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
and six months ended June 30, 2019.
Second Quarter 2019 Financial
Highlights
- Total investment income of $14.1 million for the three months
ended June 30, 2019; an increase of 24.1% over total investment
income of $11.4 million for the three months ended June 30,
2018.
- Net investment income (loss) of $(1.1) million, or $(0.06) per
share, for the three months ended June 30, 2019; a 45.5%
improvement on a per share basis compared to a net investment
income (loss) of $(2.1) million, or $(0.11) per share, for the
three months ended June 30, 2018.
- Adjusted net investment income (“ANII”)1 of $11.0 million, or
$0.57 per share, for the three months ended June 30, 2019; an
increase of 29.5% on a per share basis compared to ANII of $8.2
million, or $0.44 per share, for the three months ended June 30,
2018.
- Net asset value (“NAV”) of $293.4 million, or $15.33 per share,
at June 30, 2019; an increase of 1.8% over NAV of $15.06 per share
at June 30, 2018, and an increase of 0.9% over NAV of $15.19 per
share at December 31, 2018.
- Debt-to-equity ratio of 127.9% at June 30, 2019.
- At June 30, 2019, proforma debt-to-equity ratio was 114.5% as a
result of the sales of government-guaranteed portions of SBA 7(a)
loans prior to June 30, 2019, which sales settled subsequent to the
balance sheet date.
- Total investment portfolio increased by 17.6% to $573.5 million
at June 30, 2019, from $487.7 million at June 30, 2018, and
increased 6.0% from $541.1 million at December 31, 2018.
- On June 24, 2019, Newtek Small Business Finance, LLC (“NSBF”)
increased its existing revolving credit facility through Capital
One, National Association by $50.0 million to $150.0 million.
- On May 20, 2019, Newtek launched its joint venture, Newtek
Conventional Lending (“NCL”), to provide non-conforming
conventional C&I term loans to U.S. middle-market companies and
small businesses. NCL is a 50/50 joint venture between Newtek
Commercial Lending, Inc. a wholly-owned subsidiary of Newtek, and
Conventional Lending TCP Holding, LLC, a wholly-owned, indirect
subsidiary of BlackRock TCP Capital Corp. (Nasdaq: TCPC).
Financial Highlights - Six Months Ended
June 30, 2019
- Total investment income of $27.9 million for the six months
ended June 30, 2019; an increase of 24.2% over total investment
income of $22.5 million for the six months ended June 30,
2018.
- Net investment income (loss) of $(2.1) million, or $(0.11) per
share for the six months ended June 30, 2019; a 57.7% improvement
on a per share basis compared to a net investment income (loss) of
$(4.9) million, or $(0.26) per share, for the six months ended June
30, 2018.
- ANII of $19.3 million, or $1.01 per share, for the six months
ended June 30, 2018; an increase of 14.8% on a per share basis over
ANII of $16.3 million, or $0.88 per share, for the six months ended
June 30, 2018.
Loan Highlights
- NSBF funded $122.6 million of SBA 7(a) loans during the three
months ended June 30, 2019; an increase of 15.1% over $106.5
million of SBA 7(a) loans funded for the three months ended June
30, 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, LLC (“NBL”), our wholly owned
controlled portfolio company which originates SBA 504 loans,
forecasts full year 2019 SBA 504 loan fundings of approximately
$100 million.
- NCL funded its first loan on May 20, 2019, and has funded $20.5
million in non-conforming conventional loans through July 31,
2019.
2019 Dividend Payments & Increase in 2019 Annual
Dividend Forecast
- The Company paid a second quarter 2019 cash dividend of $0.46
per share on June 28, 2019 to shareholders of record as of June 14,
2019, which represents a 9.5% increase over the Company’s second
quarter 2018 dividend payment.
- The Company increased its 2019 annual cash dividend forecast to
$1.952 per share, which represents an 8.3% increase over the
Company’s 2018 annual dividend payment of $1.80 per
share.
Subsequent Second Quarter 2019 Highlights
- On July 25, 2019, the Company announced the pricing of its
public offering of $55.0 million in aggregate principal amount of
5.75% Notes Due 2024 (“Notes”). The Company intends to use
the net proceeds from this offering to redeem the outstanding 7.50%
2022 Notes, currently trading under the symbol ‘NEWTZ,’ to increase
its SBA 7(a) lending activity, to make direct investments in
portfolio companies and for general working capital purposes.
The Notes are to be listed on the Nasdaq Global Market under the
trading symbol ‘NEWTL’.
- Egan Jones maintained its rating of A- on Newtek Business
Services Corp. and the Notes.
