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, 2020.
Second Quarter 2020 Financial
Highlights
- Total investment income of $46.7 million for the three months
ended June 30, 2020; an increase of 230% over total investment
income of $14.1 million for the three months ended June 30,
2019.
- Net investment income increased to $29.7 million, or $1.42 per
share, for the three months ended June 30, 2020 compared to a net
investment income (loss) of $(1.1) million, or $(0.06) per share,
for the three months ended June 30, 2019.
- Adjusted net investment income (“ANII”)1 of $28.5 million, or
$1.37 per share, for the three months ended June 30, 2020; an
increase of 140.4% compared to ANII of $11.0 million, or $0.57 per
share, for the three months ended June 30, 2019.
- Net asset value (“NAV”) of $327.4 million, or $15.66 per share,
at June 30, 2020; an increase of 4.4% over NAV of $15.00 per share
at March 31, 2020, and an increase of 2.2% over NAV of $15.33 per
share at June 30, 2019.
- Debt-to-equity ratio of 1.20x at June 30, 2020 compared to
debt-to-equity ratio of 1.44x at March 31, 2020.
- Total investment portfolio increased by 13.1% to $648.4 million
at June 30, 2020, from $573.5 million at June 30, 2019.
Financial Highlights - Six Months Ended
June 30, 2020
- Total investment income of $62.5 million for the six months
ended June 30, 2020; an increase of 123.9% over total investment
income of $27.9 million for the six months ended June 30,
2019.
- Net investment income increased to $29.5 million, or $1.42 per
share, for the six months ended June 30, 2020 compared to a net
investment income (loss) of $(2.1) million, or $(0.11) per share,
for the six months ended June 30, 2019.
- ANII of $32.8 million, or $1.58 per share, for the six months
ended June 30, 2020; an increase of 56.4% on a per share basis over
ANII of $19.3 million, or $1.01 per share, for the six months ended
June 30, 2019.
2020 Dividend Payments &
Declarations
- The Company paid a second quarter 2020 cash dividend of $0.56
per share on July 31, 2020 to shareholders of record as of July 15,
2020, which represents a 21.7% increase over the second quarter
2019 cash dividend.
- The Company declared a third quarter 2020 cash dividend of
$0.582 per share, which is payable on September 30, 2020 to
shareholders of record as of September 21, 2020.
- With the payment of the third quarter 2020 dividend, the
Company will have paid a total of $1.58 per share for the first
three quarters of 2020, which would represent a 9.7% increase over
the dividends paid in the first three quarters of 2019 of $1.44 per
share.
Second Quarter 2020 Lending
Highlights
- Newtek Small Business Finance, LLC (“NSBF”) funded $1.11
billion of U.S. Small Business Administration (“SBA”) Paycheck
Protection Program (PPP) loans during the three months ended June
30, 2020.
- NSBF’s PPP lending activity contributed to record NII and ANII
for the three months ended June 30, 2020.
- NSBF estimates that upwards of 130,000 PPP borrowers’ employees
were retained with the funding of the $1.11 billion in
PPP loans.
- NSBF funded $17.4 million of SBA 7(a) loans during the three
months ended June 30, 2020.
- NSBF forecasts funding $150.0 million in SBA 7(a) loans in the
second half of 2020.
- NSBF renewed its existing $150.0 million line of credit with
Capital One Bank N.A. for a period of three years.
Barry Sloane, Chairman, President and Chief
Executive Officer said, “We are extremely pleased to report record
financial results across several key metrics for the three- and
six-months ended June 30, 2020 given the difficulties in the
economy due to the global pandemic. As an organization that has
existed for over 22 years, with 20 years as a publicly traded
company, we have weathered several difficult economic environments
and have always persevered despite challenging circumstances, most
recently demonstrated by our record performance for the first half
of 2020. The Company recently declared a third quarter 2020
cash dividend of $0.58 per share, payable on September 30, 2020 to
shareholders of record as of September 21, 2020. With the payment
of the third quarter 2020 dividend, the Company will have paid a
total of $1.58 per share for the first three quarters of 2020,
which would represent a 9.7% increase over the dividends paid in
the first three quarters of 2019 of $1.44 per share.”
