Newtekone, Inc. · NASDAQ:NEWT
Newtekone — Newtek Business Services — Q3 2009 Earnings Presentation
44 slides from Newtekone's earnings presentation, Nov 12, 2009
Slide 1: Newtek Business Services, Inc. Third Quarter 2009 Financial Results Conference Call
Exhibit 99.2 Newtek Business Services, Inc. NASDAQ: NEWT Third Quarter 2009 Financial Results Conference Call November 11, 2009, 4:15 PM Hosted By: Barry Sloane, CEO and Chairman Seth A. Cohen, CFO Investor Relations Contact: Barry Sloane 212-356-9500 bsloane@newtekbusinessservices.com
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: Third Quarter 2009 Highlights
Third Quarter 2009 Highlights Announced $782k post tax net income Improved 2009 annual guidance from $(7.4) to $(5.2) million pretax net loss to $(5.1) to $(4.7) million pretax net loss Announce 2010 annual guidance of $(2.4) million pretax net loss to $2.3 million pretax net income Wisconsin and Lo
Slide 4: Third Quarter 2009 Highlights
Third Quarter 2009 Highlights SBA lending business dynamics Government guaranteed pricing Portfolio behavior Began originations again Securitization market begins to thaw New alliance partners queue up Is this the beginning of a reversal in lending Asset management – servicing income New origination
Slide 5: Third Quarter 2009 Conference Call Agenda
Third Quarter 2009 Conference Call Agenda Primary Corporate Initiatives and Strategy Financial Results Snapshot Development in EPP & Web Hosting Segments Web Hosting, EPP & eCommerce Initiatives Small Business Finance Initiatives Cost Reduction Measures Q3 2009 corporate expenses reduced $366,000 an
Slide 6: Third Quarter 2009 Conference Call Agenda
Third Quarter 2009 Conference Call Agenda Projections for 2010 cash flow positive Lender projections for Q4 2009 and variables Repayments of Capco debt FDIC contract Variables for success in EPP Variables for success in Web Hosting Variables for success in cash flow & expense control 6
Slide 7: Continuation of our Strategy & Mission
Continuation of our Strategy & Mission 1. What do we offer for our clients? • Reduce their expenses • Grow their revenues • Reduce their risk 2. Become the authority for small businesses 3. 7 core offerings: a) Primary: lending, EPP, insurance, hosting applications b) Secondary: web design developme
Slide 8: What is a Small Business
What is a Small Business 1. SBA definition 2. Independent business owners 3. Examples: a) 75 site parking garage b) Single practitioner consultant c) Doctor group d) Restaurant 8
Slide 9: What Do We Do Well
What Do We Do Well 1. Acquiring the client a) Alliance b) Direct model 2. Servicing the client 3. Cross sell and cross market a) Development 4. Primary goal is to be the small business authority 9
Slide 10: Third Quarter 2009 Financial Results
Third Quarter 2009 Financial Results $782 thousand net income for Q3 2009 Versus $2.8 million net loss for Q3 2008 Due to: • A release of an income tax valuation allowance • Under a new accounting pronouncement effective in 2009 (SFAS 160 “Noncontrolling Interests in Consolidated Financial Statement
Slide 11: Third Quarter 2009 Financial Results
Third Quarter 2009 Financial Results Q3 2009 vs. Q3 2008 core operating segment revenue: Electronic Payment Processing: $18.1 million - up 13% over Q3 2008 Web Hosting: $4.7 million - up 3% over Q3 2008 Small Business Finance: $1.5 million – down (10)% over Q3 2008 11
Slide 12: Cash Position
Cash Position $24.1 million in cash and cash equivalents and restricted cash at September 30, 2009, down from $25.2 million at December 31, 2008. Equates to $0.67 cash per share. $5.6 million of net cash provided by operating activities in the first nine months of 2009 versus $(9.9) million of net c
Slide 13: Development in EPP
Development in EPP Q3 2009 EPP revenue up 13% over Q3 2008 EBITDA margin 8.3% for Q3 2009 compared to 10.5% for Q3 2008 Merchant attrition Cash flow positive business Significant operating leverage Potential to increase market share 2009 EPP segment EBITDA forecast: $6.0 to $6.1 million EPP segment
Slide 14: Web Hosting Initiatives
Web Hosting Initiatives Q3 2009 versus Q3 2008: Revenue up 3% Pre-tax net income up 14% Continued growth despite challenging market Continue to invest in Web Hosting segment to support future growth Continue to evaluate expenditures versus productivity, particularly in marketing, seeking additional
Slide 15: Web Hosting & EPP Focus
