Newtekone, Inc. · NASDAQ:NEWT
Newtekone — Newtek Business Services — FY2012 Earnings Presentation
50 slides from Newtekone's earnings presentation, Mar 29, 2013
Slide 1: Full Year 2012 Financial Results Conference Call
Exhibit 99.1 Newtek Business Services, Inc. “The Small Business Authority®” Full Year 2012 Financial Results Conference Call March 27, 2013 4:15pm ET Hosted by: Barry Sloane, President & CEO NASDAQ: NEWT Jennifer Eddelson, CAO www.thesba.com Investor Relations Public Relations Newtek IR Hayden Inves
Slide 2: Safe Harbor Statement
Safe Harbor Statement The statements in this slide presentation including statements regarding anticipated future financial performance, Newtek's beliefs, expectations, intentions or strategies for the future, may be "forward-looking statements" under the Private Securities Litigation Reform Act of
Slide 3: Conference Call Agenda
Full Year 2012 Conference Call Agenda Full Year 2012 Consolidated Financial Performance Segment Performance and Revenue Growth 2013 Guidance Newtek Growth Strategy Marketing Initiatives Future Initiatives 3
Slide 4: Consolidated Performance
Consolidated Performance For the full year 2012, the Company had consolidated: • Pretax income of $9.4 million, an increase of $7.4 million, or 365.4%, compared to the full year 2011 • Net income of $5.6 million, an increase of $2.3 million, or 69.2%, compared to the full year 2011 • Modified EBITDA
Slide 5: Impact of Restatement
Impact of Restatement One-time $1.5 million pretax charge (previously announced on 2/1/13), included $1.3 million restated over 4 prior quarters beginning Q4’2011 Did not impact achieving high-end of 2012 diluted EPS guidance range of $0.14 -$0.15 per share Restatement reduced 2011 diluted EPS by $0
Slide 6: Consolidated Earnings Performance
Consolidated Earnings Performance 6 *See slide 44 for definition of Modified EBITDA
Slide 7: Consolidated Earnings Performance
Consolidated Earnings Performance Earnings per Diluted Share 67% increase year over year in fully diluted EPS 7
Slide 8: 2013 Consolidated Financial Guidance
2013 Consolidated Financial Guidance Earnings Per Share Pretax Income ($ in millions) Earnings (loss) per diluted share The Company met the high end of its FY 2012 diluted EPS guidance range at $0.15 per share Expect FY 2013 diluted EPS midpoint of $0.18 per share and pretax income midpoint of $11.5
Slide 9: Consolidated Balance Sheet
Consolidated Balance Sheet Selected Items Balance Balance $ in thousands Dec 31, 2012 Dec 31, 2011 (Restated) Total Cash & Cash Equivalents $14,229 $11,201 Total Assets $152,742 $129,795 Total Liabilities $83,840 $70,642 Total Equity $68,902 $59,153 Major changes in Assets and Liabilities • Increase
Slide 10: Consolidated Cash Position
Consolidated Cash Position Between December 31, 2011 and December 31, 2012: Cash and cash equivalents increased by $3.0 million Cash per diluted share increased from $0.31 to $0.39 10
Slide 11: Operating Segment Performance
Operating Segment Performance For the Full Year 2012 vs. 2011: Small Business Lending: • Revenue increased by 21% over 2011 to $25.4 million — Excluding the reversal of the fair value adjustment related to loans achieving sale status in 2011 of $3.4 million, 2012 revenue would have increased by 43.9
Slide 12: Small Business Finance
Small Business Finance FY2012 TotalOperatingRevenue:$131.1million SBF Revenue Trend FY 2012 SBF revenue was 19.4% of total operating revenue 2012 SBF revenue increased by 21% to $25.4 million from $21.0 million in 2011 S&P-rated commercial servicer; FDIC contract Very strong lending infrastructure w
Slide 13: Small Business Finance: Loan Sale Transaction Example
Small Business Finance DirectRevenue/ Expenseof a LoanSaleTransaction– An Example Key Variables in Loan Sale Transaction Resulting Revenue (Expense) Loan Amount $1,000,000 Associated Premium** $93,750 Guaranty Percent 75% Servicing Asset*** $18,630 Guaranteed Balance $750,000 Total Premium Income $1
