Newtekone, Inc. · NASDAQ:NEWT
Newtekone — Newtek Business Services — Q1 2014 Earnings Presentation
35 slides from Newtekone's earnings presentation, May 7, 2014
Slide 1: Newtek Business Services Q1 2014 Financial Results Conference Call
Exhibit 99.1 Newtek Business Services, Inc. “The Small Business Authority®” First Quarter 2014 Financial Results Conference Call May 7, 2014 4:15pm ET Hosted by: Barry Sloane, President & CEO NASDAQ: NEWT Jennifer Eddelson, EVP & CAO www.thesba.com Investor Relations Public Relations Newtek Investor
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: Business Development Company
Business Development Company The Company expects to present to its shareholders a proposal to convert to a Business Development Company (“BDC”) once we are cleared to do so by the SEC In addition, the Company has filed preliminary materials to conduct a public offering of up to $50 million of the sh
Slide 4: Q1 2014 Financial Highlights
Q1 2014 Financial Highlights Reaffirmed 2014 consolidated guidance • Expect double-digit top-and bottom-line percentage growth in 2014 Adjusted EBITDA was $4.8 million; a year-over-year increase of 10.6% Operating revenues were $36.1 million; a year-over-year increase of 5.7% Pretax net income was $
Slide 5: Q1 2014 Operational Highlights
Q1 2014 Operational Highlights Originated $45.7 million in loans, a 31.2% year-over-year increase • Expect to originate between $240-$260 million in loans in 2014 Lender on a run rate to receive over $6.0 billion in referrals for 2014, versus the $4.4 billion in referrals received in 2013 Total loan
Slide 6: Company Reduces Cost of Capital
Company Reduces Cost of Capital Potential BDC equity raise Potential $20 million facility with Capital One Bank to refinance Summit Capital Partners debt Potential closing of $75 million Goldman Sachs small business lending warehouse line 6
Slide 7: Building Our Senior Executive Team
Building Our Senior Executive Team RichardRebetti,Presidentand ChiefOperatingOfficerof NewtekTechnology Services • Over 20 years’experience both business development and executive operations of high technology and communication companies • Former Chief Operating Officer of Data Storage Corporation a
Slide 8: Reaffirmed 2014 Guidance
Reaffirmed 2014 Guidance* Expect double-digit top- and bottom-line percentage growth in 2014 Operating Revenue: • Midpoint of $161.0 million, with a range of $154.0 million and $168.0 million • Increase of 12.1% over 2013 revenue of $143.6 million Pretax Income: • Midpoint of $13.5 million, with a r
Slide 9: Consolidated Balance Sheet
Consolidated Balance Sheet Selected Items Balance Balance $ in thousands March 31, 2014 Dec 31, 2013 Total Cash & Cash Equivalents* $20,803 $29,385 Total Assets $192,448 $198,612 Total Liabilities $113,949 $121,603 Total Equity $78,499 $77,009 9 *Includes restricted cash of $10.6 million at March 31
Slide 10: Small Business Finance
Small Business Finance Newtek Business Service, Inc. Q12014TotalOperatingRevenue$36.1millio : n Q1 2014 SBF revenue was 27.8% of total operating revenue Q1 2014 SBF revenue increased by 34.8% to $10.0 million Funded $45.7 million in Q1 2014, a 31.2% increase year-over-year • Company on track to orig
Slide 11: Loan Sale Transaction
Loan Sale Transaction DirectRevenue/ Expenseof a LoanSaleTransaction– An Example Key Variables in Loan Sale Transaction Resulting Revenue (Expense) Loan Amount $1,000,000 Associated Premium** $93,750 Guaranteed Balance (75%) $750,000 Servicing Asset*** $18,630 Unguaranteed Balance (25%) $250,000 Tot
Slide 12: Loan Sale Transaction