Barry Sloane, Chairman, President and Chief Executive Officer
said, “We are extremely pleased with how the year has progressed
and how the Company’s management team and staff have been able to
execute on its plan. The seeds are planted for future opportunity
and benefits, and we have invested in and borne the expenses of
establishing the foundation for continued growth.”
Mr. Sloane continued, “Our recent bond issuance trading under
symbol ‘NEWTL’ on the Nasdaq, the increase in our Capital One Bank
facility, hiring additional senior executives in lending, obtaining
additional space, launching our joint venture Newtek
Conventional Lending, and the operational improvements in
certain of our portfolio companies have all incurred present
and past commitments to the immediate expense line
without corresponding revenue benefits. However, we believe we
are positioned for growth and, despite these investments in
the first half of 2019, we achieved strong second quarter 2019
year-over-year comparisons for several metrics, particularly ANII,
NII and dividend payout. We would like to point out that over
the past several years, we have experienced a seasonally stronger
second half of the calendar year, which has historically
represented approximately 55 percent of annual earnings,
demonstrating that the Company has been a strong performer in the
second half of the year.”
Mr. Sloane concluded, “We believe that the recent increase in
our annual dividend forecast to $1.95 per share is indicative of
the confidence that management has in its business model and the
current market for our business solutions. Many BDCs trade at or
below NAV and struggle to maintain the payment of the historical
dividend. The Company, however, has steadily grown its annual
dividend from the forecasted $1.50 per share in 2015, and we have
increased our 2019 dividend forecast to $1.95 per share, with the
goal and expectation to have it paid out of taxable income. We
look forward to you joining our call tomorrow morning at 8:30 a.m.
to discuss our stellar second quarter 2019 financial results, and
are excited about our future.”
Investor Conference Call and
WebcastA conference call to discuss second quarter 2019
results will be hosted by Barry Sloane, President, Chairman and
Chief Executive Officer, and Christopher Towers, Executive Vice
President and Chief Accounting Officer, tomorrow, Wednesday, August
7, 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.
1Use of Non-GAAP Financial Measures -
Newtek Business Services Corp. and SubsidiariesIn
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
PaymentsAmount 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.
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
and financial solutions 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 StatementsThis
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) |
|
|
June 30, 2019 |
|
December 31, 2018 |
ASSETS |
(Unaudited) |
|
|
Investments, at fair
value |
|
|
|
SBA unguaranteed non-affiliate investments (cost of $386,753 and
$355,589, respectively; includes $270,171 and $323,388,
respectively, related to securitization trusts) |
$ |
378,626 |
|
|
$ |
349,402 |
|
SBA guaranteed non-affiliate investments (cost of $13,572 and
$17,217, respectively) |
15,142 |
|
|
19,100 |
|
Controlled investments (cost of $78,492 and $74,279,
respectively) |
178,715 |
|
|
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 |
573,492 |
|
|
541,096 |
|
Cash |
3,585 |
|
|
2,316 |
|
Restricted cash |
26,094 |
|
|
29,034 |
|
Broker receivable |
48,533 |
|
|
42,617 |
|
Due from related parties |
3,561 |
