Attached files
| file | filename |
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| 8-K - FORM 8-K - NEWTEK BUSINESS SERVICES, INC. | d8k.htm |
| EX-99.1 - EXHIBIT 99.1 - NEWTEK BUSINESS SERVICES, INC. | dex991.htm |
 Newtek Business Services, Inc.
NASDAQ: NEWT
FY 2010
Financial Results Conference Call
March 16, 2011 4:15 PM
Hosted By:
Barry Sloane, CEO and Chairman
Seth A. Cohen, CFO
Investor Relations Contact:
Barry Sloane
212-356-9500 ext. 10101
bsloane@thesba.com
Exhibit 99.2 |
 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
1995.
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
b
y 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
Our
Capcos
operate
under
a
different
set
of
rules
in
each
of
the
7
jurisdictions
and
that
these
place
varying
requirements
on
the
structure
of
our
investments.
In
some
cases,
particularly
in
Louisiana
or
in
certain
situations
in
New
York,
we
do
not
control
the
equity
or
management
of
a
qualified
business,
but
that
cannot
always
be
presented
orally
or
in
written
presentations.
2 |
 FY
2010 Highlights Announce FY 2010 consolidated net income of $1.4
million
Versus FY 2009 consolidated net loss of $(429)
thousand
Announce FY 2010 consolidated pretax net income of $877 thousand
Versus FY 2009 consolidated pretax net loss of $(4.0) million
Current 2011 annual guidance for consolidated revenue range of $119.6
million to $125.3 million
Current 2011 annual guidance for consolidated pretax net income range of
$1.2 million to $4.3 million
3 |
 FY
2010 Highlights Announce FY 2010 consolidated revenue of $112.7
million 7% growth vs. FY 2009 of $105.7 million
Primary FY 2010 revenue trends in EPP and Web Hosting exceed
FY 2009 comparisons
Combined EPP and Web Hosting revenue for FY 2010 is $100.1 million
•
Versus FY 2009 of $88.5 million
•
13% growth
Small Business Finance segment posts pretax net income of $2.0
million for FY 2010 vs. a pretax net loss of $(2.3) million for FY
2009.
4 |
 FY
2010 Conference Call Agenda FY 2010 financial performance, cash position,
balance sheet, commentary, business trends, and 2011 guidance
Strategic mission as The Small Business Authority
New
website
launched:
www.thesba.com
(January
2011)
5 |
 FY
2010 Financial Results
FY 2010 vs. FY 2009 core operating segment revenue:
Electronic Payment Processing:
$80.9 million -
up 16% from
2009
Web Hosting:
$19.2 million -
up 2% from 2009
Small Business Finance:
$9.4 million –
up 28% from 2009
FY 2010 vs. FY 2009 core operating segment pretax net income:
Electronic Payment Processing:
$5.7 million -
up 31% from
2009
Web Hosting:
$4.7 million -
up 21% from 2009
Small Business Finance:
$2.0 million -
a $4.3 million
improvement from the pretax loss in 2009 of $(2.3) million
6 |
 Cash
Position $33.2 million in cash and cash equivalents, restricted
cash, and broker receivable at December 31, 2010, up
from $25.8 million at December 31, 2009.
Equates to $0.29 cash per share.
Equates to $0.93 cash per share when including restricted
cash and the broker receivable, which we received in
January 2011.
$(2.2) million of net cash used in operating activities for 2010
versus $3.1 million of net cash provided by operating
activities in 2009.
•
Primarily reflects the use of funds for lending and purchasing
receivables in 2010.
