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| 8-K - FORM 8-K - NEWTEK BUSINESS SERVICES, INC. | d512429d8k.htm |
 Newtek Business
Services, Inc. Newtek Business Services, Inc.
“The Small Business Authority®”
“The Small Business Authority®”
Hosted by:
Hosted by:
Barry Sloane, President & CEO
Barry Sloane, President & CEO
Jennifer Eddelson, CAO
Jennifer Eddelson, CAO
Full Year 2012
Full Year 2012
Financial Results Conference Call
Financial Results Conference Call
March 27, 2013 4:15pm ET
March 27, 2013 4:15pm ET
NASDAQ: NEWT
NASDAQ: NEWT
www.thesba.com
www.thesba.com
Investor Relations
Public Relations
Newtek IR
Hayden Investor Relations
Rubenstein Public Relations, Inc.
Jayne Cavuoto
jcavuoto@thesba.com
(212) 273-8179
Brett Maas
brett@haydenir.com
(646) 536-7331
Peter Seltzberg
peter@haydenir.com
(646) 415-8972
Jonathan Goldberg
jgoldberg@rubensteinpr.com
(212) 843-9335
Exhibit 99.1 |
 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 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 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 2 |
 Full Year 2012
Full Year 2012
Conference Call Agenda
Conference Call Agenda
3
Full Year 2012 Consolidated Financial Performance
Segment Performance and Revenue Growth
2013 Guidance
Newtek Growth Strategy
Marketing Initiatives
Future Initiatives |
 Consolidated
Performance Consolidated Performance
4
For the full year 2012, the Company had consolidated:
•
Pretax income of $9.4 million, an increase of $7.4 million, or 365.4%, compared to
the full year 2011
•
Net income of $5.6 million, an increase of $2.3 million, or 69.2%, compared to the
full year 2011
•
Modified EBITDA* of $16.7 million, an increase of $7.1 million, or 74%, compared to
full year 2011
For the 12 months ended December 31, 2012, EPS was $0.15 per diluted share
vs. $0.09 per diluted share one year ago
Previously announced (on 2/1/2013) a one-time pre-tax charge of $1.5 million
increase in merchant charge-back losses caused by 1 outside
party.
Significantly affected FY 2012 performance, as well as slightly
impacted
FY 2011
•
Met high-end of previously stated guidance of $0.15 per diluted share
•
Excluding one-time charge, FY 2012 earnings per diluted share would have been
$0.17
*See slide 44 for definition of Modified EBITDA |
 Impact of
Restatement Impact of Restatement
5
One-time $1.5 million pretax charge (previously announced on 2/1/13),
included $1.3 million restated over 4 prior quarters beginning Q4’2011
Did not impact achieving high-end of 2012 diluted EPS guidance range of
$0.14 -
$0.15 per share
Restatement reduced 2011 diluted EPS by $0.01 per share, or to $0.09 per
diluted share from previously reported $0.10 per diluted share
All references to consolidated 2011 pretax and net income, 2011 diluted
EPS, Modified EBITDA* and the 2011 EPP segment results in this
presentation reflect amounts as restated
*See slide 44 for definition of Modified EBITDA |
 Consolidated
Earnings Performance Consolidated Earnings Performance
6
*See slide 44 for definition of Modified EBITDA |
 7
Consolidated Earnings Performance
Consolidated Earnings Performance
Earnings per Diluted Share
67% increase year over year in fully diluted EPS |
 2013
Consolidated Financial Guidance 2013 Consolidated Financial Guidance
Earnings (loss) per diluted share
8
Pretax Income
($ in millions)
Earnings Per Share
The Company met the high end of its FY 2012 diluted EPS guidance
range at
$0.15 per share
Expect FY 2013 diluted EPS midpoint of $0.18 per share and pretax income
midpoint of $11.5 million |
 Consolidated
Balance Sheet Consolidated Balance Sheet
Major changes in Assets and Liabilities
•
Increase of $11.8 million in Broker receivable
•
Increase of $21.2 million in SBA loans held for investment
•
Increase of $26.3 million in Notes payable
•
Decrease of $8.2 million in Credits and Notes payable in credits
in lieu of cash
9
$ in thousands
Balance
Dec 31, 2012
Balance
Dec 31, 2011
(Restated)
Total Cash & Cash Equivalents
$14,229
$11,201
Total Assets
$152,742
$129,795
Total Liabilities
$83,840
$70,642
Total Equity
$68,902
$59,153
Selected Items |
 Consolidated
Cash Position Consolidated Cash Position
10
