 | ) | ||||
Net unrealized appreciation (depreciation) on SBA unguaranteed non-affiliate investments | 1,387 | (4,511 | ) | ||||
Net unrealized appreciation (depreciation) on controlled investments | 2,375 | (10,789 | ) | ||||
Change in deferred taxes | (633 | ) | 2,911 | ||||
Net unrealized appreciation on non-control investments | 527 | — | |||||
Net unrealized appreciation (depreciation) on servicing assets | (513 | ) | 1,088 | ||||
Net realized and unrealized gains (losses) | $ | 14,929 | $ | (6,971 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | 30,124 | $ | (7,253 | ) | ||
Net increase (decrease) in net assets resulting from operations per share | $ | 1.35 | $ | (0.35 | ) | ||
Net investment income (loss) per share | $ | 0.68 | $ | (0.01 | ) | ||
Dividends and distributions declared per common share | $ | 0.50 | $ | 0.44 | |||
Weighted average number of shares outstanding | 22,337 | 20,738 | |||||
NON-GAAP FINANCIAL MEASURES-
ADJUSTED NET INVESTMENT INCOME RECONCILIATION:
Three months ended | Three months ended | |||||||||||||||
(in thousands, except per share amounts) | Per share | Per share | ||||||||||||||
Net investment income (loss) | $ | 15,195 | $ | 0.68 | $ | (282 | ) | $ | (0.01 | ) | ||||||
Net realized gain on non-affiliate investments - SBA 7(a) loans | 7,393 | 0.33 | 4,513 | 0.22 | ||||||||||||
Change in fair value of contingent consideration liabilities | — | — | 54 | 0.00 | ||||||||||||
Loss on debt extinguishment | 955 | 0.04 | — | — | ||||||||||||
Adjusted Net investment income | $ | 23,543 | $ | 1.05 | $ | 4,285 | $ | 0.21 | ||||||||
Note: Amounts may not foot due to rounding
DEBT-TO-EQUITY RATIO - ACTUAL AT
(in thousands): | |||||
Actual Debt-to-Equity Ratio at |
|||||
Total senior debt | $ | 466,603 | |||
Total equity | $ | 366,851 | |||
Debt-to-equity ratio - actual | 127.2 | % | |||
DEBT-TO-EQUITY RATIO - PROFORMA AT
(in thousands): | |||||
Broker receivable, including premium income receivable | $ | 20,095 | |||
Less: realized gain on sale included in broker receivable | (2,437 | ) | |||
Broker receivable | 17,658 | ||||
90% advance rate on SBA guaranteed non-affiliate portions of loans sold, not settled | $ | 15,892 | |||
Proforma debt adjustments at |
|||||
Total senior debt | $ | 466,603 | |||
Proforma adjustment for broker receivable | (15,892 | ) | |||
Total proforma debt | $ | 450,711 | |||
Proforma Debt-to-Equity ratio at |
|||||
Total proforma debt | $ | 450,711 | |||
Total equity | $ | 366,851 | |||
Debt-to-equity ratio - proforma | 122.9 | % | |||
Source: Newtek Business Services Corp.