7 |
 Developments in EPP
2010 EPP revenue up 16% over 2009
2010 EPP pretax net income up 31% over 2009
Cash flow positive business
Significant operating leverage
2010 EPP segment EBITDA of $7.4 million
versus 2010 guidance of $7.1 to $7.3 million
EPP segment does not have any debt
eCommerce : Single most important corporate initiative and identifier
NewtPay
“Meet or Beat”
campaign launch
8 |
 Web
Hosting Initiatives 2010 versus 2009:
Revenue up 2%
Pre-tax net income up 21%
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, seeking additional cost savings where applicable
Currently above 60% real estate capacity in our data center
2010 Web Hosting segment EBITDA of $6.7 million
versus 2010 forecast of $6.6 to $6.7 million
Great
marketing
channel
to
target
IT
partners
and
web
developers
–
TechExec
Competitive at lower-end of the market
9 |
 Cloud
Computing
What is it?
Outsourcing of hardware, software,
personnel, storage, data security and
responsibility and accountability for IT in
whole or part.
Why is it relevant?
Cost containment and efficiencies
Better service and management of resources
More security
More functionality
10 |
 Cloud
Computing
Competition
Amazon
Microsoft
Other hosting companies and IT providers like
Rackspace Hosting (RAX)
Thesba has real US based cloud authority personnel to
service and talk to the customer
Thesba has a pay for what you use at the Cloud
Authority
•
Bandwith
•
Storage
•
CPU
11 |
 Cloud
Computing
Why is this market important and why are we
good at it?
12 |
 Small Business Finance
We have very good lending infrastructure (origination, underwriting, funding,
servicing, and collection)
This infrastructure is valuable more so today
This sector offers the best opportunity for Newtek shareholders
109 to 114 pricing on governments
FDIC contract
We are an S&P rated commercial servicer
Closed S&P AA rated securitization for note issuance of $16 million in
December 2010 Capital One Bank term note paid off in December 2010
Closed Capital One Bank $12 million line of credit to fund portions of loans
guaranteed by the SBA
Closed a $10 million line with Sterling National Bank to fund accounts receivable
finance business in February 2011
Obtained Letter of Intent on an additional $15 million warehouse
line from Capital One
Bank to fund unguaranteed portions of SBA 7(a) loans until next
securitization. 13 |
 14
Small Business Finance
Servicing Portfolio (in thousands):
2010
2009
Increase
Servicing for our loans
$179,874
$ 142,513
$ 37,361
Servicing for others
$ 73,062
$ 794
$ 72,268
Total servicing portfolio
$ 252,936
$ 143,307
$109,629
We expect future growth in this business area. |
 Reduced Effect of Capco
on Consolidated Results
Balance sheet illusionary leverage
Management time
Accounting cost
Other miscellaneous costs
15 |
 Balance Sheet Items to Discuss
SBA loans transferred, subject to premium recourse
$31.2 million
Credits in lieu of cash
$35.5 million
Total assets
$165.0 million
Liability on SBA loans transferred, subject to premium recourse
$30.8 million
Notes payable in credits in lieu of cash
$35.5 million
Total liabilities
$109.4 million
16 |
 Future Year End Balance of Tax Credits
17
$-
$2
$4
$6
$8
$10
$12
$14
$16
$18
$20
2011
2012
2013
2014
(in millions) |
 Reduction of Capco Effect
Reduction of balance sheet
Credits in lieu of cash
Notes payable in credits in lieu of cash
Current percentage investment threshold and amount needed to reach 100%
Florida has sunset as per state law in December 2010
Alabama reached 100% investment threshold in December 2010
18
Capco
% Investment
threshold
$ Investments needed
to reach 100%
DC
60%
5,059,000
TX
67%
7,723,000
LA2
50%
1,808,457
LA4
78%
1,483,585
AL
100%
-
FL
100%
-
|
 What
is our Growth Strategy Going Forward?
The
Small
Business
Authority
brand
through
www.thesba.com
(launched January 2011)
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
attractive to banks, credit unions and other affinity groups
Outbound campaign with direct focus on small businesses through
television and radio
19 |
 Our
Strategy & Mission We are a thought leader and destination for
independent owner operators of small businesses. The Small Business
Authority provides products, services, and data to small and medium size
businesses across the United States to grow their sales, reduce
their expenses, reduce their risk and offer state of the art efficient
business strategies, structures, and content to run their businesses.