|
|
3,232 |
|
Servicing assets, at fair
value |
23,399 |
|
|
21,360 |
|
Right of use assets |
8,512 |
|
|
— |
|
Other assets |
14,718 |
|
|
13,686 |
|
Total assets |
$ |
701,894 |
|
|
$ |
653,341 |
|
|
|
|
|
LIABILITIES AND NET ASSETS |
|
|
|
Liabilities: |
|
|
|
Bank notes payable |
$ |
94,609 |
|
|
$ |
34,700 |
|
Notes due 2022 |
8,060 |
|
|
8,019 |
|
Notes due 2023 |
55,798 |
|
|
55,564 |
|
Notes payable - Securitization trusts |
187,492 |
|
|
216,507 |
|
Notes payable - related parties |
24,063 |
|
|
16,840 |
|
Due to related parties |
1 |
|
|
4 |
|
Lease liabilities |
10,486 |
|
|
— |
|
Deferred tax liabilities |
10,005 |
|
|
9,241 |
|
Accounts payable, accrued expenses and other liabilities |
18,028 |
|
|
25,021 |
|
Total liabilities |
408,542 |
|
|
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,
19,137 and 18,919 issued and outstanding, respectively) |
383 |
|
|
379 |
|
Additional paid-in capital |
259,043 |
|
|
254,498 |
|
Accumulated undistributed earnings |
33,926 |
|
|
32,568 |
|
Total net assets |
293,352 |
|
|
287,445 |
|
Total liabilities and net assets |
$ |
701,894 |
|
|
$ |
653,341 |
|
Net asset value per common
share |
$ |
15.33 |
|
|
$ |
15.19 |
|
|
|
|
|
|
|
|
|
|
NEWTEK BUSINESS SERVICES CORP. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (UNAUDITED)(In Thousands, except for
Per Share Data) |
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Investment income |
|
|
|
|
|
|
|
From non-affiliate investments: |
|
|
|
|
|
|
|
Interest income |
$ |
7,034 |
|
|
$ |
5,503 |
|
|
$ |
14,051 |
|
|
$ |
10,677 |
|
Servicing income |
2,503 |
|
|
2,008 |
|
|
4,931 |
|
|
4,073 |
|
Other income |
1,566 |
|
|
1,108 |
|
|
2,487 |
|
|
2,163 |
|
Total investment income from
non-affiliate investments |
11,103 |
|
|
8,619 |
|
|
21,469 |
|
|
16,913 |
|
From Non-control/affiliate investments: |
|
|
|
|
|
|
|
Dividend income |
28 |
|
|
10 |
|
|
59 |
|
|
10 |
|
From controlled investments: |
|
|
|
|
|
|
|
Interest income |
218 |
|
|
200 |
|
|
435 |
|
|
349 |
|
Dividend income |
2,800 |
|
|
2,575 |
|
|
5,950 |
|
|
5,200 |
|
Total investment income from
controlled investments |
3,018 |
|
|
2,775 |
|
|
6,385 |
|
|
5,549 |
|
Total investment income |
14,149 |
|
|
11,404 |
|
|
27,913 |
|
|
22,472 |
|
Expenses: |
|
|
|
|
|
|
|
Salaries and benefits |
3,484 |
|
|
5,212 |
|
|
7,072 |
|
|
10,090 |
|
Interest |
4,712 |
|
|
3,792 |
|
|
9,447 |
|
|
7,304 |
|
Depreciation and amortization |
124 |
|
|
116 |
|
|
253 |
|
|
236 |
|
Professional fees |
643 |
|
|
587 |
|
|
1,627 |
|
|
1,527 |
|
Origination and servicing |
2,128 |
|
|
2,168 |
|
|
3,781 |
|
|
3,773 |
|
Origination and servicing - related party |
2,471 |
|
|
— |
|
|
4,659 |
|
|
— |
|
Change in fair value of contingent consideration liabilities |
9 |
|
|
7 |
|
|
55 |
|
|
17 |
|
Loss on extinguishment of debt |
— |
|
|
— |
|
|
— |
|
|
1,059 |
|
Other general and administrative costs |
1,657 |
|
|
1,656 |
|
|
3,084 |
|
|
3,373 |
|
Total expenses |
15,228 |
|
|
13,538 |
|
|
29,978 |
|
|
27,379 |
|
Net investment loss |
(1,079 |
) |
|
(2,134 |
) |
|
(2,065 |
) |
|
(4,907 |
) |
Net realized and unrealized
gains (losses): |
|
|
|
|
|
|
|
Net realized gain on non-affiliate investments - SBA 7(a)
loans |
12,051 |
|
|
10,319 |
|
|
21,395 |
|
|
20,200 |
|
Net realized gain on controlled investments |
— |
|
|
52 |
|
|
— |
|
|
52 |
|
Net unrealized (depreciation) appreciation on SBA guaranteed
non-affiliate investments |
(382 |
) |
|
105 |
|
|
(312 |
) |
|
(175 |
) |
Net unrealized (depreciation) appreciation on SBA unguaranteed
non-affiliate investments |
(4,572 |
) |
|
1,702 |
|
|
(1,943 |
) |
|
2,694 |
