Newtekone, Inc. · NASDAQ:NEWT
Newtekone — Newtek Business Services — FY2008 Earnings Presentation
49 slides from Newtekone's earnings presentation, Mar 20, 2009
Slide 1: FY 2008 Financial Results Conference Call
Newtek Business Services, Inc. NASDAQ: NEWT FY 2008 Financial Results Conference Call March 18, 2009, 4:15 PM Hosted By: Barry Sloane, CEO and Chairman Seth A. Cohen, CFO Investor Relations Contact: Barry Sloane 212-356-9500 Exhibit 99.2 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: FY 2008 Conference Call Agenda
FY 2008 Conference Call Agenda Primary Corporate Initiatives and Strategy Financial Results Snapshot Momentum Continues in EPP & Web Hosting Segments Web Hosting, EPP & eCommerce Initiatives Small Business Finance Initiatives Cost Reduction Measures FY 2008 corporate expenses reduced $1,512,000 vs.
Slide 4: Strategic Plan, Mission, & Execution Strategies
Strategic Plan, Mission, & Execution Strategies Continue strategy and mission statement as outlined in our 10K Expense Reduction Marketing Focus Brownsville growth as an efficient provider Trends in business
Slide 5: Continuance of our Strategy & Mission
Continuance of our Strategy & Mission 1. We are outperforming others in the industry due to the business model 2. We have strategically avoided pitfalls of the other companies • Buying or acquiring merchant portfolios with debt • Buying and acquiring Web Hosts with debt 3. We have improved our cash
Slide 6: FY 2008 Financial Results
FY 2008 Financial Results 2008 vs. 2007 core operating segment revenue: Electronic Payment Processing: $63.4 million - up 15% over Web Hosting: $18.1 million - up 11% over 2007 Small Business Finance: $7.4 million - down (38)% over 2008 pre-tax loss of ($12.5) million Missed previously stated full y
Slide 7: Cash Position
Cash Position $25.2 million in cash and cash equivalents and restricted cash at December 31, 2008, down from $38.3 million at December 31, 2007. Equates to $0.71 cash per share. Invested approximately $10.7 million into SBA 7(a) loans, factored receivables, capco investments and web hosting equipmen
Slide 8: Momentum Continues in EPP
Momentum Continues in EPP 2008 EPP revenue up 15.3% over 2007 EBITDA margin 11.2% for 2008 compared to 8.4% for 2007 Merchant attrition Cash flow positive business Significant operating leverage Potential to increase market share 2009 EPP segment EBITDA forecast: $5.5 to $6.1 million EPP segment doe
Slide 9: Web Hosting Initiatives
Web Hosting Initiatives 2008 Web Hosting revenue up 11.4% over 2007 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, in the Web Hosting segment seeking addi
Slide 10: Small Business Finance
Small Business Finance 2008 revenue decreased by 38.0% to $7.4 million over 2007 primarily as a result of: A reduction in loan originations during 2008 directly attributable to the adverse conditions in the current credit environment as well as price deterioration in the SBA secondary market. Manage
Slide 11: Small Business Finance
Small Business Finance Government guaranteed Loan participation market was “frozen” in the second half of 2008. It is now “thawing”. Prime rate - LIBOR spread caused problems SBA 7A Loan Program is “rate-capped” Blimpies vs. GE analogy SBA Loan volumes Washington based solutions LIBOR Loan GE Line o
Slide 12: 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
Slide 13: 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 Are we, or will we be, the last “man” standing? The most decimated sector may offer the best oppor
Slide 14: Negative Consequences for SBA Market
Negative Consequences for SBA Market Difficult but not impossible financing options with choice Existing portfolio with appropriate reserves but what does the economy have in store for our portfolio Collateral value under pressure and small businesses under pressure Significant net worth on our lend
Slide 15: Cost Reduction Measures