20 |
 77
WABC Radio “Reporting Live from The Small Business Authority
Studios” over 400 mentions per month
Over 250 sixty second radio commercials per month. Hear our
spots on www.thesba.com
click on community, then click on radio spots to hear our
personalities, like Imus, Hannity, Levin, Kudlow, Batchelor and McIntyre
broadcast our spots The Small Business Authority Hour
The
first
Saturday
of
every
month
on
77
WABC
and
WABCradio.com
(click
listen
live)
Our show for independent business owners and operators
Go
to
our
website
www.thesba.com,
click
on
community
and
then
radio
spots
to listen to the podcasts
21 |
 WABC
Radio “The Imus in the Morning Show”
–
broadcast Monday through
Friday, 6am EST to 9:20am EST on 77 WABC and Fox
Business News
See Warner Wolfe broadcast sports from the SBAS several
times each morning
See
Bernard
McGirk
broadcast
his
“Bernie
Briefing”
from
the
SBAS
several
times
each
morning
Backdrop
Microphone flags
Testing for future growth for Thesba brand and direct-to-market
distribution
SBAS –
Small Business Authority Studios
22 |
 SB
Authority Index Financial barometer for small business economy
Made up of eight primary business and economic components
of the small business economy
SB Authority Index released at beginning of every month
Available in our newsletter with over 50,000 in distribution
Available
on
our
website
now
at
www.thesba.com
23 |
 SB
Authority Market Sentiment Survey On a monthly basis, delivers the pulse of
the small business economy by polling our client base on topical issues
like health care, the lending environment and other important issues
effecting small businesses
Usually poll in excess of 1,000 respondents
Released once per month
Results are available in our newsletter with over 50,000 in
distribution
Available to all to participate and view results on our website at
www.thesba.com
24 |
 Small Business Authority Hour
Live radio for small business on the first Saturday of every
month broadcasting from The Small Business Authority Studios
on 77 WABC or nationally at WABCRadio.com
Produced and directed by Newtek for independent business
owners and operators
Discussing key small business issues like health care and the
business lending environment
Special guests, small business news and call-ins each and
every month
25 |
 Marketing Focus |
 Strategic Alliance Partner Channel
Still our workhorse for distribution, clientele and relationships
Driven by Newtracker™
which has a patent pending
Referral volume continues to grow on a consolidated basis
CUNA
Latino Coalition
Pershing
Morgan Stanley Smith Barney
Chartis
New York Community Bank
* Plus a very large alliance to be announced within 2 weeks.
27 |
 Small Business Authority Channel
Grow internet web based direct business
through search
through branding on TV, radio, print and public relations
Increased recognition as the authority on business issues for
small businesses
Grow as the destination spot for independent owner/operator
businesses
Become recognized as best of breed in each area of:
Lending
Electronic payment processing
Insurance brokerage
Outsourced technology managed services
Business information
Payroll
Data storage
Health insurance
28 |
 In Conclusion
29 |
 Annual Pretax (Loss) Income Trend
-18
-12
-6
0
6
2007
Actual
2008
Actual
2009
Actual
2010
Actual
2011
Forecast
Midpoint
30
Pretax Net
(Loss) Income
$(17.5)
$(13.1)
$(4.0)
$0.9
in millions
$2.8 |
 2011
Current Segment Guidance 31
*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
2011 Full Year
Revenue
79.1
82.5
19.9
20.7
17.1
18.5
1.6
1.8
1.0
1.0
Pretax Net Income (Loss)
5.8
6.3
4.7
5.3
3.4
4.8
(1.2)
(1.0)
(9.7)
(9.3)
Interest Expense
-
-
0.1
0.1
1.5
1.7
-
-
-
-
Depreciation and Amortization
1.4
1.4
1.7
1.7
1.0
1.0
0.1
0.1
0.3
0.3
EBITDA
7.2
7.7
6.5
7.1
5.9
7.5
(1.1)
(0.9)
(9.3)
(8.9)
Total
Business
CAPCO
Intercompany
Segments
Segment
Eliminations
Total
Low
High
Low
High
Low
High
2011 Full Year
Revenue
118.7
124.4
2.5
2.5
(1.6)
119.6
125.3
Pretax Net Income (Loss)
3.0
6.1
(1.8)
(1.8)
-
1.2
4.3 |
 Consolidated Annual Pretax Income (Loss)
Year
Amount (in millions)
2007
$(17.5)
2008
$(13.1)
2009
$(4.0)
2010
$0.9
2011 (Forecast range
midpoint)
$2.8
32 |
 Financial Review
Seth A. Cohen -
CFO |
 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 review
and
assess
its
operating
performance.