Between December 31, 2011 and December 31, 2012:
Cash and cash equivalents increased by $3.0 million
Cash per diluted share increased from $0.31 to $0.39 |
 Operating
Segment Performance Operating Segment Performance
11
Electronic Payment Processing:
•
Revenue increased by 4% over 2011, to $85.5 million
—
Revenue up by 9% excluding impact of Durbin Amendment
•
Pretax income increased by 14% over 2011 to $7.0 million
—
Pretax income up by 30% excluding impact of restatement adjustment
For the Full Year 2012 vs. 2011:
Managed Technology Solutions:
•
Revenue decreased by 5% over 2011 to $18.2 million
•
Pretax income decreased by 12% over 2011 to $4.3 million
Small Business Lending:
•
Revenue increased by 21% over 2011 to $25.4 million
—
Excluding the reversal of the fair value adjustment related to loans achieving
sale status in 2011 of $3.4 million, 2012 revenue would have increased by
43.9% over 2011 revenue
•
Pretax income increased by 96% over 2011 to $8.1 million |
 Small Business
Finance Small Business Finance
12
2012 SBF revenue increased by 21% to $25.4 million from $21.0 million in 2011
S&P-rated commercial servicer; FDIC contract
Very strong lending infrastructure with significant leverage
Sector offers the best opportunity for NEWT shareholders
FY 2012 SBF revenue was 19.4% of total operating revenue
FY
2012
Total
Operating
Revenue:
$131.1
million
SBF Revenue Trend |
 Key Variables
in Loan Sale Transaction Loan Amount
$1,000,000
Guaranty Percent
75%
Guaranteed Balance
$750,000
Unguaranteed Balance
$250,000
Premium*
12.5%
13
Small Business Finance
Small Business Finance
Direct
Revenue
/
Expense
of
a
Loan
Sale
Transaction
–
An
Example
Resulting Revenue (Expense)
Associated Premium**
$93,750
Servicing Asset***
$18,630
Total Premium Income
$112,380
Packaging Fee Income
$2,500
FV Discount
$(18,750)
Referral Fees
$(7,500)
Total Direct Expenses
$(26,250)
Net Risk-adjusted Profit Recognized
$88,630
Net Cash Created pretax
(post securitization)****
$11,250
**Assumes 12.5% of the Guaranteed balance
***
Value determined by GAAP servicing value
**** Assuming the loan is sold in a securitization in
12 months
*Premium above 10% split 50/50 with SBA |
 Securitization
Strategy Securitization Strategy
3 securitized structures completed
•
March 2013
•
December 2011
•
December 2010
March 2013: completed securitization and sale of $20.9 million A-Rated
securities through Guggenheim Securities
•
Collateral consisted of 113 loans with an aggregate principal balance
of $23.6 million
Improved securitization economics compared to previous two
securitizations in 2010 and 2011
•
Improved long-term cost of interest of more than 150 basis points
•
Improved proceeds of securitization by between 8% and 9%
14 |
 15
Small Business Finance
Small Business Finance
During the 12 months ended December 31, 2012, the Lender closed
104 loans, totaling $112.0
million, vs. 102 loans, totaling $97.1 million,
in the 12 months ended December 31, 2011
We
forecast
the
Lender
to
close
between
$150
-
$200
million
in
2013
Loans Closed |
 Small Business
Finance Small Business Finance
16
As of March 25, 2013, the total Small Business Lending Pipeline has increased by
$69.2 million, or 95.8% year over year:
•
Closed loans increased by $9.1 million, or 55.2%
•
Approved –
Pending closing increased by $5.7 million, or 15.5%
•
Loans currently in underwriting have increased by $9.2 million, or 73.6%
•
Prequalified volume has increased by $45.2 million, or 707.3%
•
March 25, 2012 pipeline of $72.2 vs. March 25, 2013 pipeline of $141.5 million
|
 Small Business
Finance Small Business Finance
17
The SBF servicing portfolio –
December 31, 2012 vs. 2011:
•
NEWT portfolio increased by 23%; third-party servicing portfolio increased by 29%
•
Related servicing fee income on all portfolios increased by $3.8
million to $6.9
million, or 123%, for the 12 months ended December 31, 2012 vs. 2011
•
Anticipate total servicing portfolio to increase to $750 -
$850 million by 12/31/13
In
Q1’
13,
approximately
$65
million
transferred
to
NEWT
servicing
portfolio
from
large
multi-billion dollar bank
2013
loan
originations
create
$175
million
of
new
servicing
at
