Newtekone, Inc. · NASDAQ:NEWT
Newtekone — Newtek Business Services — Q2 2014 Earnings Presentation
37 slides from Newtekone's earnings presentation, Aug 15, 2014
Slide 1: Second Quarter 2014 Financial Results Conference Call
Exhibit 99.1 www.thesba.com Newtek Business Services, Inc. “The Small Business Authority®” Second Quarter 2014 Financial Results Conference Call August 14, 2014 4:15pm ET Hosted by: Barry Sloane, President & CEO NASDAQ: NEWT Jennifer Eddelson, EVP & CAO www.thesba.com Investor Relations Public Relat
Slide 2: Safe Harbor Statement
www.thesba.com 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
Slide 3: Business Development Company
www.thesba.com Business Development Company The Company expects to present to its shareholders a proposal to convert to a Business Development Company (“BDC”) once 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 o
Slide 4: Adjusted Earnings Presentation
www.thesba.com Adjusted Earnings* Presentation GAAP financial results for the three and six months ended June 30, 2014 include one-time non-cash charge of $1.9 million related to the extinguishment of the Company’s mezzanine debt with Summit Partners Credit Advisors, L.P. Pretax income, net income a
Slide 5: Q2 2014 Adjusted Financial Highlights
www.thesba.com Q2 2014 Adjusted Financial Highlights Adjusted diluted EPS* of $0.07; an increase of 40.0% over GAAP diluted EPS of $0.05 Q2 2013 For the six months ended June 30, 2014, adjusted diluted EPS of $0.10; an increase of 11.1% over GAAP diluted EPS of $0.09 for the six months ended June 30
Slide 6: Q2 2014 GAAP Results
www.thesba.com Q2 2014 GAAP Results Operating revenues of $38.1 million; an increase of 3.0% over $37.0 million in Q2 2013 GAAP diluted EPS of $0.04; a decrease of 20.0% from $0.05 in Q2 2013 For the six months ended June 30, 2014, GAAP diluted EPS of $0.07; a decrease of 22.2% from $0.09 for the si
Slide 7: Q2 2014 Operational Highlights
www.thesba.com Q2 2014 Operational Highlights The Company entered into a $20.0 million credit agreement with Capital One, N.A., refinancing existing mezzanine debt at a lower cost of interest • Refinance will reduce the Company’s interest expense by approximately $1.0 million annually, or $4.2 milli
Slide 8: Company Reduces Cost of Capital
www.thesba.com Company Reduces Cost of Capital Lower cost of debt financing Reduced cost of equity capital Ability to attract lower-cost debt financing and intention to raise cost- effective equity capital leaves Management optimistic regarding ability to grow balance sheet, revenue and net income g
Slide 9: 2014 Adjusted Consolidated Guidance
www.thesba.com 2014 Adjusted Consolidated 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 Adjusted Pretax Income**:
Slide 10: Consolidated Balance Sheet
www.thesba.com Consolidated Balance Sheet Selected Items Balance at Balance at $ in thousands June 30, 2014 Dec 31, 2013 Total Cash & Cash Equivalents* $27,817 $29,385 Total Assets $200,896 $198,612 Total Liabilities $120,332 $121,603 Total Equity $80,564 $77,009 10 *Includes restricted cash of $18.
Slide 11: Small Business Finance
www.thesba.com Small Business Finance Newtek Business Service, Inc. Q22014TotalOperatingRevenue$38.1millio : n SBF $10.2M Q2 2014 SBF revenue was 26.8% of total operating revenue Q2 2014 SBF pretax income increased by 90.8% to $3.9 million; SBF revenue increased by 22.2% to $10.2 million Capital One
Slide 12: Loan Sale Transaction
www.thesba.com 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
Slide 13: Loan Sale Transaction
www.thesba.com 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 Bal
Slide 14: Comparative Loan Portfolio Data
www.thesba.com Comparative Loan Portfolio Data (12/31/10 vs. 6/30/2014) Loan Characteristic As of 12/31/10 As of 6/30/14 Loan Characteristic As of 12/31/10 Loan Characteristic As of 6/30/14 Business Type: Existing Businesses 53.93% 79.64% Industry: Industry: Business Acquisition 25.89% 13.59% Restau
Slide 15: Servicing Portfolio
www.thesba.com Servicing Portfolio TheSBFservicingportfolio – Q22013vs.Q22014 • Total servicing portfolio increased by 65.4% to $1.1 billion – Newtek portfolio increased by 32.9% – Third-party servicing portfolio increased by 125.0% – Plan to continue to grow the loan servicing aspect of the busines
Slide 16: Building Our Senior Executive Team
www.thesba.com Building Our Senior Executive Team SusanStreich:NamedChiefRiskOfficerandChiefComplianceOfficerfor Newtek Business Services, Inc. and Newtek Small Business Finance • Over 30 years’experience as an executive-level finance professional; extensive experience initiating and leading nationa
Slide 17: Electronic Payment Processing
www.thesba.com Electronic Payment Processing Newtek Business Services, Inc. Q22014TotalOperatingRevenue$38.1million : EPP Revenue $23.2M Q2 2014 EPP revenue was 60.8% of total operating revenue Q2 2014 EPP revenue decreased slightly by approximately 1.0% to $23.2 million Implementing price changes i