Slide 14: Securitization Strategy
Securitization Strategy 3 securitized structures completed • March 2013 • December 2011 • December 2010 March 2013: completed securitization and sale of $20.9 million A-Rated securities through Guggenheim Securities • Collateral consisted of 113 loans with an aggregate principal balance of $23.6 mil
Slide 15: Small Business Finance: Loans Closed
Small Business Finance Loans Closed During the 12 months ended December 31, 2012, the Lender closed 104 loans, totaling $112.0 million, vs. 102 loans, totaling $97.1 million, in the 12 months ended December 31, 2011 We forecastthe Lenderto closebetween$150- $200million in 2013 15
Slide 16: Small Business Finance: Lending Pipeline
Small Business Finance As of March 25, 2013, the total Small Business Lending Pipeline has increased by $69.2 million, or 95.8% year over year: • Closed loans increased by $9.1 million, or 55.2% • Approved –Pending closing increased by $5.7 million, or 15.5% • Loans currently in underwriting have in
Slide 17: Small Business Finance: Servicing Portfolio
Small Business Finance The SBF servicing portfolioDecember – 31, 2012 vs. 2011: • NEWT portfolio increased by 23%; third-party servicing portfolio increased by 29% • Related servicing fee income on all portfolios increased by $3.8 million to $6.9 million, or 123%, for the 12 months ended December 31
Slide 18: Electronic Payment Processing
Electronic Payment Processing FY2012 TotalOperatingRevenue:$131.1million FY 2012 EPP revenue was 65.2% of total operating revenue 2012 EPP revenue increased by 4% to $85.5 million from $82.5 million in 2011 • Excluding impact of Durbin amendment, 2012 revenue increased by 9% over 2011 eCommerce: sin
Slide 19: 2013 - Enhancing Risk Management
2013 -Enhancing Risk Management Historically,Newtekhashadan excellentrecordof managingriskthrough both goodandbadtimesby continuallyenhancingour credit policiesand procedures NamedEdwardPetroskyasChiefCreditandRiskOfficerof the Holding Companyandall subsidiaries • Formerly serving the function of Ch
Slide 20: 2013 - Enhancing Revenue Management
2013 -Enhancing Revenue Management Randy Sagar Executive Vice President of Business Development Located in Louisville, Kentucky Sundeep ‘Sunny’ Dronawat Executive Vice President and Advisor to the Chairman Located in Louisville, Kentucky Tom Stier Senior Vice President and Western Region Manager Loc
Slide 21: Managed Technology Solutions
Managed Technology Solutions FY2012 TotalOperatingRevenue:$131.1million FY 2012 MTS revenue was 13.9% of total operating revenue 2012 MTS revenue decreased by 5% to $18.2 million from $19.2 million in 2011 This segment is being transformed to take advantage of shift to cloud-based business trends in
Slide 22: Shift to Linux-based Platforms
Shift to Linux-based Platforms NTS plans to launch Linux Apache and Linux Nginx platforms • Should capture additional market opportunities • NTS created associated control panels, service support and billing, which allows NTS to participate in growth of 100% of the market of new web design (vs. 33%
Slide 23: 2013 Revised Guidance
2013 Revised Guidance OperatingRevenue:midpoint of $148.2million, with a rangeof $145.1 million and $151.2 million, an increase over the previously issued midpoint of $147.0 million, and a 12.1% increase over FY 2012 revenue of $131.1 million PretaxIncome:midpoint of $11.5million, with a rangeof $10
Slide 24: Consolidated Guidance
Consolidated Guidance The Company met the high end of its 2012 diluted EPS guidance range of $0.14 -$0.15 per share Fullyear2013revisedguidanceincludesdilutedEPSrangeof $0.17- $0.19 per share, with a midpoint of $0.18 per share 24
Slide 25: Consolidated Guidance
Consolidated Guidance Full year 2013 guidance includes Modified EBITDA* midpoint of $20.9 million, with a range of $19.3 million and $22.4 million 25 *See slide 44 for definition of Modified EBITDA
