Newtek Business Services Corp. Reports Full Year 2016 Financial Results

Achieved 27.5% Year-Over-Year Growth in SBA 7(a) Loan Fundings in 2016

LAKE SUCCESS, N.Y., March 06, 2017 (GLOBE NEWSWIRE) -- Newtek Business Services Corp. ("Newtek" or the "Company"), (NASDAQ:NEWT), an internally managed business development company ("BDC"), announced today its financial results for the year ended December 31, 2016.  

Full Year 2016 Highlights:

Loan Funding Highlights:

2016 and 2017 Dividend Forecast and Payments:

January 2017 Highlights:

Barry Sloane, Chairman, President and Chief Executive Officer said, "We are extremely pleased to report strong full year 2016 results, which were in line with our expectations and previous forecasts.  We continued to grow our NAV, which at December 31, 2016 realized a 2.6% year-over-year increase to $209.1 million, or $14.30 per share.  At the December 31, 2016 market close, our stock generated a total one-year return, based on market value, to our shareholders of approximately 27.7%3.  We met our full year 2016 dividend forecast of $1.53 per share, which was equivalent to approximately 94% of our estimated taxable income in 2016.  It is important to note, that approximately 47% of our total quarterly cash dividends paid in 2016 qualify for preferential tax treatment.  We believe this is one of the distinct advantages of our business model in which our portfolio companies' reoccurring stream of income is taxed at the portfolio-company level prior to being distributed to the Company.  Equally important is that we believe this reoccurring stream of income to be less sensitive to credit risk, interest rates and inflation, and could potentially benefit with such increases. We are also pleased to reaffirm our dividend forecast for 2017 of $1.57 per share, which represents a 2.6% increase over our 2016 annual dividend.  We expect the 2017 annual dividend to maintain similar tax attributes as in 2016 in accordance with the structure of our business model."

Mr. Sloane continued, "We continued to capitalize on our cost-effective client-acquisition model utilizing our proprietary web-based technology, NewTracker, and our ever-growing network of alliance partnerships and, as a result, have experienced an increase in our business referrals across all business lines.  In 2016, we added several new brand-recognized entities as alliance partners including Raymond James, Meineke and True Value stores.  In addition, we continued to seek synergistic investment opportunities that we believe will expand and complement our current business solutions footprint.  We currently have several investment opportunities in the pipeline including companies that focus on cloud computing, information technology, payment processing, accounts receivable financing, human resources and benefits solutions, as well as an SBIC fund. As we move through 2017, we look forward to continuing to expand our business and deliver strong returns to our shareholders."

Investor Conference Call and Webcast

A conference call to discuss the full year 2016 results will be hosted by Barry Sloane, Chairman, Chief Executive Officer, and Jennifer Eddelson, Executive Vice President and Chief Accounting Officer, Tuesday, March 7, 2017 at 8:30 a.m. ET.  The live conference call can be accessed by dialing (877) 303-6993 or (760) 666-3611.

In addition, a live audio webcast of the call with the corresponding presentation will be available in the ‘Events & Presentations' section of the Investor Relations portion of Newtek's website at http://investor.newtekbusinessservices.com/events.cfm. A replay of the webcast with the corresponding presentation will be available on Newtek's website shortly following the live presentation and will remain available for 90 days following the live presentation.

Use of Non-GAAP Financial Measures - Newtek Business Services Corp. and Subsidiaries:

In evaluating its business, Newtek considers and uses adjusted net investment income as a measure of its operating performance.  Adjusted net investment income includes short-term capital gains from the sale of the guaranteed portions of SBA 7(a) loans, and beginning in 2016, capital gain distributions from controlled portfolio companies, which are reoccurring events. The Company defines Adjusted net investment income (loss) as Net investment income (loss) plus Net realized gains (losses) recognized from the sale of guaranteed portions of SBA 7(a) loan investments, plus Loss on lease expense, plus stock-based compensation expense (added back in third quarter of 2016 only and will not be included prospectively as it is anticipated to be a reoccurring expense), plus the net realized gains on controlled investments (beginning in 2016 as it is anticipated this will be reocurring income).