Cost Reduction Measures Significantly reduced expenses in Corporate Segment; efforts to reduce or hold expenses in other segments Discontinued three service lines and associated headcount Cost reductions are expected to equate to a minimum $4.0 million of cash savings in 2009 Plan to continue to rev
Slide 16: Payroll Reductions
Payroll Reductions “Run rate” analysis based on semi-monthly pay snapshot
Slide 17: Expense Reduction
Expense Reduction Payroll Headcount Consolidated 2/15/08 Payroll 2/15/09 payroll 2/15/08 Payroll 2/15/09 payroll 90 reduction or 24.7%
Slide 18: Payroll
Payroll February 15, 2008 – Payroll register Headcount 364 February 15, 2009 – Payroll register Headcount 274 90 reduction or 24.7%
Slide 19: Payroll Annualized Run-rate
Payroll Annualized Run-rate February 15, 2008 $20.170 million February 15, 2009 $14.443 million 28.4% Dollar Reduction
Slide 20: Expense Reduction
Expense Reduction Annualized Consolidated Payroll 2/15/08 run rate 2/16/09 run rate 2/15/08 run rate 2/16/09 run rate 28.4% decline 20.1 14.43
Slide 21: Corporate Segment Expense Reductions
Corporate Segment Expense Reductions $3 million in payroll Merged IT Dept into Web Hosting Division Shifted marketing expenses to cross selling and database mining out of Brownsville and reduced significant expense as new initiative is more cost effective Reduced real estate exposure Reduced expense
Slide 22: Brownsville Growth as an Efficient provider
Brownsville Growth as an Efficient provider Build out finished (1.25mm Federal Grant) 15K square ft facility at $3.0 per square ft. Brian Flax ( Senior VP of Operations ) moves to Brownsville April 1 CDIA functional as of December 2008 Outbound calling personnel launched on virgin initiative Decembe
Slide 23: Brownsville Growth as an Efficient provider
Brownsville Growth as an Efficient provider Early results show clients like the initiative Cost effective, efficient processing, great customer service and marketing center
Slide 24: What is our Growth Strategy Going Forward?
What is our Growth Strategy Going Forward? Acquisitions within our footprint Utilize balance sheet and strategic partner financings 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 attractiv
Slide 25: Marketing Focus
Marketing Focus
Slide 26: Marketing Adjustments
Marketing Adjustments Focus since inception has been on inbound opportunity from contracted base of alliance partners. October 2008 to current: Degradation in flow from traditional “Fortune 100” sources : • AIG • Merrill Lynch • Morgan Stanley Increase in flow from “non-Fortune 100” traditional sour
Slide 27: Marketing Adjustments
Marketing Adjustments Marketing Adjustments Required Client Acquisition Messaging Product Mix Channel Marketing/Advertising Staffing
Slide 28: Marketing Adjustments
Marketing Adjustments Client Acquisition (leverage CDIA) Employees, all divisions, submitting referrals from inbound customer sales and service calls (implemented January 2009) Newtek Processing Center (NPC) beginning outbound initiatives to existing Newtek client base (implemented January 2009) New
Slide 29: Marketing Adjustments
Marketing Adjustments Messaging Focus on “reducing costs and operational expenses” Business Owners Policy Payroll Worker Compensation (Pay As You Go) EPP Processing Costs and Processing Methodology eComm/hosting/gateway/shopping carts – “one stop branded shop” Focus on “net new incremental revenue”
Slide 30: Marketing Adjustments
Marketing Adjustments Product Mix Shift in “lending” from SBA/LOC/BCC to Receivable Financing and Cash Advance Focus on complimentary multiple sales to one client EPP and Cash Advance Payroll and Worker Comp/Health and Benefits Hosting and EPP • eComm Hosting (April th target – MS/TechExec)
Slide 31: Marketing Adjustments
Marketing Adjustments Advertising Branding and messaging on every phone call, e-mail, correspondence, packaging and inbound voice messaging Promotion of brand and select service offerings through CATV advertising leveraging existing ads (trial program – 90 days) Leverage assets of alliances for prom