midpoint
*Principal balance of loans serviced (dollars in millions) |
 2012 EPP
revenue increased by 4% to $85.5 million from $82.5 million in 2011
•
Excluding impact of Durbin amendment, 2012 revenue increased by 9% over 2011
eCommerce: single most important corporate initiative and identifier; will be a
significant growth engine
$1.3 million merchant chargeback loss, recorded in 2012, significantly impacted
2012 performance
Electronic Payment Processing
Electronic Payment Processing
18
FY 2012 EPP revenue was 65.2% of total operating revenue
FY
2012
Total
Operating
Revenue:
$131.1
million |
 2013
- 2013 -
Enhancing Risk Management
Enhancing Risk Management
Historically,
Newtek
has
had
an
excellent
record
of
managing
risk
through
both
good
and
bad
times
by
continually
enhancing
our
credit
policies
and
procedures
Named
Edward
Petrosky
as
Chief
Credit
and
Risk
Officer
of
the
Holding
Company
and
all
subsidiaries
Named
Eric
Turille
as
President
of
the
Electronic
Payment
Processing
Unit
Named
Ted
Rallis
as
Senior
Vice
President
of
Human
Resources
19
Has
over
20
years
of
experience
in
human
resource
management
and
relationship
building
•
Formerly serving the function of Chief Credit Officer at 5 banking
institutions
•
Has over 20 years of experience in operations, sales and marketing in the
electronic payment processing space |
 2013
- 2013 -
Enhancing Revenue Management
Enhancing Revenue Management
Randy Sagar
Executive Vice President of Business Development
Located in Louisville, Kentucky
Sundeep ‘Sunny’
Dronawat
Executive Vice President and Advisor to the Chairman
Located in Louisville, Kentucky
Tom Stier
Senior Vice President and Western Region Manager
Located in Irvine, California
Adam Epstein
Director of Strategic Alliances
Located in New York (Long Island & NYC)
20 |
 Managed
Technology Solutions Managed Technology Solutions
21
2012 MTS revenue decreased by 5% to $18.2 million from $19.2 million in 2011
This segment is being transformed to take advantage of shift to cloud-based
business trends including: eCommerce, Payroll and Insurance
FY 2012 MTS revenue was 13.9% of total operating revenue
FY
2012
Total
Operating
Revenue:
$131.1
million |
 Shift to
Linux-based Platforms Shift to Linux-based Platforms
NTS plans to launch Linux Apache and Linux Nginx platforms
•
Should capture additional market opportunities
•
NTS created associated control panels, service support and billing, which allows
NTS to participate in growth of 100% of the market of new web design (vs. 33%
represented by Microsoft)
•
All platforms are available with NTS’s Cloud and non-Cloud environment, and are
fully managed offerings unlike NTS competitors
•
Newtek Advantage™
leverages NTS’s underlying technologies to deliver real-time
information and actionable business intelligence to new and existing customers
•
NTS launched a complete line of Cloud-based business and eCommerce
packages, or Cloud Spaces, to streamline the decision process for business
owners and accommodate designers and developers who wish to build sites in
both Microsoft and Linux environments
22 |
 2013 Revised
Guidance 2013 Revised Guidance
23
Operating
Revenue:
midpoint
of
$148.2
million,
with
a
range
of
$145.1
million and $151.2 million, an increase over the previously issued
midpoint of $147.0 million, and a 12.1% increase over FY 2012 revenue of
$131.1 million
Pretax
Income:
midpoint
of
$11.5
million,
with
a
range
of
$10.0
million
and $13.0 million, unchanged from previously issued midpoint guidance,
and an increase of 22.3% over 2012 pretax income of $9.4 million
Diluted
EPS:
midpoint
of
$0.18,
with
a
range
of
$0.17
-
$0.19
per
share,
an increase of 20.0% over 2012 diluted EPS of $0.15 per share |
 Consolidated
Guidance Consolidated Guidance
24
The Company met the high end of its 2012 diluted EPS guidance range of
$0.14 -
$0.15 per share
Full
year
2013
revised
guidance
includes
diluted
EPS
range
of
$0.17
-
$0.19
per share, with a midpoint of $0.18 per share |
 Consolidated
Guidance Consolidated Guidance
25
Full year 2013 guidance includes Modified EBITDA* midpoint of $20.9
million, with a range of $19.3 million and $22.4 million