Web Hosting & EPP Focus One stop shop Gateway, hosting, merchant processing, shopping cart Everything you need NewtPay NewtPay Pro TechExec Reseller Combined marketing and client service focus 15
Slide 16: Positive Trends for SBA Lending
Positive Trends for SBA Lending 90% Government guaranty up from 75% for 2009 Significantly reduced government guaranteed lender competition Conventional loan market not very competitive Better quality loans at better prices 16
Slide 17: Positive Trends for SBA Lending
Positive Trends for SBA Lending 75% vs. 90% Government Guaranty of SBA 7(a) Loans Loan Size $ 350,000 $ 1,500,000 Servicing 1.00% 1.00% Premium 110.00% 110.00% 75% 90% 75% 90% GAAP Premium Received $ 21,599 $ 31,627 $ 104,216 $ 150,679 Cash Premium Received $ 26,250 $ 31,500 $ 112,500 $ 135,000 Serv
Slide 18: Small Business Finance
Small Business Finance Buying sub & non-performing portfolios Bidding on SBA servicing and sub-servicing contracts We have very good lending infrastructure This infrastructure is valuable more so today The most decimated sector may offer the best opportunity for Newtek shareholders 18
Slide 19: Small Business Finance
Small Business Finance 110 pricing on governments Signed LOI with major money center lender bank on lender FDIC contract Q4 2009 $250k anticipated loss vs. $800k loss previously expected 19
Slide 20: Cost Reduction Measures
Cost Reduction Measures Significantly reduced expenses in Corporate Segment; efforts to reduce or hold expenses in other segments Cost reductions are expected to equate to a minimum $4.0 million of cash savings in 2009 Plan to continue to review all segments to recognize additional cost reductions i
Slide 21: Payroll Reductions
Payroll Reductions “Run rate” analysis based on semi-monthly pay snapshot Headcount 2/15/08 10/15/09 10/15/09 Headcount Payroll % Payroll % Headcount 2/15/08 Payroll Headcount Payroll Reduction Reduction Reduction Reduction EPP Segment 79 $119,059 67 $119,515 12 ($456) 15.2% -0.4% Web hosting segmen
Slide 22: Payroll
Payroll February 15, 2008 – Payroll register Headcount 364 October 15, 2009 – Payroll register Headcount 279 Reduction of 85 or 23.4% 22
Slide 23: Payroll Annualized Run-rate
Payroll Annualized Run-rate February 15, 2008 $20.2 million October 15, 2009 $14.2 million 29.8% Dollar Reduction 23
Slide 24: Brownsville - Update
Brownsville - Update Occupied new space officially on March 15, 2009 15,000 sq ft facility with the capacity for 145 positions, constructed with $1.25m Federal Grant, co-located with University of Texas – Brownsville (UTB) 24/7 bi-lingual processing center for all lines of business UTB provides sign
Slide 25: What is our Growth Strategy Going Forward?
What is our Growth Strategy Going Forward? Emphasize cross-selling and cross-marketing into the customer base which we are now doing Continue to grow alliance channels as outsourcing of our services is attractive to banks, credit unions, and other Improve our cash flow Reduce Capco exposure Acquisit
Slide 26: Positive Capco and Overhead Trends
Positive Capco and Overhead Trends Wilshire Partners (Florida) note of $37.4 million matured (previously defeased) Return of insurance premium of $250k to Wilshire Partners (Florida) received Operating agreement, monitoring agreement, audited financials, tax return, and office real estate all dissip
Slide 27: Marketing Focus
Marketing Focus
Slide 28: Marketing Adjustments
Marketing Adjustments Messaging What makes us unique? Our relationship with the client. We now own the client. We are calling our clients. Exceptionally well received. We are their partners!!! Increase Sales Reduce Expenses Reduce Risk Financing EPP Insurance Coverage SEO Payroll Cost PCI Compliance
Slide 29: Marketing Adjustments
Marketing Adjustments Product Mix Product Revenue Reduce Reduce Growth Expense Risk EPP / E-Commerce Lending Hosting Storage Web Design SEO Payroll Insurance 29
Slide 30: Marketing Adjustments
Marketing Adjustments Advertising Newtek buys radio advertising on WFAN Boomer and Carton can be heard live in seven states in the Northeast and with online live internet streaming of their show, they can be heard in every state Audience of approximately 2.5 million during prime drive time (6am to10
Slide 31: Revised 2009 Segment Guidance
Revised 2009 Segment Guidance In millions of dollars Electronic Small Payment Web Business All Corporate Processing Hosting Finance Other Activities Low High Low High Low High Low High Low High 2009 Full Year Revenue 68.2 68.5 18.9 19.0 7.0 7.1 2.2 2.2 3.2 3.2 Pretax Net Income (Loss) 4.3 4.4 4.0 4.
