Newtekone, Inc. · NASDAQ:NEWT
Newtekone — Newtek Business Services — Q1 2015 Earnings Presentation
39 slides from Newtekone's earnings presentation, May 8, 2015
Slide 1: First Quarter 2015 Financial Results Conference Call
Exhibit 99.1 Newtek Business Services Corp. “The Small Business Authority®” NASDAQ: NEWT First Quarter 2015 Financial Results Conference Call May 7, 2015 4:15pm ET Hosted by: Barry Sloane, President & CEO Jennifer Eddelson, EVP & CAO Investor Relations Public Relations Newtek Investor Relations Newt
Slide 2: Note Regarding Forward Looking Statements
Note Regarding Forward Looking Statements This presentation contains certain forward-looking statements. Words such as “believes,” “expects,”“plans,” “anticipates,”“forecasts” and “future” or similar expressions are intended to identify forward-looking statements. All forward-looking statements invo
Slide 3: First Quarter Financial Highlights
First Quarter Financial Highlights First full quarter reporting as a BDC Net asset value (“NAV”) equaled $169.6 million, or $16.61 per share, at March 31, 2015, a 1.9% increase from the NAV of $166.4 million, or $16.31 per share, at December 31, 2014 Adjusted net investment income* was $5.2 million,
Slide 4: Dividend Distributions
Dividend Distributions On April 13, 2015 paid first quarterly dividend of $0.39 per share in cash, which was $0.01 per share higher than previously forecasted, and represents 76.5% of the Q1 2015 adjusted net investment income Increased 2015 annual cash dividend forecast to approximately $1.82* per
Slide 5: Consolidated Balance Sheet Highlights
Consolidated Balance Sheet Highlights Balance Balance $ in thousands March 31, 2015 Dec 31, 2014 Total Cash & Cash Equivalents $8,593 $17,813 Total Assets $304,975 $301,832 Total Liabilities $135,411 $135,414 Total Net Assets $169,566 $166,418 NAV/Share $16.61 $16.31 Total liquidity of $26.6 million
Slide 6: Capital One, N.A., Bank Line
Capital One, N.A., Bank Line Restructured $50 million Capital One, N.A., bank line of credit (subject to approval by the Small Business Administration) – Holding-company only guarantee – Ability to distribute dividends Prior line of credit collateralized by: – Newtek Merchant Solutions – Newtek Mana
Slide 7: Newtek Small Business Finance
Newtek Small Business Finance Currently the largest non-bank institution U.S. Small Business Administration (SBA) licensed lender under the federal Section 7(a) loan program based on annual origination volume (national PLP status) One of 14 Non-Bank SBA Government-Guaranteed Lender Licenses (these l
Slide 8: Actual & Forecasted 2015 SBA 7(a) Loan Fundings
Actual & Forecasted 2015 SBA 7(a) Loan Fundings $ n Millions Actual SBA 7(a) Loan Fundings Q1 2015 $48.3 Quarterly SBA 7(a) Loan Funding Forecast Q2 2015 $60.0 Q3 2015 $70.0 Q4 2015 $80.0 Expect to fund between $240 million and $280 million of SBA 7 (a) loans in 2015, which represents an approximate
Slide 9: Current SBA 7(a) Loan Pipeline
Current SBA 7(a) Loan Pipeline SBA 7(a) Loan Pipeline at March 31, 2015 Prequalified Loans $40,921,692 Loans In Underwriting $40,599,318 Approved Pending Closing $29,490,400 Open Referrals $302,642,526 Total Loan Pipeline $413,642,526 www.thesba.com 8
Slide 10: SBA 7(a) Loan Sale Transaction
SBA 7(a) Loan Sale Transaction Net CashCreatedin SBA7(a) LoanSaleTransaction– AnExample 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 Guaranteed Balance (2) $93,750 Unguaranteed
Slide 11: SBA 7(a) Loan Sale Transaction
SBA 7(a) Loan Sale Transaction Direct Revenue / Expense of an SBA 7(a) Loan Sale Transaction An Example – Key Variables in Loan Sale Transaction Resulting Revenue (Expense) Loan Amount $1,000,000 Associated Premium (2) $93,750 Guaranteed Balance (75%) $750,000 Servicing Asset(3) $18,630 Unguaranteed
Slide 12: Net Realized and Unrealized Gains
Net Realized and Unrealized Gains In December 2014, the Company held approximately $28.1 million in guaranteed loans originated in December 2014, and estimated the sale of these loans would have generated $3.4 million of realized gains During Q1 2015, $24.4 million of these loans were sold, which ge
Slide 13: Guaranteed Loan Pricing Comparison
Guaranteed Loan Pricing* Comparison All Loans 10-Year Term Loans 25-Year Term Loans Weighted Weighted Weighted Weighted Weighted Weighted Weighted Average SaleAverage Net Average LoanAverage Sale Average NetAverage SaleAverage Net Qtr Price Price to NSBFTerm (Yrs) Price Price to NSBF Price Price to