*See slide 44 for definition of Modified EBITDA |
 Managed
Technology Solutions Electronic Payment Processing
2013 Revised Segment Guidance
2013 Revised Segment Guidance
26
Revenue: $90.4 -
$94.1M
Pretax
Income:
$8.2
-
$9.0M
Modified
EBITDA*:
$8.5
-
$9.3M
Revenue: $18.4 -
$19.2M
Pretax
Income:
$3.9-
$4.7M
Modified
EBITDA*:
$5.5
-
$6.3M
All Other
Small Business Finance
Revenue: $34.0 -
$35.6M
Pretax
Income:
$10.0
-
$10.8M
Modified
EBITDA*:
$17.1
-
$17.9M
Revenue: $2.2 -
$2.2M
Pretax Loss: $(1.1) -
$(0.9)M
Modified
EBITDA*:
$(1.0)
-
$(0.8)M
Revenue by Segment
*See slide 44 for definition of Modified EBITDA |
 2013 Revised
Segment Guidance 2013 Revised Segment Guidance
*Note: totals may not add due to rounding
In millions of dollars
Electronic
Managed
Small
Total
Payment
Technology
Business
All
Corporate
Business
CAPCO
Intercompany
Processing
Solutions
Finance
Other
Activities
Segments
Segment
Eliminations
Total
Low
High
Low
High
Low
High
Low
High
Low
High
Low
High
Low
High
Low
High
2013 Full Year
Revenue
90.4
94.1
18.4
19.2
34.0
35.6
2.2
2.2
0.8
0.8
145.8
151.9
0.1
0.1
(0.8)
145.1
151.2
Pretax Income (Loss)
8.2
9.0
3.9
4.7
10.0
10.8
(1.1)
(0.9)
(9.6)
(9.3)
11.4
14.3
(1.5)
(1.3)
-
10.0
13.0
Income from tax credits
-
-
-
-
-
-
-
-
-
-
-
-
(0.1)
(0.1)
-
(0.1)
(0.1)
Net change in fair value of
credits in lieu of cash and
notes payable in credits in
lieu of cash
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Deferred compensation
expense
-
-
-
-
-
-
-
-
0.4
0.4
0.4
0.4
-
-
-
0.4
0.4
Lease loss amortization
-
-
-
-
-
-
-
-
(0.3)
(0.3)
(0.3)
(0.3)
-
-
-
(0.3)
(0.3)
Interest Expense
-
-
0.1
0.1
5.9
5.9
-
-
-
-
6.4
6.4
0.2
0.2
-
6.2
6.2
Depreciation and
Amortization
0.3
0.3
1.5
1.5
1.2
1.2
0.1
0.1
0.1
0.1
3.3
3.3
-
-
-
3.2
3.2
Modified EBITDA*
8.5
9.3
5.5
6.3
17.1
17.9
(1.0)
(0.8)
(9.4)
(9.1)
20.5
24.9
(1.4)
(1.2)
-
19.3
22.4
27
*See slide 44 for definition of Modified EBITDA |
 28
Growth Strategy
Growth Strategy
Increased
advertising
budget by
50%
Grow brand
organically & via
www.thesba.com
Corporate
re-brand:
authoritative
presence in small
business economy
Cross sell
and cross
market
Continue to
grow alliance
channels
Grow
applications
hosted in the
Cloud
•
Remain #1 in Non-bank
Government Guaranteed
Lender
•
Grow Newtek Advantage
Platform
•
Grow revenues between
9-11% organically |
 Edward is the
former President and CEO of Hanover Community Bank. Edward has over 35 years of experience in
credit and risk management in the financial services industry, including money center,
regional and community banks. Edward is the former President/CEO/Chief Credit Officer
of successful turnaround situations and two start- up banks, and has 15 years
experience as a Chief Credit/Chief Lending Officer in the banking industry. Edward will
be actively involved and reporting directly to the Board of Directors and the Chair of the
Audit Committee about regular compliance and supervision regarding the Company's
primary operating subsidiaries and evaluating their risk, controls, policies and
procedures. Ted Rallis, Senior Vice President of Human Resources
Eric Turille, President of Newtek Merchant Solutions
Edward Petrosky, Chief Credit Officer and Chief Risk Officer
Eric is the former President of First National Bank of Omaha, Merchant Services, former COO
and Head of Sales at Vital Processing, former COO of Retriever Merchant Services and
has served on several VISA and MasterCard committees. Eric has a vast background, with
over 20 years of experience in operations, sales and marketing in the electronic
payment processing space. Eric will be directly responsible for the day-to-day operations of our
electronic payment processing business, in conjunction with Kim Olszewski, Chief Operating
Officer of Newtek Merchant Solutions, who has been with the organization since
2005. Expanding Our Team of Professionals
Expanding Our Team of Professionals
29
Ted
is
the
former
Vice
President,
Human
Resources
at
Marathon
National
Bank
of
NY,
former
Vice
President,
Human
Resources
of
ABN-AMRO
North
America
(EAB),
former
Human
Resources
Manager
of
Home
Depot
Regional,
and
former
Corporate
Director
of
Human
Resources
of
The
Revenue
Maximization
Group.