Mr. Sloane continued, “Due to the depth and breadth
of experience of our lending team and the technological
efficiencies in our lending platform, we were able to quickly
reposition and adapt our business model to successfully participate
in the Paycheck Protection Program (“PPP”) and were able to offer
all of our existing SBA 7(a) borrowers and new clients the
opportunity to apply for a PPP loan to assist them in keeping their
business and employees intact. As of the close of business on
August 4, 2020, NSBF funded $1.15 billion of PPP loans in slightly
over four months’ time, which is equivalent to approximately 2
years’ worth of NSBF’s SBA 7(a) production under normal operating
circumstances. The PPP is legislatively scheduled to conclude on
August 8, 2020, but we are hopeful there will be a third round of
PPP funding, which we believe could provide the Company with the
opportunity to generate additional income from the continued
origination of PPP loans. We anticipate by August 8, 2020 we
will have obtained approximately 10,200 new borrowers that obtained
either loan approvals, or closed or funded loans through NSBF by
borrowing money through the first two rounds of the
already-legislated PPP. Additionally, we are hopeful that Congress
will authorize the SBA to extend the current six-month term of
providing payments of principal and interest on behalf of SBA 7(a)
borrowers in regular (accrual) servicing status, for an additional
three to six months As of June 30, 2020, our SBA 7(a) loan
portfolio in accrual status was 99.0% current with payments.
We are hopeful that bipartisan support for small businesses will
continue to provide benefits in both of these areas.”
Mr. Sloane further stated, “We are pleased that
NSBF renewed its existing $150.0 million line of credit with
Capital One Bank N.A. for a period of three years. As
previously announced, NSBF restarted its SBA 7(a) loan program and
began accepting applications on June 29, 2020. Throughout the
remainder of the year, we will continue to participate in the SBA
7(a) loan program in a cautious and measured manner, selectively
financing businesses based on the health of their financial
statements, forward projections, focusing on companies with a 2- to
3-year operating history, hard collateral assets, pre-Covid-19 cash
flows, liquidity to maintain their business and in geographical
locations that were least affected by the current pandemic and
economic slowdown. We are currently forecasting $150 million
of SBA 7(a) loan fundings for the second half of 2020.”
Mr. Sloane concluded, “Our participation in the PPP
has enabled us to introduce Newtek’s and its portfolio companies’
lending ecosystem, technology offerings, and financial and business
solutions across financing, payment processing, payroll, insurance,
and IT solutions to several new alliance partners and clients.
Additionally, our portfolio companies’ payment processing business
has been recovering sequentially month over month, and its June and
July processing volumes are recovering from steep declines in April
and May. We believe this is a result of increased consumer spending
as local and state economies continue to reopen across the U.S.
While it is very challenging to forecast economic opportunities in
the immediate future, and it may be difficult to match last year’s
financial performance, we are cautiously optimistic about the
second half of 2020, as well as the lending environment in 2021,
with the potential for additional economic stimulus from the
government and this pandemic hopefully in our rearview mirror.”
Investor Conference Call and
Webcast
A conference call to discuss second quarter 2020
results will be hosted by Barry Sloane, President, Chairman and
Chief Executive Officer, and Chris Towers, Chief Accounting