Slide 32: Trends In Business
Trends In Business 1. Macro a. Dow Jones drops below - Down 12% in February b. Warren Buffet states “ The economy will be in shambles throughout 2009”. c. AIG requires another 30 Billion on top of 150 Billion d. GE cuts dividend, stock down 40% from the start of this year e. Dell trades at cash plus
Slide 33: Trends In Business
Trends In Business 2. Negative Micro a. Competitive pricing and repricing pressures margin b. Marginal clients are failing and going out of business and increasing attrition c. Health care costs are increasing d. Energy costs are increasing e. Employees personal and financial stresses are affecting
Slide 34: Trends In Business
Trends In Business 3. Positive Micro Trends a. Repricing can lead to new opportunity and gain in market share b. Newtek morale is very high c. Brownsville and cross selling is beginning to demonstrate processing efficiencies d. Brownsville and cross selling is developing marketing opportunities e. M
Slide 35: 2009 Segment Guidance
2009 Segment Guidance *Note: totals may not add due to rounding 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 Preta
Slide 36: Pretax Earnings Trend
Pretax Earnings Trend 2007 Actual 2008 Actual 2009 Forecast 2007 Actual 2008 Actual 2009 Forecast Pretax Net Loss 17.1mm 12.5mm 6.3mm
Slide 37: Consolidated Pretax Loss
Consolidated Pretax Loss Year Amount (in millions) 17.1 12.5 2009 (Forecast range midpoint) 6.3
Slide 38: Financial Review
Financial Review Seth A. Cohen - CFO
Slide 39: 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 40: FY 2008 Actual vs. FY 2007 Actual
FY 2008 Actual vs. FY 2007 Actual Revenue For The Year Ended December 31, 2008 Actual Revenue For The Year Ended December 31, 2007 Actual Pretax Net Income (Loss) For The Year Ended December 31, 2008 Actual Pretax Net Income (Loss) For The Year Ended December 31, 2007 Actual EBITDA For The Year Ende
Slide 41: FY 2008 Guidance vs. FY 2008 Actual
FY 2008 Guidance vs. FY 2008 Actual In millions of dollars Revenue Guidance Revenue Actual Pretax Net Income (Loss) Guidance Pretax Net Income (Loss) Actual EBITDA Guidance EBITDA Actual Electronic Payment Processing 63.6 – 63.9 63.356 4.6 – 4.8 4.338 6.9 – 7.1 7.068 Web Hosting 18.0 – 18.1 18.088 3
Slide 42: Q4 2008 Actual vs. Q4 2007 Actual
Q4 2008 Actual vs. Q4 2007 Actual Revenue Q4 2008 Actual Revenue Q4 2007 Actual Pretax Net Income (Loss) Q4 2008 Actual Pretax Net Income (Loss) Q4 2007 Actual EBITDA Q4 2008 Actual EBITDA Q4 2007 Actual Electronic Payment Processing 16.222 15.331 0.977 (0.155) 2.028 0.398 Web Hosting 4.715 4.226 1.
Slide 43: Q4 2008 Guidance vs. Q4 2008 Actual
Q4 2008 Guidance vs. Q4 2008 Actual Revenue Guidance Revenue Actual Pretax Net Income (Loss) Guidance Pretax Net Income (Loss) Actual EBITDA Guidance EBITDA Actual Electronic Payment Processing 16.5 – 16.8 16.222 1.3 – 1.5 0.977 1.9 – 2.1 2.028 Web Hosting 4.6 – 4.7 4.715 0.8 – 0.9 1.086 1.6 – 1.7 1
Slide 44: 2009 Segment Guidance
2009 Segment Guidance *Note: totals may not add due to rounding 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 Preta
Slide 45: Going Forward: 2008
Going Forward: 2008 Barry Sloane - CEO
Slide 46: Questions & Answers
Questions & Answers
Slide 47: Addendums
Addendums
Slide 48: Pretax Income (Loss)
Pretax Income (Loss) for 2008 Interest Expense for 2008 Depreciation and amortization for 2008 EBITDA Electronic Payment Processing 4.338 0.001 2.729 7.068 Web Hosting 3.335 0.083 3.230 6.648 Small Business Finance (6.148) 2.107 1.123 (2.918) All Other (1.994) - 0.095 (1.899) Corporate Activities (5
Slide 49: Pretax Income (Loss)
Pretax Income (Loss) for Q4 2008 Interest Expense for Q4 2008 Depreciation and amortization for Q4 2008 Q4 2008 EBITDA Electronic Payment Processing 0.977 0.001 1.050 2.028 Web Hosting 1.086 0.038 0.789 1.913 Small Business Finance (2.361) 0.668 0.260 (1.433) All Other (0.468) - 0.024 (0.444) Corpor
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