Ted
has
over
20
years
experience
and
a
proven
track
record
in
management
and
relationship
building,
demonstrating
excellent
communication
skills
and
expertise
in
the
varied
disciplines
of
Human
Resources
with
contributions
focused
on
quality
delivery,
improved
efficiency
and
cost-effective
results. |
 Expanding Our
Team of Professionals Expanding Our Team of Professionals
30
Randy Sagar, Executive Vice President of Business Development
Randy is a former partner in Financial Alliance and was the EVP of sales and marketing for
National Processing Company of Kentucky (NPC) and its successor Bank of America
Merchant Services, where he was responsible for building a team of professionals who
added over 8,000 new merchant accounts per month through its Wholesale, ISO, Agent
Banks and Direct programs. Randy has been active in the Electronic Transaction
Association for 15 years where he has authored or coauthored numerous whitepapers.
Additionally, Randy has 20 years experience in the acquiring side of the business and is a
National City Bank Excel award winner for revenue company-wide. Randy will be
opening an office in Louisville, Kentucky.
Mike Valerio, Vice President of Business Development
Mike has spent most of his career establishing and creating distributional channels, and
brings more than 12 years of experience in helping ISOs and ISAs build their
business and boost their bottom line.
Mike will focus on developing the Independent Sales Agent (“ISA”) and Independent
Sales Organization (“ISO”) electronic payment channels and will be working
closely with Randy Sagar. William Berry , Vice President of Strategic Market
Alliances William’s
primary
focus
has
been
on
developing
relationships
with
agent
banks
and
credit
unions,
and
he
will
extensively
utilize
the
patented
NewTracker®
system
to
further
grow
and
develop
Newtek’s
strategic
alliance partner channel. William will focus on developing the Independent Sales Agent
(“ISA”) and Independent Sales Organization (“ISO”) electronic
payment channels, and will be working closely with Randy Sagar.
|
 Tom Stier,
Senior Vice President and Western Region Manager Expanding Our Team of Professionals
Expanding Our Team of Professionals
31
Tom
most
recently
was
the
Vice
President—Sales,
Marketing,
Product
Development
&
Investor
Relations
at
Aurora
Bank,
FSB,
and
has
extensive
experience
in
managing
all
aspects
of
residential
and
commercial
lending
including
loan
origination,
assembling,
underwriting
and
servicing.
Tom
will
establish
and
run
a
West
Coast
business
development
office
for
Newtek,
and
will
have
up
to
4
other
professional
staff
members.
The
activities
of
the
Office
will
be
to
promote
and
sell
the
total
spectrum
of
Newtek
products
including
the
Newtek
Advantage™
operating
platform
to
distribution
partners
and
retail
accounts.
Sundeep ‘Sunny’
Dronawat, Executive Vice President and Advisor to Chairman
Sunny is the Co-Founder of Rural America Onshore Outsourcing and POS on Cloud. He has an
MBA in Marketing
and
a
Ph.D.
in
Chemical
Engineering
from
University
of
Louisville.
Sunny
is
certified
in
Six
Sigma, and is a Fellow of Financial Services Institute (FFSI) and Life Office Management
Institute (FLMI). Sunny will be focused on working with Newtek’s technological
products such as future offerings in the areas of cyber-security and POS in the
cloud for eCommerce clients. |
 Geographic
& Office Expansion Geographic & Office Expansion
32
New Office -
Louisville, Kentucky
•
Led by Randy Sagar, with Mike Valerio and William Berry
•
Focus on developing the Independent Sales Agent (“ISA”) and Organization
(“ISO”) electronic payment channels, as well as grow Newtek’s strategic
alliance partner channel
•
Focus on growing customer count and distributing Newtek’s full suite of products,
including the Newtek Advantage™
focused on payroll, insurance, web traffic statistics
and merchant processing in the Cloud
New Office -
Orange County, California
•
West Coast regional office led by Tom Stier and 4 other professional staff
•
Will promote and sell total spectrum of Newtek products including the Newtek
Advantage™
platform to distribution partners and retail accounts
Expansion of existing Office -
West Hempstead, New York
•
Added 11,000 square feet, which doubles office capacity for small business lending
•
Anticipate adding 30 jobs over the next two years
•
Expect over 50% loan volume growth in 2013, and growth in our loan servicing platform
for our own account and other financial institutions as small business lenders
|
 Marketing
Strategy Marketing Strategy
33 |
 34
Marketing Campaign –
Marketing Campaign –
National
National
Television Commercials
Television Commercials
•
CNN
•
Fox News
•
Fox Business
On average, 190 or more monthly commercials which have aired on the
following properties:
Commercial
schedule
primarily
Monday
to
Thursday
from
5am
-
11pm
Improvement in Website statistics since start of TV campaign
•
32% increase in average time on site
•
20% improvement in our bounce rate
•
MSNBC
•
Headline News
•
The Outdoor Channel |
 Marketing
Results Marketing Results
Before & After TV Commercials
Before & After TV Commercials
Average Weekday Referrals (Lending Only)
35
Since start of campaign, the average number of daily referrals for our
Lending products increased by 94%, from 18 to 35 referrals |
 Lending
Referrals
–
Q4
2011
vs.