Officer, tomorrow, Thursday, August 6, 2020 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 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.
2Amount and timing of dividends, if any, remain
subject to the discretion of the Company’s Board of Directors.
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 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
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 Camuto Telephone: (212) 273-8179 /
jcavuoto@newtekone.com
NEWTEK BUSINESS SERVICES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF ASSETS AND
LIABILITIES (In Thousands, except for Per Share
Data) |
|
|
|
|
|
June 30, 2020 |
|
December 31, 2019 |
ASSETS |
(Unaudited) |
|
|
Investments, at fair value |
|
|
|
SBA unguaranteed non-affiliate investments (cost of $423,554 and
$429,697, respectively; includes $341,707 and $364,063,
respectively, related to securitization trusts) |
$ |
404,937 |
|
|
$ |
417,223 |
|
SBA guaranteed non-affiliate investments (cost of $19,881 and
$23,345, respectively) |
21,151 |
|
|
25,004 |
|
Controlled investments (cost of $123,705 and $107,300,
respectively) |
221,351 |
|
|
215,817 |
|
Non-control/affiliate investments (cost of $1,000 and $1,000,
respectively) |
1,000 |
|
|
1,000 |
|
Total investments at fair
value |
648,439 |
|
|
659,044 |
|
Cash |
13,385 |
|
|
1,762 |
|
Restricted cash |
40,213 |
|
|
31,445 |
|
Broker receivable |
— |
|
|
51,173 |
|
Due from related parties |
5,274 |
|
|
2,972 |
|
Servicing assets, at fair
value |
25,511 |
|
|
24,411 |
|
Right of use assets |
7,454 |
|
|
7,990 |
|
Other assets |
25,781 |
|
|
18,614 |
|
Total assets |
$ |
766,057 |
|
|
$ |
797,411 |
|
|
|
|
|
LIABILITIES AND NET ASSETS |
|
|
|
Liabilities: |
|
|
|
Bank notes payable |
$ |
23,640 |
|
|
$ |
30,000 |
|
Notes due 2023 (par: $57,500 as of June 30, 2020 and December 31,
2019) |
56,269 |
|
|
56,035 |
|
Notes due 2024 (par: $63,250 as of June 30, 2020 and December 31,
2019) |
61,563 |
|
|
61,354 |
|
Notes payable - Securitization trusts (par: $246,931 and $276,637
as of June 30, 2020 and December 31, 2019) |
243,126 |
|
|
272,376 |
|
Dividends payable |
11,685 |
|
|
— |
|
Notes payable - related parties |
— |
|
|
12,163 |
|
Due to related parties |
804 |
|
|
131 |
|
Lease liabilities |
9,296 |
|
|
9,897 |
|
Deferred tax liabilities |
9,465 |
|
|
12,405 |
|
Accounts payable, accrued expenses and other liabilities |
22,763 |
|
|
20,824 |
|
Total liabilities |
438,611 |
|
|
475,185 |
|
|
|
|
|
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,
20,905 and 20,530 issued and outstanding, respectively) |
418 |
|
|
411 |
|
Additional paid-in capital |
297,836 |
|
|
289,963 |
|
Accumulated undistributed earnings |
29,192 |
|
|
31,852 |
|
Total net assets |
327,446 |
|
|
322,226 |
|
Total liabilities and net assets |
$ |
766,057 |
|
|
$ |
797,411 |
|
Net asset value per common
share |
$ |
15.66 |
|
|
$ |
15.70 |
|
NEWTEK BUSINESS SERVICES CORP. AND
SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED) |
(In Thousands, except for Per Share Data) |
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Investment income |
|
|
|
|
|
|
|
From non-affiliate investments: |
|
|
|
|
|
|
|
Interest income - PPP loans |
$ |
34,657 |
|
|
$ |
— |
|
|
$ |
34,657 |
|
|
$ |
— |
|
Interest income - SBA 7(a) loans |
6,189 |
|
|
7,034 |
|
|
13,511 |
|
|
14,051 |
|
Servicing income |
2,777 |
|
|
2,503 |
|
|
5,492 |
|
|
4,931 |
|
Other income |
303 |
|
|
1,566 |
|
|
1,209 |
|
|
2,487 |
|
Total investment income from
non-affiliate investments |
43,926 |
|
|
11,103 |
|
|
54,869 |
|
|
21,469 |
|
From non-control/affiliate investments: |
|
|
|
|
|
|
|
Dividend income |
20 |
|
|
28 |
|
|
40 |
|
|
59 |
|
From controlled investments: |
|
|
|
|
|
|
|
Interest income |
480 |
|
|
218 |
|
|
937 |
|
|
435 |
|
Dividend income |
2,268 |
|
|
2,800 |
|
|
6,650 |
|
|
5,950 |
|
Total investment income from
controlled investments |
2,748 |
|
|
3,018 |
|
|
7,587 |