Loan Sale Transaction Net CashCreatedin LoanSaleTransaction– An Example Key Variables in Loan Sale Transaction Net Cash Created Pretax Loan Amount $1,000,000 Guaranteed Balance $750,000 Guaranteed Balance (75%) $750,000 Premium Received on $93,750 Guaranteed Balance** Unguaranteed Balance (25%) $250
Slide 13: Comparative Loan Portfolio Data
Comparative Loan Portfolio Data (12/31/10 vs. 3/31/2014) Loan Characteristic As of 12/31/10 As of 3/31/14 Loan Characteristic As of 12/31/10 Loan Characteristic As of 3/31/14 Business Type: Existing Businesses 53.93% 79.57% Industry: Industry: Business Acquisition 25.89% 13.45% Restaurant 10.60% Res
Slide 14: Servicing Portfolio
Servicing Portfolio $1,068.7 $521.5 $547.3 $546.4 $379.2 $167.2 NEWT Loans* Servicing Other Loans* Total Loans* Q1 2013 Q1 2014 TheSBFservicingportfolio – Q12013vs.Q12014 • Total servicing portfolio increased by 95.6% to $1.1 billion Newtek portfolio increased by 37.5% Third-party servicing portfoli
Slide 15: Electronic Payment Processing
Electronic Payment Processing Newtek Business Services, Inc. EPP Revenue Trend Q12014TotalOperatingRevenue$36.1million : $24 $21.7 $21.5 $20.1 $20.6 $20 EPP Revenue $16 $21.5M $12 $8 $4 $0 Q1 2014 EPP revenue was 59.7% of total operating revenue Q1 '11 Q1' 12 Q1 '13 Q1' 14 Q1 2014 EPP revenue decrea
Slide 16: Electronic Payment Processing
Electronic Payment Processing Growth in business depends on: • Execution of Point of Sale (“POS”) in the Cloud Strategy • Execution of EuroPay, Mastercard® and Visa®(“EMV”) Strategy • Growthof NewtekAdvantage™ platform • Successful integration of our EPP product into The Newtek Advantage™ – Digital
Slide 17: Managed Technology Solutions
Managed Technology Solutions Newtek Business Services, Inc. MTS Revenue Trend Q12014TotalOperatingRevenue$36.1million : $4.8 $5 $4.7 $4.4 $4.1 $4 MTS $4.1M $3 $2 $1 Q1 2014 MTS revenue was 11.2% of total operating revenue $- Q1' 11 Q1' 12 Q1' 13 Q1' 14 Q1 2014 MTS revenue decreased by 7.7% to $4.1 m
Slide 18: Managed Technology Solutions
Managed Technology Solutions Results attributable to: • Decrease in the number of lower-priced shared hosting plans • Decrease in the number of higher-priced dedicated hosting plans • Maintained investment in software development costs given lower revenues Key to turnaround success: • Execute on hyp
Slide 19: Newtek: 2014 and Beyond
Newtek: 2014 and Beyond To further our positionasTHEbrand,the authoritativepresence,that independent business owners depend on for business and financial products and services Is our operating model more similar to Walmart or Amazon? Walmart • We control the service experience: 24/7/365 • We take ca
Slide 20: Positioned as a FinTech Company
Positioned as a FinTech Company Proprietary state-of-the-art web-based technology, NewTracker® allows cost- effective client acquisition • NewTracker®technology positions Newtek as a FinTech Company • To date have received 500,000+ referrals from independent business owners through NewTracker® • Fin
Slide 21: Positioned as a FinTech Company
Positioned as a FinTech Company All-in-one e-Commerce offering • Secure proprietary gateway • Web Design • Secure web hosting in the Cloud • We are the merchant processor • Data protection and secure payments Payroll • Health & Benefits • Worker’s Compensation and P&C • Payroll in the Cloud Payroll
Slide 22: Services in the Cloud Through The Newtek Advantage
Services in the Cloud Through The Newtek Advantage™ Current working modules include: • eCommerce in the Cloud • Payroll in the Cloud • Web hosting in the Cloud • Manage a business from a mobile device, i.e. Tablet or Smartphone Intend to add modules including: • Insurance Agency in the Cloud • Cloud
Slide 23: Marketing Strategy