Q4
2012
Marketing Campaign Results
Marketing Campaign Results
36
Lending referrals increased by over 200% compared with the year
ago quarter |
 Visitor Trend
to www.thesba.com Visitor Trend to www.thesba.com
37
As a result of our Direct Marketing Initiatives:
•
Total Quarterly Visitors* increased by 148% in Q4’12 vs. Q4’11
•
Total Quarterly Unique Visitors** increased by 134% for Q4’12 vs. Q4’11
*Represents
the
total
visitors
to
www.thesba.com
during
each
of
the
fourth
quarters
in
2011
and
2012.
**Represents
the
total
of
unique
visitors
that
visited
www.thesba.com
during
each
of
the
fourth
quarters
in
2011
and
2012.
Total Visitors and Unique Visitors for Q4 2011 vs. Q4 2012 |
 thesba.com
2.0 thesba.com 2.0
38 |
 39
The Newtek Advantage™
is a mobile real-time SMB management platform that puts
all of a business’s critical transactions and economic, eCommerce and web site traffic
data
on
a
smartphone,
tablet,
laptop
or
PC.
The
Newtek
Advantage™
provides
the
intelligence that businesses require and will give them the advantage to succeed.
This revolutionary platform will allow owners and operators of small-
and medium-
sized businesses to manage their businesses from their mobile device anywhere,
anytime, all without an IT department.
The Newtek Advantage ™
is SMART:
The Newtek Advantage™
The Newtek Advantage™
S:
Sales
Increased
—
less
time
spent
on
administration;
more
time
spent
on
sales
and
servicing
customers
M:
More Control, Fewer Surprises —
key business stats and metrics available in real time for
faster and more informed decisions
A:
Accelerated Profits —
real-time information means better and more profitable decisions
R:
Real-time information means key business management data is only seconds away,
whenever and wherever the business operator is
T:
Technology
Enhancements
—
leads
to
decreased
cost
of
an
IT
department
—
everything
is
in
the
Cloud |
 Publicly Traded
Comparable Companies Publicly Traded Comparable Companies
Digital River (DRIV) announces purchase of LML Payment Systems (LMLP)
Universal Business Payment Solutions (UBPS) announced $179 million planned
acquisition of credit/debit card sales and processing, payroll processing and tax filing
companies
GoDaddy announced strategic purchase of a cloud-based financial management
application company to reach more small businesses
Newtek has the advantage of experience providing a “suite of services”
which operate
on
a
similar,
coordinated
platform,
and
will
also
be
available
in
the
cloud;
it’s
called
The
Newtek Advantage™
Medallion
Financial
Corp
(TAXI)
Heartland Payment Systems (HPY)
Web.com Group, Inc. (WWWW)
Cbeyond, Inc. (CBEY)
8 x 8, Inc. (EGHT)
ReachLocal, Inc. (RLOC)
Stamps.com, Inc. (STMP)
Marchex, Inc. (MCHX)
Vistaprint, NV (VPRT)
40 |
 Investment
Summary Investment Summary
Publicly traded Company since 2000
Management’s interests aligned with shareholders
•
CEO alone owns over 14.5% of outstanding shares*
Trades at slightly more than 3x 2013 forecasted Modified EBITDA**
•
2013 forecasted Modified EBITDA** of $20.9 million, an increase of approximately
26.7% over FY 2012 Modified EBITDA* of $16.5 million
Trades at 1.1x book value
Growing revenues
•
Expect to grow revenues by approximately 13% in 2013
Tremendous opportunity to penetrate market
•
Over 27 million small business in the U.S.
Inexpensive relative to market comparables
•
Market comps: LMLP, VNTV
41
*As of December 31, 2012
**See slide 44 for definition of Modified EBITDA |
 Key Statistics
– Key Statistics –
NASDAQ: NEWT
NASDAQ: NEWT
42
Stock Price (at 3/26/13)
$1.85
52-Week Range
$1.14-$2.21
Common Shares O/S
36.7M
Market Cap (at 3/26/13)
$68.0M
Avg. Daily Trading Vol.
36,641
(based on 3 mo avg. as of 3/26/13)
Share Statistics (USD)
………………………......................................
Revenue
$148.2M
Pre-tax Income
$11.5M
Diluted EPS
$0.18
Financial Highlights*
………………………......................................