|
Net unrealized appreciation (depreciation) on controlled
investments |
4,865 |
|
|
(1,250 |
) |
|
2,918 |
|
|
(80 |
) |
Change in deferred taxes |
(1,294 |
) |
|
326 |
|
|
(765 |
) |
|
27 |
|
Net unrealized depreciation on servicing assets |
(911 |
) |
|
(1,499 |
) |
|
(1,467 |
) |
|
(2,078 |
) |
Net realized and unrealized
gains |
$ |
9,757 |
|
|
$ |
9,755 |
|
|
$ |
19,826 |
|
|
$ |
20,640 |
|
Net increase in net assets
resulting from operations |
$ |
8,678 |
|
|
$ |
7,621 |
|
|
$ |
17,761 |
|
|
$ |
15,733 |
|
Net increase in net assets resulting from operations per share |
$ |
0.45 |
|
|
$ |
0.41 |
|
|
$ |
0.93 |
|
|
$ |
0.85 |
|
Net investment loss per share |
$ |
(0.06 |
) |
|
$ |
(0.11 |
) |
|
$ |
(0.11 |
) |
|
$ |
(0.26 |
) |
Dividends and distributions declared per common share |
$ |
0.46 |
|
|
$ |
0.42 |
|
|
$ |
0.86 |
|
|
$ |
0.82 |
|
Weighted average number of shares outstanding |
19,113 |
|
|
18,680 |
|
|
19,058 |
|
|
18,588 |
|
|
|
|
|
|
|
|
|
|
|
|
|
NEWTEK BUSINESS SERVICES CORP. AND
SUBSIDIARIESNON-GAAP FINANCIAL MEASURES-ADJUSTED NET INVESTMENT
INCOME RECONCILIATION:
|
|
|
|
|
|
|
|
(in thousands, except per
share amounts) |
Three months endedJune 30, 2019 |
|
Per share |
|
Three months endedJune 30, 2018 |
|
Per share |
|
|
|
|
|
|
|
|
Net investment loss |
$ |
(1,079 |
) |
|
$ |
(0.06 |
) |
|
$ |
(2,134 |
) |
|
$ |
(0.11 |
) |
Net realized gain on
non-affiliate investments - SBA 7(a) loans |
|
12,051 |
|
|
|
0.63 |
|
|
|
10,319 |
|
|
|
0.55 |
|
Net realized gain on
controlled investments |
|
- |
|
|
|
- |
|
|
|
52 |
|
|
|
0.00 |
|
Loss on lease |
|
(26 |
) |
|
|
(0.00 |
) |
|
|
(76 |
) |
|
|
(0.00 |
) |
Change in fair value of
contingent consideration liabilities |
|
9 |
|
|
|
0.00 |
|
|
|
7 |
|
|
|
0.00 |
|
Adjusted Net investment
income |
$ |
10,955 |
|
|
$ |
0.57 |
|
|
$ |
8,168 |
|
|
$ |
0.44 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except per
share amounts) |
Six months endedJune 30, 2019 |
|
Per share |
|
Six months endedJune 30, 2018 |
|
Per share |
|
|
|
|
|
|
|
|
Net investment loss |
$ |
(2,065 |
) |
|
$ |
(0.11 |
) |
|
$ |
(4,907 |
) |
|
$ |
(0.26 |
) |
Net realized gain on
non-affiliate investments - SBA 7(a) loans |
|
21,395 |
|
|
|
1.12 |
|
|
|
20,200 |
|
|
|
1.09 |
|
Net realized gain on
controlled investments |
|
- |
|
|
|
- |
|
|
|
52 |
|
|
|
0.00 |
|
Loss on lease |
|
(105 |
) |
|
|
(0.01 |
) |
|
|
(152 |
) |
|
|
(0.01 |
) |
Change in fair value of
contingent consideration liabilities |
|
55 |
|
|
|
0.00 |
|
|
|
17 |
|
|
|
0.00 |
|
Loss on debt
extinguishment |
|
- |
|
|
|
- |
|
|
|
1,059 |
|
|
|
0.06 |
|
Adjusted Net investment
income |
$ |
19,280 |
|
|
$ |
1.01 |
|
|
$ |
16,269 |
|
|
$ |
0.88 |
|
|
|
|
|
|
|
|
|
|
|
NEWTEK BUSINESS SERVICES CORP. AND SUBSIDIARIES |
DEBT TO EQUITY RATIO – PROFORMA AT JUNE 30, 2019 |
|
|
(in thousands): |
|
Broker receivable, including premium income receivable |
$ |
48,533 |
|
Less: premium income included in broker receivable |
|
(4,988 |
) |
Broker receivable |
|
43,545 |
|
|
|
90% advance rate on SBA guaranteed non-affiliate portions of loans
sold, not settled |
$ |
39,191 |
|
|
|
Proforma debt adjustments: |
|
Total
Senior Debt as of June 30, 2019 |
$ |
375,058 |
|
Proforma
adjustment for broker receivable as of June 30, 2019, as calculated
above |
|
(39,191 |
) |
Total proforma debt at June 30, 2019 |
$ |
335,868 |
|
|
|
Proforma Debt to Equity ratio at June 30,
2019: |
|
Total proforma debt |
$ |
335,868 |
|
Total
equity |
$ |
293,352 |
|
Debt to equity ratio - proforma at June 30, 2019 |
|
114.5 |
% |
|
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