Marketing Strategy Continue branding of The Small Business Authority® • Present Company to the independent business audience as the authoritative presence in the small- and medium-sized business market for all their business and financial product and service needs Expansion of national TV advertisin
Slide 24: Competition
Competition Publicly Traded Comparables Intuit, Inc. (INTU) Digital River, Inc. (DRIV) Heartland Payment Systems, Inc. (HPY) Vantiv, Inc. (VNTV) JetPay, Inc. (JTPY) formerly UBPS Web.com Group, Inc. (WWWW) Endurance International Group, Inc. (EIGI) Rackspace Holdings, Inc. (RAX) Paychex, Inc. (PAYX)
Slide 25: Comparable Company Statistics
Comparable Company Statistics Lending Club –$3.8 billion market valuation • 4/17/2014: raised $115 million in debt and equity On Deck Capital recently – raised $180 million in venture capital • Have made less than $1.0 billion in loans Go Daddy estimated worth more than $6 billion in an IPO, based o
Slide 26: Investment Summary
Investment Summary Publicly traded Company since 2000 Management’s interests aligned with shareholders • CEO alone owns approximately 13.4% of outstanding shares* • Founders, Management and Board combined own over 25% of outstanding shares* Trades at approximately 4.0x 2014 forecasted Adjusted EBITD
Slide 27: Key Statistics NASDAQ: NEWT
Key StatisticsNASDAQ: – NEWT ShareStatistics* (USD) ……………………….................... 2014Guidance*** ………………………........................... Stock Price $2.70 Revenue $161.0M 52-Week Range $1.98-$3.43 Pre-tax Income $13.5M Common Shares O/S 37.0M Diluted EPS $0.23 Market Cap $99.9M Adjusted EBITDA** $26.5
Slide 28: Financial Review
Financial Review Jennifer C. Eddelson CAO -
Slide 29: Non-GAAP Financial Measures
Non-GAAP Financial Measures In evaluating its business, Newtek considers and uses adjusted EBITDA as a supplemental measure of its operating performance. The Company defines adjusted EBITDA as earnings before income from tax credits, interest expense, taxes, depreciation and amortization, stock comp
Slide 30: Q1 2014 Actual vs. Q1 2013 Actual
Q1 2014 Actual vs. Q1 2013 Actual Revenue For Revenue For Pretax Income Pretax Income ADJUSTED ADJUSTED The Quarter The Quarter (Loss) For The (Loss) For The EBITDA For The EBITDA For The Ended Ended Quarter Ended Quarter Ended Quarter Ended Quarter Ended March 31, 2014 March 31, 2013 March 31, 2014
Slide 31: 2014 Segment Guidance
2014 Segment Guidance Electronic Small Managed Total Inter- Payment Business Technology All Corporate Business CAPCO Company Processing Finance Solutions Other Activities Segments Segment Eliminations Total Low High Low High Low High Low High Low High Low High Low High Low High 2014 Full Year Revenu
Slide 32: Addenda
Newtek www.thesba.com “The Small Business Authority’” Addenda
Slide 33: Adjusted EBITDA Reconciliation
Adjusted EBITDA Reconciliation Adjusted EBITDA Reconciliation from Pretax Income (Loss) For the three months ended March 31, 2014 Net Change in Fair Value of Credits in Lieu of Cash and Notes Other than First Payable in Temporary Amortization Quarter Pretax Credits in Decline in Deferred of 2011 Lea
Slide 34: Adjusted EBITDA Reconciliation
Adjusted EBITDA Reconciliation Adjusted EBITDA Reconciliation from Pretax Income (Loss) For the three months ended March 31, 2013 Net Change in Fair Value of Credits in Lieu of Cash First and Notes Amortization of Quarter Pretax Income Payable in Deferred 2011 Lease Depreciation 2013 Income from Tax
Slide 35: Adjusted EBITDA Reconciliation
Adjusted EBITDA Reconciliation Adjusted EBITDA Reconciliation from Pretax Income (Loss) For the year ended December 31, 2013 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 2013 In
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