Slide 26: 2013 Revised Segment Guidance
2013 Revised Segment Guidance Revenue by Segment Electronic Payment Processing Revenue: $90.4$94.1M - Managed Technology Solutions PretaxIncome:$8.2- $9.0M Revenue: $18.4$19.2M - Modified EBITDA*:$8.5- $9.3M PretaxIncome:$3.9- $4.7M ModifiedEBITDA*:$5.5- $6.3M Small Business Finance Revenue: $34.0$3
Slide 27: 2013 Revised Segment Guidance
2013 Revised Segment Guidance Electronic Managed Small Total Payment Technology Business All Corporate Business CAPCO Intercompany Processing Solutions Finance Other Activities Segments Segment Eliminations Total Low High Low High Low High Low High Low High Low High Low High Low High 2013 Full Year
Slide 28: Growth Strategy
Growth Strategy Increased • Remain #1 in Non-bank advertising Government Guaranteed Cross sell Lender and cross budget by • Grow Newtek Advantage 50% market Platform • Grow revenues between 9-11% organically Grow brand Continue to organically & via grow alliance www.thesba.com channels Corporate re-
Slide 29: Expanding Our Team of Professionals
Expanding Our Team of Professionals Edward Petrosky, Chief Credit Officer and Chief Risk Officer Edward is the former President and CEO of Hanover Community Bank. Edward has over 35 years of experience in credit and risk management in the financial services industry, including money center, regional
Slide 30: Expanding Our Team of Professionals
Expanding Our Team of Professionals Randy Sagar, Executive Vice President of Business Development Randy is a former partner in Financial Alliance and was the EVP of sales and marketing for National Processing Company of Kentucky (NPC) and its successor Bank of America Merchant Services, where he was
Slide 31: Expanding Our Team of Professionals
Expanding Our Team of Professionals Sundeep ‘Sunny’ Dronawat, Executive Vice President and Advisor to Chairman Sunny is the Co-Founder of Rural America Onshore Outsourcing and POS on Cloud. He has an MBA in Marketinganda Ph.D.in ChemicalEngineeringfrom Universityof Louisville.Sunnyis certifiedin Six
Slide 32: Geographic & Office Expansion
Geographic & Office Expansion New Office -Louisville, Kentucky • Led by Randy Sagar, with Mike Valerio and William Berry • Focus on developing the Independent Sales Agent (“ISA”) and Organization (“ISO”) electronic payment channels, as well as grow Newtek’s strategic alliance partner channel • Focus
Slide 33: Marketing Strategy
Newtek “The Small Business Authority’” Marketing Strategy Direct to SMB Strategy: Generate awareness of qualified small-business owners through a National prime-time television advertising campaign with a 50% increased marketing budget Indirect SMB Strategy: Targets Alliance Partners, Community Bank
Slide 34: Marketing Campaign - National Television Commercials
Marketing CampaignNational – Television Commercials On average, 190 or more monthly commercials which have aired on the following properties: • CNN • MSNBC • Fox News • Headline News • Fox Business • The Outdoor Channel CommercialscheduleprimarilyMondayto Thursdayfrom 5am- 11pm Improvement in Websit
Slide 35: Marketing Results Before & After TV Commercials
Marketing Results Before & After TV Commercials Average Weekday Referrals (Lending Only) Since start of campaign, the average number of daily referrals for our Lending products increased by 94%, from 18 to 35 referrals 35
Slide 36: Marketing Campaign Results
Marketing Campaign Results LendingReferrals– Q42011vs.Q42012 Lending referrals increased by over 200% compared with the year ago quarter 36
Slide 37: Visitor Trend to www.thesba.com
Visitor Trend to www.thesba.com Total Visitors and Unique Visitors for Q4 2011 vs. Q4 2012 As a result of our Direct Marketing Initiatives: • Total Quarterly Visitors* increased by 148% in Q4’12 vs. Q4’11 • Total Quarterly Unique Visitors** increased by 134% for Q4’12 vs. Q4’11 *Representsthe total