Slide 14: Comparative Loan Portfolio Data
Comparative Loan Portfolio Data 12/31/2010 vs. 03/31/2015 Since 2010, the credit quality and diversification of the loan portfolio has steadily improved As of As of As of As of Loan Characteristic 12/31/10 03/31/15 Loan Characteristic 12/31/10 Loan Characteristic 03/31/15 Business Type: Industry: Ex
Slide 15: Quality Loan Portfolio
Quality Loan Portfolio Continue to maintain strict underwriting guidelines and the credit quality of our loans, which enabled us to build a well-balanced loan portfolio of senior-secured floating-rate loan participation certificates with an average loan balance of approximately $175,000 11-year hist
Slide 16: Changes in Newtek Business Credit
Changes in Newtek Business Credit Appointed Gary T. Taylor as President and Chief Operating Officer – Harold Gartner to move to a sales, marketing and business development role Signed LOI for a $50 million warehouse line of credit, which represents an increase from the existing credit facility of $1
Slide 17: SBA 504 Loans: A New Focus for Newtek
SBA 504 Loans: A New Focus for Newtek Provide financing for major fixed assets such as equipment or real estate Loanscannotbeusedfor workingcapitalor purchasinginventory(allowedusesunderthe 7(a)program) The CDC/504 Loan Program is a long-term financing tool that provides growing businesses with fixe
Slide 18: Sample SBA 504 Loan Structure
Sample SBA 504 Loan Structure An example of a typical SBA 504 loan structure is detailed below Real Estate Acquisition Loan Percent $ Amount $ Amount of Total Purchase Price $800,000 1st Mortgage Originated by Newtek $500,000 50% Renovations $150,000 Bridge Loan Originally Funded by Newtek* $400,000
Slide 19: Loan Sale Transaction - SBA 504 Loan
Loan Sale Transaction- SBA 504 Loan Net Cash Created in SBA 504 Loan Sale Transaction An Example – Key Variables in Loan Sale Transaction Net Cash Created Pretax Total Projected Financing $2,000,000 Total Senior & Junior Debt $1,800,000 Senior Loan Balance $1,000,000 Funded Under Bank Facility $1,62
Slide 20: Gaining New Alliance Partners
Gaining New Alliance Partners Newtek has a new partner program that on average has generated 30-50 referrals per day with seemingly similar quality to referrals from existing referring agents In May of 2015, entered into a partnership with Lending Club (NYSE: LC) This partnership will enable Newtek
Slide 21: Expanding Senior Management Team
Expanding Senior Management Team Gary T. Taylor Over 30 years of extensive experience in lending, commercial/investment banking, specialty and President & Chief Operating structured finance, process improvement, credit operations, technology integration and portfolio Officer, Newtek Business Credit
Slide 22: Expanding Senior Management Team
Expanding Senior Management Team John Raven Over 20 years of experience in information technology space Chief Operating Officer, Brings a broad array of expertise in areas of cloud technology, information technology and, security and Managed Technology Solutions data center and storage solutions as
Slide 23: Expanding Senior Management Team
Expanding Senior Management Team Michael W. Campbell Over 20 years of experience in merchant bankcard operationsexpertise with in credit and risk Chief Credit Officer & Chief Riskmanagement Officer, Newtek Merchant Brings extensive and diversified experience in areas of merchant operations, bankcard
Slide 24: Expanding Senior Management Team
Expanding Senior Management Team Dean Choksi, CFA Over 14 years of experience with financial analysis and equity research and possesses specific expertise in Treasurer & Senior Vice areas of valuation, financial modeling, capital markets and financing President, Newtek Business Most recently, Mr. Ch
Slide 25: Portfolio Company Electronic Payment Processing
Portfolio Company Electronic - Payment Processing We wholly owned and have managed this business for over 10 years We are a registered Independent Sales Organization (ISO) with Visa and MasterCard We are the “State-of-the-Art Merchant Processor” Point of sale (POS) in the Cloud, Gateway and Switch,
Slide 26: Portfolio Company Electronic Payment Processing
