Newtek Business Services Corp. (“Newtek” or the “Company”) (Nasdaq:
NEWT), an internally managed business development company (“BDC”),
announced today its financial and operating results for the three
months ended March 31, 2019.
First Quarter 2019 Financial
Highlights
- Net investment loss of $(0.99) million, or $(0.05) per share,
for the three months ended March 31, 2019; an improvement of 66.7%,
on a per share basis, over net investment loss of $(2.8) million,
or $(0.15) per share, for the three months ended March 31,
2018.
- Adjusted net investment income (“ANII”)1 of $8.3 million, or
$0.44 per share, for the three months ended March 31, 2019;
compared to ANII of $8.1 million, or $0.44 per share, for the three
months ended March 31, 2018.
- Total investment income of $13.8 million for the three months
ended March 31, 2019; an increase of 24.4% over total investment
income of $11.1 million for the three months ended March 31,
2018.
- Net asset value (“NAV”) of $292.0 million, or $15.31 per share,
at March 31, 2019; compared to NAV of $15.19 per share at December
31, 2018, and an increase of 1.7% on a per share basis over NAV of
$15.05 per share at March 31, 2018.
- Debt-to-equity ratio of 122.6% at March 31, 2019.
- At March 31, 2019, proforma debt-to-equity ratio was 110.0% as
a result of the sales of government-guaranteed portions of SBA 7(a)
loans prior to March 31, 2019, which sales settled subsequent to
the balance sheet date.
- Total investment portfolio increased by 3.1% to $557.7 million
at March 31, 2019, from $541.1 million at December 31, 2018.
- Loan referral volume was $5.3 billion for the three months
ended March 31, 2019; a 12.5% increase over $4.7 billion for the
three months ended March 31, 2018.
- On March 29, 2019, Standard and Poor’s Global Ratings raised
its rating from A+ to AA on the Class A Notes issued by Newtek
Small Business Loan Trust 2014-1
First Quarter 2019: Subsequent
Event
- On April 29, 2019, Newtek Conventional Lending, LLC, a joint
venture between a Newtek subsidiary and a subsidiary of BlackRock
TCP Capital Corp., closed a $100 million senior-secured revolving
credit facility with Deutsche Bank.
- The JV facility includes a $100 million accordion feature,
allowing the JV to increase the borrowing available under the
facility to $200 million.
SBA Loan Highlights
- NSBF funded $97.8 million of SBA 7(a) loans during the three
months ended March 31, 2019; an increase of 7.0% over $91.4 million
of SBA 7(a) loans funded for the three months ended March 31,
2018.
- NSBF forecasts full year 2019 SBA 7(a) loan fundings of between
$580 million and $620 million, which would represent a 27.9%
increase, at the midpoint of the range, over SBA 7(a) loan fundings
for the year ended December 31, 2018.
- Newtek Business Lending, forecasts full year 2019 SBA 504 loan
fundings of $100 million.
2019 Dividends
- The Company paid a first quarter 2019 cash dividend of $0.40
per share on March 29, 2019 to shareholders of record as of March
15, 2019
- On May 1, 2019, Newtek’s Board of Directors declared a second
quarter 2019 cash dividend of $0.46 per share, which represents a
9.5% increase over the second quarter 2018 cash dividend of $0.42
per share.
- The Company forecasts paying an annual cash dividend in a range
of $1.852 per share to $1.862 per share in 2019, which would
represent a 3.3% increase over the 2018 cash dividend of $1.80 per
share at the top end of the range.
Barry Sloane, Chairman, President and Chief Executive Officer
said, “We are pleased with our first quarter 2019 financial
results, which were in line with analysts’ consensus estimates,
considering we realized lighter than expected loan funding volume
in the first quarter primarily due to the government shutdown in
the first quarter; the longest government shutdown in U.S.
history. We achieved an approximate 67% improvement in the
first quarter’s net investment loss per share over the same period
last year, and believe we can continue to improve this metric as
our loan portfolio continues to grow and perform. In
addition, our securitization spreads continue to tighten, which
reduces interest expense due to performance and execution as
evidenced by our securitization notes being upgraded by Standard
and Poor’s. Our net investment loss continues to narrow as
recurring income from the loan portfolio becomes a larger portion
of our growing business.”
Mr. Sloane continued, “We are experiencing strong business
trends and continued growth in our loan referral volume. Loan
referrals for the first quarter of 2019 totaled $5.3 billion, which
represents a 12.5% increase over the same period last year.
Our large and growing referral volume enables us to select the
loans with the best credit quality which helps us maintain
attractive credit quality standards for our loans. We also
experienced a material improvement in the pricing of the sale of
guaranteed portions of our SBA 7(a) loans during the first quarter
of 2019, with the weighted average net premium received on the sale
of guaranteed portions of SBA loans of 111.09%. In
addition, our loan pipeline remains strong, and we believe that a
portion of the first quarter loan volume shifted forward, as a
result of the government shutdown, and will be recaptured in the
second quarter 2019. As such, we recently increased our 2019
annual cash dividend forecast by a range of $0.01 per share to
$0.02 per share to a range of $1.85 per share to $1.86 per share,
which would represent a 3.3% increase at the top of the range over
the Company’s 2018 annual dividend payment of $1.80 per
share. In addition, we are maintaining our full year 2019 SBA
7(a) loan fundings forecast of between $580 million and $620
million, which would represent a 27.9% increase, at the midpoint of
the range, over SBA 7(a) loan fundings for the year ended December
31, 2018.”