The
Company
also
presents
EBITDA
because
it
believes
it is frequently used by securities analysts, investors and other interested
parties as a measure of financial performance.
The term EBITDA is not defined under U.S. generally accepted accounting principles,
or U.S. GAAP, and is not a measure of operating income(loss), operating
performance or liquidity presented in accordance with U.S. GAAP.
EBITDA has limitations as a analytical tool and, when assessing the
Company’s operating performance, investors should not consider EBITDA in
isolation, or as a substitute for net income (loss) or other consolidated income
statement data prepared in accordance with U.S. GAAP. Among other
things, EBITDA does not reflect the Company’s actual cash
expenditures. Other companies may calculate similar measures
differently than Newtek, limiting their usefulness as comparative tools.
Newtek compensates for these limitations by relying primarily on its GAAP
results and using EBITDA only supplementally. 34
|
 Cash Position
Balance at
December 31, 2010
Balance at
December 31, 2009
Cash and cash equivalents
$10,382
$12,581
Restricted cash
$10,747
$6,739
Broker receivable
$12,058
$6,467
Total
$33,187
$25,787
Bank notes payable
$28,053
$16,298
35
In thousands of dollars |
 FY
2010 Actual vs. FY 2009 Actual Revenue For
The Year Ended
December 31,
2010 Actual
Revenue For
The Year Ended
December 31,
2009 Actual
Pretax Net
Income (Loss)
For The Year
Ended December
31, 2010 Actual
Pretax Net
Income (Loss)
For The Year
Ended December
31, 2009 Actual
EBITDA For The
Year Ended
December 31,
2010 Actual
EBITDA For
The Year Ended
December 31,
2009 Actual
Electronic
Payment
Processing
80.936
69.688
5.718
4.353
7.354
6.112
Web Hosting
19.168
18.858
4.730
3.925
6.665
6.623
Small
Business
Finance
9.371
7.308
2.045
(2.295)
4.751
0.121
All Other
1.347
2.413
(1.602)
(0.368)
(1.467)
(0.238)
Corporate
Activities
2.257
3.210
(6.816)
(5.940)
(6.504)
(5.503)
CAPCO
2.442
7.983
(3.198)
(3.677)
Interco
Eliminations
(2.802)
(3.749)
Totals
112.719
105.711
0.877
(4.002)
36
In millions of dollars |
 FY
2010 Guidance vs. FY 2010 Actual Revenue
Guidance
Revenue
Actual
Pretax Net
Income (Loss)
Guidance
Pretax Net
Income (Loss)
Actual
EBITDA
Guidance
EBITDA
Actual
Electronic
Payment
Processing
81.0 –
81.2
80.936
5.5 –
5.7
5.718
7.1 –
7.3
7.354
Web Hosting
19.2 –
19.4
19.168
4.7 –
4.8
4.730
6.6 –
6.7
6.665
Small
Business
Finance
9.1 –
9.3
9.371
1.6 –
1.9
2.045
4.1 –
4.4
4.751
All Other
1.2 –
1.3
1.347
(1.5) –
(1.2)