Portfolio Company Electronic - Payment Processing Q1 2015 Revenue of $23.2 million; an increase of 7.9% over $21.5 million in Q1 2014 Q1 2015 Adjusted EBITDA of $1.9 million; an increase of 5.6% over $1.8 million in Q1 2014 FY 2015 Forecast: – Revenue: $100.2 million – Adjusted EBITDA: $9.8 million
Slide 27: Portfolio Company Managed Technology Solutions
Portfolio Company Managed - Technology Solutions We have wholly owned and managed this business for over 10 years We host and manage SMBs computer hardware, software and their technology solutions in our Level-4, 5,000 square foot data center in Phoenix, Arizona Over 106,000 business accounts manage
Slide 28: Portfolio Company Managed Technology Solutions
Portfolio Company Managed - Technology Solutions Q12015 Revenueof $3.6 million;a decreaseof 12.2%over $4.1 million in Q12014 Q12015 AdjustedEBITDAof $644,000;a decreaseof 41.5%over $1.1 million in Q12014 FY 2015 Forecast: – Revenue: $17.5 million – Adjusted EBITDA: $5.1 million Publicly Traded Compa
Slide 29: Managed Technology Solutions Subsequent Q1 2015 Events
Managed Technology SolutionsSubsequent – Q1 2015 Events Restructured IO data center lease, which we anticipate will allow us to realize significant cost savings over the next 5 years; announcement forthcoming Between $200,000$250,000 - of cost reduction per year Acquired additional space in London,
Slide 30: Other Portfolio Companies
Other Portfolio Companies Newtek Business Credit Newtek Insurance Agency Newtek Payroll Solutions Small Business Lending (third-party loan servicing) www.thesba.com 29
Slide 31: Internally Managed vs. Externally Managed BDCs
Internally Managed vs. Externally Managed BDCs Newtek is an internally managed BDC Internally Managed BDCs – No base or incentive fees paid to an external manager – Generally a greater percent of revenue becomes dividend income for the shareholder – Lower operating expense ratios than externally man
Slide 32: Internally Managed BDC Public Comparables
Internally Managed BDC Public Comparables Newtek currently trading at 1.04x* NAV Internally managed BDC public comparables currently trade at a median price to NAV of approximately 1.3x** – Hercules Technology Growth Capital (NASDAQ: HTGC) – KCAP Financial (NASDAQ: KCAP) – Main Street Capital (NASDA
Slide 33: Comparable Company Statistics
Comparable Company Statistics On Deck Capital (NYSE: ONDK) – Operates an online platform for small business lending – Raised $200 million in IPO on 12/17/14 – $1.3 billion market valuation Lending Club (NYSE: LC) – Operates as an online marketplace that facilitates loans to consumers and businesses
Slide 34: Investment Summary
Investment Summary NAV of $16.61 per share at March 31, 2015; a 1.9% increase over NAV per share at December 31, 2014 Company is better suited for investors as a BDC vs. an operating company Forecasted dividends – ExpectQ22015 dividendof $0.47 per share;forecastpayingan annualcashdividendof approxim
Slide 35: Financial Review
Financial Review Jennifer – C. Eddelson, Chief Accounting Officer www.thesba.com
Slide 36: Consolidated Statement of Operations
Consolidated Statement of Operations Newtek Business Services Corp. and Subsidiaries Three Months Ended March 31, 2015 Investment income: From non-controlled/non-affiliate investments Interest income $ 2,125 Servicing income 1,043 Other income 395 Total investment income from non-controlled/non-affi
Slide 37: NEWT Change in Net Asset Value
NEWT Change in Net Asset Value Newtek Business Services Corp. and Subsidiaries (in thousands) As of March 31, 2015 NAV NAV/Share NAV % Change NAV at December 31, 2014 $ 166,418 $ 16.31 Net investment income (loss) (2,476) (0.24) -1.5% Net realized gains - non-affiliate investments 7,699 0.75 4.6% Un
Slide 38: Non-GAAP Financial Measures
Non-GAAP Financial Measures In evaluating its business, Newtek considers and uses Adjusted net investment income and Adjusted EBITDA as a supplemental measure of its operating performance. Adjusted net investment income includes short-term capital gains from the sale of the guaranteed portions of SB
Slide 39: Adjusted Net Investment Income Reconciliation
Adjusted Net Investment Income Reconciliation Adjusted Net Investment Income For the three months $ in Thousands ended March 31, 2015Per share Net investment loss $ (2,476) $ (0.24) Net realized gain on non-affiliate investments 7,699 0.75 Adjusted net investment income $ 5,223 $ 0.51 www.thesba.com
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