Slide 38: thesba.com 2.0
“The Small Business Authority’” Hh 2 thesba.com 2.0 = D= BOX | dipnemecserces 1. « jl 2/ Newtek 222" axm ae CEE “The Small Business Authority” — Small Business Loans Payroll Merchant Processing Website Design insurance ‘iter speaking with 3 other vendors | felt the most comfortable with Newtek, they
Slide 39: The Newtek Advantage
The Newtek Advantage™ The Newtek Advantage™ is a mobile real-time SMB management platform that puts all of a business’s critical transactions and economic, eCommerce and web site traffic data on a smartphone,tablet, laptop or PC.TheNewtekAdvantage™providesthe intelligence that businesses require and
Slide 40: Publicly Traded Comparable Companies
Publicly Traded Comparable Companies MedallionFinancialCorp(TAXI) Heartland Payment Systems (HPY) Web.com Group, Inc. (WWWW) Cbeyond, Inc. (CBEY) 8 x 8, Inc. (EGHT) ReachLocal, Inc. (RLOC) Stamps.com, Inc. (STMP) Marchex, Inc. (MCHX) Vistaprint, NV (VPRT) Digital River (DRIV) announces purchase of L
Slide 41: Investment Summary
Investment Summary Publicly traded Company since 2000 Management’s interests aligned with shareholders • CEO alone owns over 14.5% of outstanding shares* Trades at slightly more than 3x 2013 forecasted Modified EBITDA** • 2013 forecasted Modified EBITDA** of $20.9 million, an increase of approximate
Slide 42: Key Statistics NASDAQ: NEWT
Key StatisticsNASDAQ: – NEWT Share Statistics (USD) ………………………...................................... Financial Highlights* ………………………...................................... Stock Price (at 3/26/13) $1.85 Revenue $148.2M 52-Week Range $1.14-$2.21 Pre-tax Income $11.5M Common Shares O/S 36.7M Diluted EPS
Slide 43: Financial Review
Financial Review Jennifer C. Eddelson CAO -
Slide 44: Non-GAAP Financial Measures
Non-GAAP Financial Measures In evaluating its business, Newtek considers and uses modified EBITDA as a supplemental measure of its operating performance. The Company defines modified EBITDA as earnings before income from tax credits, interestexpense,taxes,depreciation andamortization,stockcompensati
Slide 45: FY 2012 Actual vs. FY 2011 Actual
FY 2012 Actual vs. FY 2011 Actual Revenue For Revenue For Pretax Income Pretax Income MODIFIED MODIFIED The Year The Year (Loss) For The (Loss) For The EBITDA For The EBITDA For The Ended Ended Year Ended Year Ended Year Ended Year Ended December 31, December 31, December 31, December 31, December 3
Slide 46: 2013 Revised Segment Guidance
2013 Revised Segment Guidance Electronic Managed Small Total Payment Technology Business All Corporate Business CAPCO Intercompany Processing Solutions Finance Other Activities Segments Segment Eliminations Total Low High Low High Low High Low High Low High Low High Low High Low High 2013 Full Year
Slide 47: 2013 Previous Segment Guidance
2013 Previous Segment Guidance Electronic Managed Small Total Payment Technology Business All Corporate Business CAPCO Intercompany Processing Solutions Finance Other Activities Segments Segment Eliminations Total Low High Low High Low High Low High Low High Low High Low High Low High 2013 Full Year
Slide 48: Addenda
HW 2/ Addenda
Slide 49: Modified EBITDA Reconciliation
Modified EBITDA Reconciliation Modified EBITDA Reconciliation from Pretax Income (Loss) For the year ended December 31, 2012 Net Change in Fair Value of Credits in Lieu of Cash Other than and Notes Temporary Amortization of Pretax Income Payable in Decline in Deferred 2011 Lease Depreciation 2012 In
Slide 50: Modified EBITDA Reconciliation
Modified EBITDA Reconciliation Modified EBITDA Reconciliation from Pretax Income (Loss) For the year ended December 31, 2011 (as Restated) Net Change in Fair Value of Credits in Lieu of Cash and Notes Other than Payable in Temporary 2011 Pretax Income Credits in Decline in Lease Deferred Depreciatio
Newtek Business Services — FY2012 Earnings Presentation on 6ix