(1.602)
(1.4) –
(1.1)
(1.467)
Corporate
Activities
2.0 –
2.0
2.257
(7.3) –
(7.1)
(6.816)
(6.9) –
(6.8)
(6.504)
CAPCO
2.5 –
2.5
2.442
(3.0) –
(3.0)
(3.198)
Interco
Eliminations
(2.6 )–
(2.6)
(2.802)
Totals
112.4 –
113.1
112.719
0.0 –
1.0
0.877
37
In millions of dollars
* Note: totals may not add due to rounding
|
 2011
Current Segment Guidance 38
*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
2011 Full Year
Revenue
79.1
82.5
19.9
20.7
17.1
18.5
1.6
1.8
1.0
1.0
Pretax Net Income (Loss)
5.8
6.3
4.7
5.3
3.4
4.8
(1.2)
(1.0)
(9.7)
(9.3)
Interest Expense
-
-
0.1
0.1
1.5
1.7
-
-
-
-
Depreciation and Amortization
1.4
1.4
1.7
1.7
1.0
1.0
0.1
0.1
0.3
0.3
EBITDA
7.2
7.7
6.5
7.1
5.9
7.5
(1.1)
(0.9)
(9.3)
(8.9)
Total
Business
CAPCO
Intercompany
Segments
Segment
Eliminations
Total
Low
High
Low
High
Low
High
2011 Full Year
Revenue
118.7
124.4
2.5
2.5
(1.6)
119.6
125.3
Pretax Net Income (Loss)
3.0
6.1
(1.8)
(1.8)
-
1.2
4.3 |
 2011
Previous Segment Guidance 39
*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
2011 Full Year
Revenue
86.7
90.3
19.9
20.7
14.2
15.8
1.8
2.2
1.2
1.2
Pretax Net Income (Loss)
5.8
6.3
4.7
5.3
3.4
4.8
(0.9)
(0.7)
(8.9)
(8.6)
Interest Expense
-
-
0.1
0.1
2.4
2.6
-
-
-
-
Depreciation and Amortization
1.4
1.4
1.9
1.9
0.8
0.8
0.1
0.1
0.3
0.3
EBITDA
7.2
7.7
6.7
7.3
6.6
8.2
(0.8)
(0.6)
(8.5)
(8.2)
Total
Business
CAPCO
Intercompany
Segments
Segment
Eliminations
Total
Low
High
Low
High
Low
High
2011 Full Year
Revenue
123.8
130.2
2.5
2.5
(1.9)
124.4
130.8
Pretax Net Income (Loss)
4.1
7.1
(2.1)
(2.1)
-
2.0
5.0 |
 Going Forward: 2011
Barry Sloane -
CEO |
 Questions & Answers |
 Addendum |
 43
Pretax Income
(Loss) for 2010
Interest Expense
for 2010
Depreciation and
amortization for 2010
2010
EBITDA
Electronic Payment
Processing
5.718
0.004
1.632
7.354
Web Hosting
4.730
0.107
1.828
6.665
Small Business Finance
2.045
1.916
0.790
4.751
All Other
(1.602)
-
0.135
(1.467)
Corporate Activities
(6.816)
-
0.312
(6.504)
Pretax Income
(Loss) for 2009
Interest Expense
for 2009
Depreciation and
amortization for 2009
2009
EBITDA
Electronic Payment
Processing
4.353
0.005
1.754
6.112
Web Hosting
3.925
0.123
2.575
6.623
Small Business Finance
(2.295)
1.485
0.931
0.121
All Other
(0.368)
-
0.130
(0.238)
Corporate Activities
(5.940)
-
0.437
(5.503)
EBITDA Reconciliation
EBITDA Reconciliation from Net Income (Loss)
For the year ended December 31, 2010
In millions of dollars
EBITDA Reconciliation from Net Income (Loss)
For the year ended December 31, 2009
In millions of dollars |