The term Adjusted net investment income is not defined under U.S. generally accepted accounting principles, or U.S. GAAP, and is not a measure of operating income, operating performance or liquidity presented in accordance with U.S. GAAP.  Adjusted net investment income has limitations as an analytical tool and, when assessing the Company's operating performance, investors should not consider Adjusted net investment income in isolation, or as a substitute for net investment income (loss), or other consolidated income statement data prepared in accordance with U.S. GAAP.  Among other things, Adjusted net investment income does not reflect the Company's actual cash expenditures.  Other companies may calculate similar measures differently than Newtek, limiting their usefulness as comparative tools.  The Company compensates for these limitations by relying primarily on its GAAP results supplemented by Adjusted net investment income.

1Adjusted net investment income (loss) is a non-GAAP financial measure. Adjusted net investment income (loss) equals Net investment income (loss), plus Net realized gains (losses) recognized from the sale of guaranteed portions of SBA 7(a) loans, plus Loss on lease expense plus stock based compensation (added back in third quarter of 2016 only and will not be included prospectively as it is anticipated to be a reoccurring expense), plus the net realized gains on controlled investments (beginning in 2016 as it is anticipated this will be reoccurring income).

2Amount and timing of dividends, if any, remain subject to the discretion of the Company's Board of Directors.

3As per Bloomberg. Total one-year return includes dividends reinvested in Newtek common stock.

Note regarding Dividend Payments:  The Company's Board of Directors expects to maintain a dividend policy with the objective of making quarterly distributions in an amount that approximates 90 - 100% of the Company's annual taxable income.  The determination of the tax attributes of the Company's distributions is made annually as of the end of the Company's fiscal year based upon its taxable income for the full year and distributions paid for the full year.

About Newtek Business Services Corp.

Newtek Business Services Corp., Your Business Solutions Company, is an internally managed BDC, which along with its controlled portfolio companies, provides a wide range of business services and financial products under the Newtekฎ brand to the small- and medium-sized business ("SMB") market. Since 1999, Newtek has provided state-of-the-art, cost-efficient products and services and efficient business strategies to SMB accounts across all 50 states to help them grow their sales, control their expenses and reduce their risk.

Newtek's and its portfolio companies' products and services include: Business Lending, SBA Lending Solutions, Electronic Payment ProcessingTechnology Solutions (Cloud Computing, Data Backup, Storage and Retrieval), eCommerce, Accounts Receivable Financing & Inventory Financing, The Secure Gateway, The Newtek Advantage™, Insurance Solutions, Web Services, and Payroll and Benefits Solutions.

Newtekand Your Business Solutions Companyฎ are registered trademarks of Newtek Business Services Corp.

Note Regarding Forward Looking Statements

This press release contains certain forward-looking statements. Words such as "believes," "intends," "expects," "projects," "anticipates," "forecasts," and "future" or similar expressions are intended to identify forward-looking statements. All forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from the plans, intentions and expectations reflected in or suggested by the forward-looking statements. Such risks and uncertainties include, among others, intensified competition, operating problems and their impact on revenues and profit margins, anticipated future business strategies and financial performance, anticipated future number of customers, business prospects, legislative developments and similar matters. Risk factors, cautionary statements and other conditions, which could cause Newtek's actual results to differ from management's current expectations, are contained in Newtek's filings with the Securities and Exchange Commission and available through http://www.sec.gov/. Newtek cautions you that forward-looking statements are not guarantees of future performance and that actual results or developments may differ materially from those projected or implied in these statements.

 

NEWTEK BUSINESS SERVICES CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

(In Thousands, except for Per Share Data)

 

December 31,

 

2016

 

2015

ASSETS

 

 

 

Investments, at fair value

 

 

 

SBA unguaranteed non-affiliate investments (cost of $219,784 and $166,752, respectively; includes $197,927 and $146,463, respectively, related to securitization trusts)

$

211,471

 

 

$

158,355

 

SBA guaranteed non-affiliate investments (cost of $10,262 and $2,069, respectively)

11,512

 

 

2,284

 

Controlled investments (cost of $41,001 and $35,781, respectively)

121,302

 

 

104,376

 

Non-control/non-affiliate investments (cost of $904 and $1,847, respectively)

904

 

 

1,824

 

Investments in money market funds (cost of $35 and $35, respectively)

35

 

 

35

 

Total investments at fair value

345,224

 

 

266,874

 

Cash and cash equivalents

2,051

 

 

4,308

 

Restricted cash

20,845

 

 

22,869

 

Broker receivable

2,402

 

 

32,083

 

Due from related parties

3,748

 

 

3,056

 

Servicing assets, at fair value

16,246

 

 

13,042

 