|
|
6,385 |
|
Total investment income |
46,694 |
|
|
14,149 |
|
|
62,496 |
|
|
27,913 |
|
Expenses: |
|
|
|
|
|
|
|
Salaries and benefits |
3,740 |
|
|
3,484 |
|
|
7,187 |
|
|
7,072 |
|
Interest |
4,604 |
|
|
4,712 |
|
|
9,788 |
|
|
9,447 |
|
Depreciation and amortization |
104 |
|
|
124 |
|
|
219 |
|
|
253 |
|
Professional fees |
1,207 |
|
|
643 |
|
|
2,171 |
|
|
1,627 |
|
Origination and loan processing |
2,722 |
|
|
2,128 |
|
|
4,546 |
|
|
3,781 |
|
Origination and loan processing - related party |
3,095 |
|
|
2,471 |
|
|
5,733 |
|
|
4,659 |
|
Change in fair value of contingent consideration liabilities |
— |
|
|
9 |
|
|
54 |
|
|
55 |
|
Other general and administrative costs |
1,475 |
|
|
1,657 |
|
|
3,333 |
|
|
3,084 |
|
Total expenses |
16,947 |
|
|
15,228 |
|
|
33,031 |
|
|
29,978 |
|
Net investment income (loss) |
29,747 |
|
|
(1,079 |
) |
|
29,465 |
|
|
(2,065 |
) |
Net realized and unrealized gains
(losses): |
|
|
|
|
|
|
|
Net realized gain (loss) on non-affiliate investments - SBA 7(a)
loans |
(1,214 |
) |
|
12,051 |
|
|
3,299 |
|
|
21,395 |
|
Net unrealized depreciation on SBA guaranteed non-affiliate
investments |
(200 |
) |
|
(382 |
) |
|
(383 |
) |
|
(312 |
) |
Net unrealized (depreciation) appreciation on SBA unguaranteed
non-affiliate investments |
(1,633 |
) |
|
(4,572 |
) |
|
(6,144 |
) |
|
(1,943 |
) |
Net unrealized (depreciation) appreciation on controlled
investments |
(82 |
) |
|
4,865 |
|
|
(10,871 |
) |
|
2,918 |
|
Change in deferred taxes |
29 |
|
|
(1,294 |
) |
|
2,940 |
|
|
(765 |
) |
Net unrealized (depreciation) appreciation on servicing assets |
(1,180 |
) |
|
(911 |
) |
|
(92 |
) |
|
(1,467 |
) |
Net realized and unrealized gains
(losses) |
$ |
(4,280 |
) |
|
$ |
9,757 |
|
|
$ |
(11,251 |
) |
|
$ |
19,826 |
|
Net increase in net assets
resulting from operations |
$ |
25,467 |
|
|
$ |
8,678 |
|
|
$ |
18,214 |
|
|
$ |
17,761 |
|
Net increase in net assets resulting from operations per share |
$ |
1.22 |
|
|
$ |
0.45 |
|
|
$ |
0.88 |
|
|
$ |
0.93 |
|
Net investment income (loss) per share |
$ |
1.42 |
|
|
$ |
(0.06 |
) |
|
$ |
1.42 |
|
|
$ |
(0.11 |
) |
Dividends and distributions declared per common share |
$ |
0.56 |
|
|
$ |
0.46 |
|
|
$ |
1.00 |
|
|
$ |
0.86 |
|
Weighted average number of shares outstanding |
20,893 |
|
|
19,113 |
|
|
20,815 |
|
|
19,058 |
|
NEWTEK BUSINESS SERVICES CORP. AND
SUBSIDIARIESNON-GAAP FINANCIAL
MEASURES-ADJUSTED NET INVESTMENT INCOME
RECONCILIATION: |
|
(in thousands, except per
share amounts) |
Three months ended June 30, 2020 |
|
|
Per share |
|
|
Three months ended June 30, 2019 |
|
|
Per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income (loss) |
$ |
29,747 |
|
|
$ |
1.42 |
|
|
$ |
(1,079 |
) |
|
$ |
(0.06 |
) |
Net realized gain (loss) on
non-affiliate investments - SBA 7(a) loans |
(1,214 |
) |
|
(0.06 |
) |
|
12,051 |
|
|
0.63 |
|
Loss on lease |
- |
|
|
- |
|
|
(26 |
) |
|
(0.00 |
) |
Change in fair value of
contingent consideration liabilities |
- |
|
|
- |
|
|
9 |
|
|
0.00 |
|
Adjusted Net investment income |
$ |
28,533 |
|
|
$ |
1.37 |
|
|
$ |
10,955 |
|
|
$ |
0.57 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except per
share amounts) |
Six months ended June 30, 2020 |
|
|
Per share |
|
|
Six months ended June 30, 2019 |
|
|
Per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
(loss) |
$ |
29,465 |
|
|
$ |
1.42 |
|
|
$ |
(2,065 |
) |
|
$ |
(0.11 |
) |
Net realized gain (loss) on
non-affiliate investments - SBA 7(a) loans |
3,299 |
|
|
0.16 |
|
|
21,395 |
|
|
1.12 |
|
Loss on lease |
- |
|
|
- |
|
|
(105 |
) |
|
(0.01 |
) |
Change in fair value of
contingent consideration liabilities |
54 |
|
|
0.00 |
|
|
55 |
|
|
0.00 |
|
Adjusted Net investment income |
$ |
32,818 |
|
|
$ |
1.58 |
|
|
$ |
19,280 |
|
|
$ |
1.01 |
|
Note: Amounts may not foot due to rounding
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