Mr. Sloane concluded, “We are extremely excited about future
initiatives, specifically the launching of Newtek Conventional
Lending, LLC, our JV with BlackRock TCP Capital Corp., which will
be originating non-conforming conventional loans. The JV launch
coincides with the JV closing a $100 million senior-secured
revolving leveraged credit facility with Deutsche Bank. The JV
facility includes a $100 million accordion feature, allowing the JV
to increase the borrowing available under the facility to $200
million. The JV plans to use this leverage facility to
grow the business and we believe this new initiative will have a
positive impact on our results going forward. However, at
this point in time, none of the benefit of this joint venture has
been factored into our annual dividend forecast for 2019.”
Investor Conference Call and
Webcast
A conference call to discuss first quarter 2019
results will be hosted by Barry Sloane, President, Chairman and
Chief Executive Officer, and Jennifer Eddelson, Executive Vice
President and Chief Accounting Officer, tomorrow, Thursday, May 2,
2019 at 8:30 a.m. ET. The live conference call can be
accessed by dialing (877) 303-6993 or (760) 666-3611.
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 -
Newtek Business Services Corp. and Subsidiaries
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 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.
About Newtek Business Services Corp.
Newtek Business Services Corp., Your Business Solutions
Company®, 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 SMB relationships
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, SBA Lending Solutions, Electronic
Payment Processing, Technology Solutions (Cloud Computing,
Data Backup, Storage and Retrieval, IT Consulting), eCommerce,
Accounts Receivable Financing & Inventory Financing, Insurance
Solutions, Web Services, and Payroll and Benefits Solutions.
Newtek® and Your Business Solutions Company®,
are registered trademarks 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,” “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
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
RelationsContact: Jayne Cavuoto Telephone: (212) 273-8179
/ jcavuoto@newtekone.com
|
NEWTEK BUSINESS SERVICES CORP. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
ASSETS AND LIABILITIES(In Thousands, except for
Per Share Data) |
|
March 31,
2019 |
|
December 31, 2018 |
ASSETS |
(Unaudited) |
|
|
Investments, at fair
value |
|
|
|
SBA unguaranteed
non-affiliate investments (cost of $370,328 and $355,589,
respectively; includes $323,388 and $323,388, respectively, related
to securitization trusts) |
$ |
366,769 |
|
|
$ |
349,402 |
|
SBA
guaranteed non-affiliate investments (cost of $16,634 and $17,217,
respectively) |
18,586 |
|
|
19,100 |
|
Controlled
investments (cost of $75,935 and $74,279, respectively) |
171,294 |
|
|
171,585 |
|
Non-control/affiliate investments (cost of $1,000 and $1,000,
respectively) |
1,000 |
|
|
1,000 |
|
Investments
in money market funds (cost of $9 and $9, respectively) |
9 |
|
|
9 |
|
Total investments at fair
value |
557,658 |
|
|
541,096 |
|
Cash |
3,083 |
|
|
2,316 |
|
Restricted cash |
26,654 |
|
|
29,034 |
|
Broker receivable |
45,354 |
|
|
42,617 |
|
Due from related
parties |
3,596 |
|
|
3,232 |
|
Servicing assets, at fair
value |
22,339 |
|
|
21,360 |
|
Right of use assets |
8,768 |
|
|
— |
|
Other assets |
14,282 |
|
|
13,686 |
|
Total
assets |
$ |
681,734 |
|
|
$ |
653,341 |
|
|
|
|
|
LIABILITIES AND NET ASSETS |
|
|
|
Liabilities: |
|
|
|
Bank notes
payable |
$ |
64,500 |
|
|
$ |
34,700 |
|
Notes due
2022 (par: $8,324 as of March 31, 2019 and December 31, 2018) |
8,039 |
|
|
8,019 |
|
Notes due
2023 (par: $57,500 as of March 31, 2019 and December 31, 2018) |
55,681 |
|
|
55,564 |
|
Notes
payable - Securitization trusts (par: $201,859 and $220,137 as of
March 31, 2019 and December 31, 2018) |
198,592 |
|
|
216,507 |
|
Notes
payable - related parties |
25,890 |
|
|
16,840 |
|
Due to
related parties |
2 |
|
|