Credits in lieu of cash, at fair value

—

 

 

860

 

Other assets

10,934

 

 

9,338

 

Total assets

$

401,450

 

 

$

352,430

 

LIABILITIES AND NET ASSETS

 

 

 

Liabilities:

 

 

 

Bank notes payable

$

5,100

 

 

$

29,100

 

Notes due 2022

7,853

 

 

7,770

 

Notes due 2021

38,767

 

 

—

 

Notes payable - Securitization trusts

118,122

 

 

89,244

 

Dividends payable

—

 

 

5,802

 

Note payable - related parties

1,400

 

 

5,647

 

Due to related parties

1,227

 

 

256

 

Notes payable in credits in lieu of cash, at fair value

—

 

 

860

 

Deferred tax liabilities

5,983

 

 

857

 

Accounts payable, accrued expenses and other liabilities

13,904

 

 

8,945

 

Total liabilities

192,356

 

 

148,481

 

Commitments and contingencies

 

 

 

Net Assets:

 

 

 

Preferred stock (par value $0.02 per share; authorized 1,000 shares, no shares issued and outstanding)

—

 

 

—

 

Common stock (par value $0.02 per share; authorized 200,000 shares, 14,624 and 14,509 issued and outstanding, respectively)

293

 

 

290

 

Additional paid-in capital

188,472

 

 

189,031

 

Undistributed net investment income

8,092

 

 

4,437

 

Net unrealized appreciation, net of deferred taxes

13,008

 

 

8,062

 

Net realized (losses) gains

(771

)

 

2,129

 

Total net assets

209,094

 

 

203,949

 

Total liabilities and net assets

$

401,450

 

 

$

352,430

 

Net asset value per common share

$

14.30

 

 

$

14.06

 

 

NEWTEK BUSINESS SERVICES CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands, except for Per Share Data)

 

As a Business Development Company

 

Prior to becoming a Business Development Company

 

Year ended December 31, 2016

 

Year ended December 31, 2015

 

November 12, 2014 to December 31, 2014

 

January 1, 2014 to November 11, 2014

Investment income:

 

 

 

 

 

 

 

From non-affiliate investments:

 

 

 

 

 

 

 

Interest income

$

11,158

 

 

$

8,924

 

 

$

1,076

 

 

$

—

 

Servicing income

6,160

 

 

4,611

 

 

562

 

 

—

 

Other income

2,714

 

 

1,929

 

 

270

 

 

—

 

Total investment income from non-affiliate investments

20,032

 

 

15,464

 

 

1,908

 

 

—

 

From controlled investments:

 

 

 

 

 

 

 

Interest income

360

 

 

277

 

 

27

 

 

—

 

Dividend income

10,573

 

 

10,218

 

 

37

 

 

—

 

Other income

—

 

 

111

 

 

4

 

 

—

 

Total investment income from controlled investments

10,933

 

 

10,606

 

 

68

 

 

—

 

Total investment income

30,965

 

 

26,070

 

 

1,976

 

 

—

 

Operating revenues:

 

 

 

 

 

 

 

Electronic payment processing

$

—

 

 

$

—

 

 

$

—

 

 

$

79,527

 

Web hosting and design

—

 

 

—

 

 

—

 

 

13,730

 

Premium income

—

 

 

—

 

 

—

 

 

18,623

 

Interest income

—

 

 

—

 

 

—

 

 

5,663

 

Servicing fee income - NSBF portfolio

—

 

 

—

 

 

—

 

 

3,111

 

Servicing fee income - external portfolios

—

 

 

—

 

 

—

 

 

6,142

 

Income from tax credits

—

 

 

—

 

 

—

 

 

48

 

Insurance commissions

—

 

 

—

 

 

—

 

 

1,480

 

Other income

—

 

 

—

 

 

—

 

 

3,523

 

Total operating revenues

—

 

 

—

 

 

—

 

 

131,847

 

Net change in fair value of:

 

 

 

 

 

 

 

SBA loans

—

 

 

—

 

 

—

 

 

(3,663

)

Credits in lieu of cash and notes payable in credits in lieu of cash

—

 

 

—

 

 

—

 

 

(5

)

Total net change in fair value

—

 

 

—

 

 

—

 

 

(3,668

)

Expenses:

 

 

 

 

 

 

 

Electronic payment processing costs

—

 

 

—

 

 

—

 

 

67,011

 

Salaries and benefits

15,234

 

 

12,753

 