Slide 18: Implementation of Price Changes & New Security Programs
www.thesba.com Implementation of Price Changes & New Security Programs Company enacted first price increase in 3 years for its clients; effective July 2014 Company will implement new Payment Card Industry Data Security Standards (“PCI DSS”) programs for merchants in second half of 2014 Increased tra
Slide 19: New Product Development
www.thesba.com New Product Development Eric Turille: Named Director of Business Development • Relocated to Phoenix, Arizona, where he leads business development for the following product offerings: – Point of Sale (“POS”) in the Cloud Creates revenue for EPP segment – Further penetration with Secure
Slide 20: Management Changes in EPP Segment
www.thesba.com Management Changes in EPP Segment BruceHopkins:NamedPresidentof NewtekMerchantSolutions • Over 25 years’experience in financial institutions and payment services spaces • Former General Manager, Debit & Credit Solutions at Fiserv Corporation • Former Senior Vice President, Merchant So
Slide 21: Managed Technology Solutions
www.thesba.com Managed Technology Solutions Newtek Business Services, Inc. Q22014TotalOperatingRevenue$38.1million : MTS $4.2M Q2 2014 MTS revenue was 11.0% of total operating revenue Q2 2014 MTS revenue decreased by 8.8% to $4.2 million This segment is being transformed to take advantage of shift t
Slide 22: Cost Reduction Measures
www.thesba.com Cost Reduction Measures Implemented cost-reduction measures in the MTS segment in July 2014, which are expected to take full effect in the second half of 2014 Recurring forecasted monthly cost reductions*: • Gross Wages: $25,000 • SPLA (Microsoft licensing) expenses: $30,000 • Discont
Slide 23: New Competitive Product Offerings
www.thesba.com New Competitive Product Offerings Point of Sale (“POS”) in the Cloud • Creates hosting revenue for MTS segment Cyber Scanning Newtek Partners Program (PAR) Program 23
Slide 24: Management Changes in MTS
www.thesba.com Management Changes in MTS RichardRebetti:NamedPresidentandChiefOperatingOfficerof NewtekTechnology Services • Over 20 years’experience in both business development and executive operations of high technology and communications companies • Former Chief Operating Officer of Data Storage
Slide 25: Competition
www.thesba.com Competition 25
Slide 26: Comparable Company Statistics
www.thesba.com 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
Slide 27: Investment Summary
www.thesba.com 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 3.6x 2014 forecasted
Slide 28: Key Statistics NASDAQ: NEWT
www.thesba.com Key StatisticsNASDAQ: – NEWT Share Statistics* (USD) ………………………............... 2014 Guidance*** ………………………..................... Stock Price $2.55 Revenue $161.0M 52-Week Range $2.26-$3.43 Adjusted Pre-tax Income** $13.5M Common Shares O/S 37.0M Adjusted Diluted EPS** $0.23 Market Cap $9
Slide 29: Financial Review
www.thesba.com Financial Review Jennifer C. Eddelson CAO -
Slide 30: Non-GAAP Financial Measures
www.thesba.com 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 amortizat
Slide 31: Q2 2014 Actual vs. Q2 2013 Actual
www.thesba.com Q2 2014 Actual vs. Q2 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 June 30, 2014 June 30, 2013 J
Slide 32: 2014 Adjusted Segment Guidance
www.thesba.com 2014 Adjusted 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 H
Slide 33: Addenda
® Newtek wwww.thesba.com “The Small Business Authority’” Addenda
Slide 34: Adjusted EBITDA Reconciliation
www.thesba.com Adjusted EBITDA Reconciliation Adjusted EBITDA Reconciliation from Pretax Income (Loss) For the three months ended June 30, 2014 Net Change in Fair Value of Credits in Lieu of Cash and Notes Other than Second Payable in Temporary Amortization Quarter Pretax Credits in Decline in Defer
Slide 35: Adjusted EBITDA Reconciliation
www.thesba.com Adjusted EBITDA Reconciliation Adjusted EBITDA Reconciliation from Pretax Income (Loss) For the three months ended June 30, 2013 Net Change in Fair Value of Credits in Lieu of Cash Second and Notes Amortization of Quarter Pretax Income Payable in Deferred 2011 Lease Depreciation 2013
Slide 36: Adjusted EBITDA Reconciliation
www.thesba.com 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 Depre
Slide 37: Adjusted Earnings Reconciliation
www.thesba.com Adjusted Earnings Reconciliation NEWTEK BUSINESS SERVICES, INC. AND SUBSIDIARIES RECONCILIATION OF ADJUSTED PRETAX INCOME AND DILUTED EPS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014 (In Thousands, except for Per Share Data) For the three For the six months ended months ended June
Newtek Business Services — Q2 2014 Earnings Presentation on 6ix