*2013 forecast |
 Financial
Review Financial Review
Jennifer C. Eddelson -
Jennifer C. Eddelson -
CAO
CAO |
 Non-GAAP
Financial Measures Non-GAAP Financial Measures
In evaluating its business, Newtek considers and uses modified EBITDA as a supplemental measure
of its operating performance. The Company defines modified EBITDA as earnings
before income from tax credits, interest
expense,
taxes,
depreciation
and
amortization,
stock
compensation
expense,
other
than
temporary
decline
in
value
of
investments,
Capco
fair
value
change
and
the
amortization
of
the
2011
accrued
loss
on
the
lease restructure. Newtek uses modified EBITDA as a supplemental measure to review and
assess its operating
performance.
The
Company
also
presents
modified
EBITDA
because
it
believes
it
is
frequently used
by securities analysts, investors and other interested parties as a measure of financial
performance. The term modified 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.
Modified
EBITDA
has
limitations
as
a
analytical
tool
and,
when
assessing
the
Company’s
operating performance, investors should not consider modified 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, modified 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
modified EBITDA
only supplementally.
Our
Capcos
operate
under
a
different
set
of
rules
in
each
of
the
7
jurisdictions
and
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.
44 |
 In
millions of dollars *Note: totals may not add due to rounding
FY 2012 Actual vs. FY 2011 Actual
FY 2012 Actual vs. FY 2011 Actual
45
Revenue For
The Year
Ended
December 31,
2012
Revenue For
The Year
Ended
December 31,
2011
Pretax Income
(Loss) For The
Year Ended
December 31,
2012
Pretax Income
(Loss) For The
Year Ended
December 31,
2011 (Restated)
MODIFIED
EBITDA For The
Year Ended
December 31,
2012
MODIFIED
EBITDA For The
Year Ended
December 31,
2011 (Restated)
Electronic
Payment
Processing
85.489
82.486
7.041
6.157
7.765
7.611
Managed
Technology
Solutions
18.211
19.184
4.254
4.837
5.580
6.355
Small
Business
Finance
25.408
21.025
8.094
4.135
12.908
7.094
All Other
1.860
1.835
(1.038)
(0.734)
(0.970)
(0.625)
Corporate
Activities
0.785
1.092
(7.511)
(10.169)
(7.278)
(8.662)
CAPCO
0.683
1.497
(1.401)
(2.197)
(1.310)
(2.213)
Interco
Eliminations
(1.306)
(1.780)
–
–
–
–
Total
131.130
125.339
9.439
2.029
16.695
9.560 |
 2013 Revised
Segment Guidance 2013 Revised Segment Guidance
*Note: totals may not add due to rounding
In millions of dollars
Electronic
Managed
Small
Total
Payment
Technology
Business
All
Corporate
Business
CAPCO
Intercompany
Processing
Solutions
Finance
Other
Activities
Segments
Segment
Eliminations
Total
Low
High
Low
High
Low
High
Low
High
Low
High
Low
High
Low
High
Low
High
2013 Full Year
Revenue
90.4
94.1
18.4
19.2
34.0
35.6
2.2
2.2
0.8
0.8
145.8
151.9
0.1
0.1
(0.8)
145.1
151.2
Pretax Income (Loss)
8.2
9.0
3.9
4.7
10.0
10.8
(1.1)
(0.9)
(9.6)
(9.3)
11.4
14.3
(1.5)
(1.3)
-
10.0
13.0
Income from tax credits
-
-
-
-
-
-
-
-
-
-
-
-
(0.1)
(0.1)
-
(0.1)
(0.1)
Net change in fair value of
credits in lieu of cash and
notes payable in credits in
lieu of cash
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Deferred compensation
expense
-
-
-
-
-
-
-
-
0.4
0.4
0.4
0.4
-
-
-
0.4
0.4
Lease loss amortization
-
-
-
-
-
-
-
-
(0.3)
(0.3)
(0.3)
(0.3)
-
-
-
(0.3)
(0.3)
Interest Expense
-
-
0.1
0.1
5.9
5.9
-
-
-
-
6.0
6.0
0.2
0.2
-
6.2
6.2
Depreciation and
Amortization