 

1,458

 

 

23,373

 

Interest

8,440

 

 

6,479

 

 

568

 

 

7,323

 

Depreciation and amortization

296

 

 

326

 

 

43

 

 

3,140

 

Goodwill impairment

—

 

 

—

 

 

—

 

 

1,706

 

Provision for loan losses

—

 

 

—

 

 

—

 

 

(53

)

Other general and administrative costs

16,255

 

 

12,697

 

 

2,236

 

 

18,536

 

Total expenses

40,225

 

 

32,255

 

 

4,305

 

 

121,036

 

Net investment loss before income tax

(9,260

)

 

(6,185

)

 

(2,329

)

 

—

 

Provision for income tax - post BDC

—

 

 

—

 

 

194

 

 

—

 

Net investment loss

(9,260

)

 

(6,185

)

 

(2,523

)

 

—

 

Net realized and unrealized gains (losses):

 

 

 

 

 

 

 

Net realized gains on non-affiliate investments

31,512

 

 

28,386

 

 

595

 

 

—

 

Net realized gains on controlled investments

108

 

 

5,473

 

 

—

 

 

—

 

Net unrealized (depreciation) appreciation on SBA guaranteed non-affiliate investments

1,035

 

 

(3,215

)

 

3,007

 

 

—

 

Net unrealized appreciation (depreciation) on SBA unguaranteed non-affiliate investments

18

 

 

1,183

 

 

(274

)

 

—

 

Net unrealized appreciation on controlled investments

11,337

 

 

12,250

 

 

—

 

 

—

 

Provision for deferred taxes on unrealized appreciation on investments

(5,128

)

 

(857

)

 

—

 

 

—

 

Net unrealized depreciation on non-control/non-affiliate investments

(43

)

 

(24

)

 

—

 

 

—

 

Net unrealized depreciation on servicing assets

(2,269

)

 

(1,268

)

 

(120

)

 

—

 

Net unrealized depreciation on credits in lieu of cash and notes payable in credits in lieu of cash

(5

)

 

(7

)

 

(4

)

 

—

 

Net realized and unrealized gains

36,565

 

 

41,921

 

 

3,204

 

 

—

 

Income before income taxes

—

 

 

—

 

 

—

 

 

7,143

 

Net increase in net assets

$

27,305

 

 

$

35,736

 

 

$

681

 

 

$

—

 

Provision for income taxes

—

 

 

—

 

 

—

 

 

3,935

 

Net income

—

 

 

—

 

 

—

 

 

3,208

 

Net loss attributable to non-controlling interests

—

 

 

—

 

 

—

 

 

85

 

Net income attributable to Newtek Business Services Corp.

$

—

 

 

$

—

 

 

$

—

 

 

$

3,293

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

Basic

—

 

 

—

 

 

—

 

 

7,315

 

Diluted

—

 

 

—

 

 

—

 

 

7,315

 

Basic income per share

$

—

 

 

$

—

 

 

$

—

 

 

$

0.45

 

Diluted income per share

$

—

 

 

$

—

 

 

$

—

 

 

$

0.45

 

Net increase in net assets per share

$

1.88

 

 

$

3.32

 

 

$

(0.33

)

 

$

—

 

Net investment loss per share

$

(0.64

)

 

$

(0.57

)

 

$

0.09

 

 

$

—

 

Dividends and distributions declared per share

$

1.53

 

 

$

4.45

 

 

$

—

 

 

$

—

 

Weighted average shares outstanding

14,541

 

 

10,770

 

 

7,620

 

 

—

 

 

NEWTEK BUSINESS SERVICES CORP. AND SUBSIDIARIES

ADJUSTED NET INVESTMENT INCOME RECONCILIATION:

 


(in thousands, except per share amounts)

Year ended
December 31, 2016

 

Per share

 

 

 

 

Net investment loss

$

(9,260

)

 

$

(0.64

)

Net realized gain on non-affiliate debt investments

 

31,512

 

 

 

2.17

 

Loss on lease

 

604

 

 

 

0.04

 

Stock-based compensation

 

226

 

 

 

0.02

 

Net realized gains on controlled investments

 

108

 

 

 

0.01

 

Adjusted Net investment income

$

23,190

 

 

$

1.60

 

 

 

 

 

 

Investor Relations & Public Relations
 
Contact: Jayne Cavuoto
 
Telephone: (212) 273-8179 / jcavuoto@newtekone.com