Slide 32: Annual Pretax Loss Trend
Annual Pretax Loss Trend $(17.1)mm $(12.5)mm $(4.9)mm 0 -6 Pretax 2007 Actual Net Loss -12 2008 Actual 2009 Forecast -18 Midpoint 2007 Actual 2008 Actual 2009 Forecast Midpoint 32
Slide 33: Consolidated Annual Pretax Loss
Consolidated Annual Pretax Loss Year Amount (in millions) 2007 (17.1) 2008 (12.5) 2009 (Forecast range (4.9) midpoint) 33
Slide 34: Financial Review
Financial Review Seth A. Cohen - CFO
Slide 35: Non-GAAP Financial Measures
Non-GAAP Financial Measures In evaluating its business, Newtek considers and uses EBITDA as a supplemental measure of its operating performance. The Company defines EBITDA as earnings before interest expense, taxes, depreciation and amortization. Newtek uses EBITDA as a supplemental measure to revie
Slide 36: Cash Position
Cash Position In thousands of dollars Balance at Balance at September 30, 2009 December 31, 2008 Cash and cash equivalents $15,572 $16,852 Restricted cash $8,548 $8,366 SBA loans held for sale - $6,133 Notes payable $16,801 $25,998 2009 nine month cash flow: Net cash provided by operating activities
Slide 37: Q3 2009 Actual vs. Q3 2008 Actual
Q3 2009 Actual vs. Q3 2008 Actual In millions of dollars Revenue For Revenue For Pretax Net Pretax Net EBITDA For EBITDA For The Quarter The Quarter Income (Loss) Income (Loss) The Quarter The Quarter Ended Ended For The Quarter For The Quarter Ended Ended September 30, September 30, Ended Ended Sep
Slide 38: Original 2009 Segment Guidance
Original 2009 Segment Guidance In millions of dollars Electronic Small Payment Web Business All Corporate Processing Hosting Finance Other Activities Low High Low High Low High Low High Low High 2009 Full Year Revenue 63.5 67.5 18.6 19.6 6.3 6.8 1.0 1.4 2.6 2.6 Pretax Net Income (Loss) 3.7 4.4 4.0 4
Slide 39: Revised 2009 Segment Guidance
Revised 2009 Segment Guidance In millions of dollars Electronic Small Payment Web Business All Corporate Processing Hosting Finance Other Activities Low High Low High Low High Low High Low High 2009 Full Year Revenue 68.2 68.5 18.9 19.0 7.0 7.1 2.2 2.2 3.2 3.2 Pretax Net Income (Loss) 4.3 4.4 4.0 4.
Slide 40: 2010 Segment Guidance
2010 Segment Guidance In millions of dollars Electronic Small Payment Web Business All Corporate Processing Hosting Finance Other Activities Low High Low High Low High Low High Low High 2010 Full Year Revenue 76.6 78.8 19.2 20.2 9.4 11.5 1.2 1.5 1.4 1.4 Pretax Net Income (Loss) 4.1 5.0 4.0 5.0 (1.0)
Slide 41: Going Forward: 2009/2010
Going Forward: 2009/2010 Barry Sloane - CEO
Slide 42: Questions & Answers
Questions & Answers
Slide 43: Addendum
Addendum
Slide 44: EBITDA Reconciliation
EBITDA Reconciliation EBITDA Reconciliation from Net Income (Loss) In millions of dollars For The Three Months Ended September 30, 2009 Pretax Income Interest Expense Depreciation and Q3 2009 (Loss) for Q3 2009 for Q3 2009 amortization for Q3 2009 EBITDA Electronic Payment 1.088 - 0.421 1.509 Proces
Newtek Business Services — Q3 2009 Earnings Presentation on 6ix