0.3
0.3
1.5
1.5
1.2
1.2
0.1
0.1
0.1
0.1
3.2
3.2
-
-
-
3.2
3.2
Modified EBITDA
8.5
9.3
5.5
6.3
17.1
17.9
(1.0)
(0.8)
(9.4)
(9.1)
20.7
23.6
(1.4)
(1.2)
-
19.3
22.4
46 |
 2013 Previous
Segment Guidance 2013 Previous Segment Guidance
*Note: totals may not add due to rounding
In millions of dollars
Electronic
Managed
Small
Total
Payment
Technology
Business
All
Corporate
Business
CAPCO
Intercompany
Processing
Solutions
Finance
Other
Activities
Segments
Segment
Eliminations
Total
Low
High
Low
High
Low
High
Low
High
Low
High
Low
High
Low
High
Low
High
2013 Full Year
Revenue
90.4
94.1
18.4
19.2
31.4
35.9
2.2
2.2
0.8
0.8
143.2
152.2
0.1
0.1
(0.8)
142.5
151.5
Pretax Income (Loss)
8.2
9.0
3.9
4.7
8.1
10.5
(1.1)
(0.9)
(8.4)
(8.2)
10.7
15.1
(1.5)
(1.3)
-
9.2
13.8
Income from tax credits
-
-
-
-
-
-
-
-
-
-
-
-
(0.1)
(0.1)
-
(0.1)
(0.1)
Net change in fair value of
credits in lieu of cash and
notes payable in credits in
lieu of cash
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Deferred compensation
expense
-
-
-
-
-
-
-
-
0.4
0.4
0.4
0.4
-
-
-
0.4
0.4
Lease loss amortization
-
-
-
-
-
-
-
-
(0.3)
(0.3)
(0.3)
(0.3)
-
-
-
(0.3)
(0.3)
Interest Expense
-
-
0.1
0.1
6.3
6.3
-
-
-
-
6.4
6.4
0.2
0.2
-
6.6
6.6
Depreciation and
Amortization
0.3
0.3
1.5
1.5
1.3
1.3
0.1
0.1
0.1
0.1
3.3
3.3
-
-
-
3.3
3.3
Modified EBITDA
8.5
9.3
5.5
6.3
15.7
18.1
(1.0)
(0.8)
(8.2)
(8.0)
20.5
24.9
(1.4)
(1.2)
-
19.1
23.7
47 |
 Addenda
Addenda |
 Pretax
Income
(Loss)
Income
from Tax
Credits
Net Change
in Fair Value
of Credits in
Lieu of Cash
and Notes
Payable in
Credits in
Lieu of Cash
Other than
Temporary
Decline in
Value of
Investments
Deferred
Comp
Expense
Amortization of
2011 Lease
restructuring
charge
Interest
Expense
Depreciation
and
amortization
2012
Modified
EBITDA
Electronic Payment
Processing
7.041
-
-
-
(0.020)
-
0.001
0.743
7.765
Managed Technology
Solutions
4.254
-
-
-
0.033
-
0.079
1.214
5.580
Small Business Finance
8.094
-
-
-
0.059
-
3.836
.919
12.908
All Other
(1.038)
-
-
-
0.031
-
-
0.036
(0.971)
Corporate Activities
(7.511)
-
-
-
0.396
(0.291)
0.011
0.117
(7.278)
CAPCO
(1.401)
(0.522)
(0.003)
0.043
-
-
0.567
0.007
(1.309)
Total
9.439
(0.522)
(0.003)
0.043
0.499
(0.291)
4.494
3.036
16.695
Modified EBITDA Reconciliation
Modified EBITDA Reconciliation
Modified EBITDA Reconciliation from Pretax Income (Loss)
For the year ended December 31, 2012
In millions of dollars
*Note: totals may not add due to rounding
49 |
 Modified
EBITDA Reconciliation Modified EBITDA Reconciliation
Modified EBITDA Reconciliation from Pretax Income (Loss)
For the year ended December 31, 2011 (as Restated)
In millions of dollars
*Note: totals may not add due to rounding
Pretax
Income
(Loss)
Income
from Tax
Credits
Net
Change in
Fair Value
of Credits
in Lieu of
Cash and
Notes
Payable in
Credits in
Lieu of
Cash
Other than
Temporary
Decline in
Value of
Investments
Lease
Restructuring
Charges
Deferred
Comp
Expense
Interest
Expense
Depreciation
and
amortization
2011
(Restated)
Modified
EBITDA
Electronic Payment
Processing
6.159
-
-
-
-
0.033
-
1.419
7.611
Managed
Technology
Solutions
4.837
-
-
-
-
0.027
0.104
1.387
6.355
Small Business
Finance
4.135
-
-
-
-
0.036
2.030
0.893
7.094
All Other
(0.734)
-
-
-
-
0.028
-
0.080
(0.625)
Corporate Activities
(10.172)
-
-
-
.990
0.356
0.003
0.163
(8.662)
CAPCO
(2.197)
(1.390)
0.131
(0.051)
-
-
1.282
0.012
(2.213)
Total
2.029
(1.390)
0.131
(0.051)
.990
0.480
3.416
3.955
9.560
50 |