4 |
|
Lease
liabilities |
10,775 |
|
|
— |
|
Deferred tax
liabilities |
8,712 |
|
|
9,241 |
|
Accounts
payable, accrued expenses and other liabilities |
17,537 |
|
|
25,021 |
|
Total
liabilities |
389,728 |
|
|
365,896 |
|
|
|
|
|
Commitment 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, 19,073 and
18,919 issued and outstanding, respectively) |
382 |
|
|
379 |
|
Additional
paid-in capital |
257,597 |
|
|
254,498 |
|
Accumulated undistributed earnings |
34,027 |
|
|
32,568 |
|
Total net
assets |
292,006 |
|
|
287,445 |
|
Total
liabilities and net assets |
$ |
681,734 |
|
|
$ |
653,341 |
|
Net asset value per common
share
|
$ |
15.31 |
|
|
$ |
15.19 |
|
|
|
|
|
|
|
|
|
NEWTEK BUSINESS SERVICES CORP. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (UNAUDITED)(In Thousands, except for
Per Share Data) |
|
Three MonthsEnded March 31,2019 |
|
Three MonthsEnded March 31,2018 |
Investment income |
|
|
|
From
non-affiliate investments: |
|
|
|
Interest income |
$ |
7,017 |
|
|
$ |
5,174 |
|
Servicing
income |
2,428 |
|
|
2,065 |
|
Other
income |
921 |
|
|
1,055 |
|
Total investment income
from non-affiliate investments |
10,366 |
|
|
8,294 |
|
From
Non-control/affiliate investments: |
|
|
|
Dividend
income |
31 |
|
|
— |
|
From
controlled investments: |
|
|
|
Interest
income |
217 |
|
|
149 |
|
Dividend
income |
3,150 |
|
|
2,625 |
|
Total investment income
from controlled investments |
3,367 |
|
|
2,774 |
|
Total investment
income |
13,764 |
|
|
11,068 |
|
Expenses: |
|
|
|
Salaries and
benefits |
3,588 |
|
|
4,878 |
|
Interest |
4,735 |
|
|
3,512 |
|
Depreciation
and amortization |
129 |
|
|
120 |
|
Professional
fees |
984 |
|
|
940 |
|
Origination
and servicing |
1,653 |
|
|
1,605 |
|
Origination
and servicing - related party |
2,188 |
|
|
— |
|
Change in
fair value of contingent consideration liabilities |
46 |
|
|
10 |
|
Loss on
extinguishment of debt |
— |
|
|
1,059 |
|
Other
general and administrative costs |
1,427 |
|
|
1,717 |
|
Total expenses |
14,750 |
|
|
13,841 |
|
Net investment loss |
(986 |
) |
|
(2,773 |
) |
Net realized and
unrealized gains (losses): |
|
|
|
Net realized
gain on non-affiliate investments - SBA 7(a) loans |
9,344 |
|
|
9,881 |
|
Net
unrealized appreciation (depreciation) on SBA guaranteed
non-affiliate investments |
70 |
|
|
(280 |
) |
Net
unrealized appreciation on SBA unguaranteed non-affiliate
investments |
2,629 |
|
|
992 |
|
Net
unrealized (depreciation) appreciation on controlled
investments |
(1,947 |
) |
|
1,170 |
|
Change in
deferred taxes |
529 |
|
|
(299 |
) |
Net
unrealized depreciation on servicing assets |
(556 |
) |
|
(579 |
) |
Net realized and
unrealized gains |
$ |
10,069 |
|
|
$ |
10,885 |
|
Net increase in net assets
resulting from operations |
$ |
9,083 |
|
|
$ |
8,112 |
|
Net increase
in net assets resulting from operations per share |
$ |
0.48 |
|
|
$ |
0.44 |
|
Net
investment loss per share |
$ |
(0.05 |
) |
|
$ |
(0.15 |
) |
Dividends
and distributions declared per common share |
$ |
0.40 |
|
|
$ |
0.40 |
|
Weighted
average number of shares outstanding |
19,003 |
|
|
18,495 |
|
|
|
|
|
|
|
|
NEWTEK BUSINESS SERVICES CORP. AND SUBSIDIARIES |
NON-GAAP FINANCIAL MEASURES- |
ADJUSTED NET INVESTMENT INCOME RECONCILIATION: |
|
|
|
|
|
|
|
|
(in thousands, except
per share amounts) |
Three monthsended March 31,2019 |
|
Per share |
|
Three monthsended March 31,2018 |
|
Per share |
|
|
|
|
|
|
|
|
Net investment loss |
$ |
(986 |
) |
|
$ |
(0.05 |
) |
|
$ |
(2,773 |
) |
|
$ |
(0.15 |
) |
Net realized gain on
non-affiliate investments - SBA 7(a) loans |
|
9,344 |
|
|
|
0.49 |
|
|
|
9,881 |
|
|
|
0.53 |
|
Loss on lease |
|
(78 |
) |
|
|
(0.00 |
) |
|
|
(76 |
) |
|
|
(0.00 |
) |
Change in fair value of
contingent consideration liabilities |
|
46 |
|
|
|
0.00 |
|
|
|
10 |
|
|
|
0.00 |
|
Loss on debt
extinguihsment |
|
- |
|
|
|
- |
|
|
|
1,059 |
|
|
|
0.06 |
|
Adjusted Net
investment income |
$ |
8,326 |
|
|
$ |
0.44 |
|
|
$ |
8,101 |
|
|
$ |
0.44 |
|
|
|
|
|
|
|
|
|
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