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| file | filename |
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| 8-K - FORM 8-K - NEWTEK BUSINESS SERVICES, INC. | d8k.htm |
| EX-99.1 - PRESS RELEASE - NEWTEK BUSINESS SERVICES, INC. | dex991.htm |
 Newtek Business Services, Inc.
NASDAQ: NEWT
First Quarter 2011
Financial Results Conference Call
May 11, 2011 4:15 PM
Hosted By:
Barry Sloane, CEO and Chairman
Seth A. Cohen, CFO
Public Relations Contact:
Liz Petrova
Rubenstein Public Relations, Inc.
(212) 843-9335
lpetrova@rubensteinpr.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 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
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
|
 First Quarter 2011 Highlights
Announce consolidated net income of $509 thousand for the quarter ended
March 31, 2011
Versus consolidated net loss of $(467) thousand for the quarter ended
March 31, 2010
Announce consolidated pretax income of $834 thousand for the quarter
ended March 31, 2011
Versus consolidated pretax loss of $(874) thousand for the quarter
ended March 31, 2010
Reaffirming 2011 annual guidance of:
$119.6 million to $125.3 million for consolidated revenue range
$1.2 million to $4.3 million for consolidated pretax income range
3 |
 First Quarter 2011 Highlights
Announce Q1 2011 consolidated revenue of $30.5 million
18% growth vs. Q1 2010 of $25.9 million
Primary Q1 2011 revenue trends in EPP and Managed Technology
Solutions exceed Q1 2010 comparisons
Combined EPP and Managed Technology Solutions revenue for Q1
2011 is $24.9 million
•
Versus Q1 2010 of $23.6 million
•
6% growth
Small Business Finance segment posts pretax income of $1.3
million
for
Q1
2011
vs.
a
pretax
loss
of
$(110)
thousand
for Q1
2010
4 |
 First Quarter 2011 Conference Call Agenda
Q1 2011 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 |
 First
Quarter
2011
Financial
Results
Q1 2011 vs. Q1 2010 core operating segment revenue:
Electronic Payment Processing:
$20.1 million -
up 7% from Q1 2010
Managed Technology Solutions:
$4.8 million -
up 1% from Q1 2010
Small Business Finance:
$5.1 million –
up 282% from Q1 2010
Q1 2011 vs. Q1 2010 core operating segment pretax net income:
Electronic Payment Processing:
$1.2 million -
up 11% from Q1 2010
Managed Technology Solutions:
$1.2 million -
up 32% from Q1 2010
Small Business Finance:
$1.3 million -
a $1.4 million improvement from
the pretax loss in Q1 2010 of $(110) thousand
6 |
 Cash
Position $25.6 million in cash and cash equivalents, restricted
cash, and broker receivable at March 31, 2011, down from
$33.2 million at December 31, 2010.
Equates to $0.39 cash per share.
Equates to $0.72 cash per share when including restricted
cash and the broker receivable, which we received in April
2011.
$2.8 million of net cash provided by operating activities for
Q1 2011 versus $1.7 million of net cash used in operating
activities for Q1 2010 2009.
•
Primarily reflects the operations of the SBA lender in Q1 2011.
7 |
 Developments in EPP
Q1 2011 EPP revenue up 7% over Q1 2010
Q1 2011 EPP pretax income up 11% over Q1 2010
Cash flow positive business
Significant operating leverage
Q1 2011 EPP segment EBITDA of $1.6 million
versus Q1 2010 of $1.5 million
EPP segment does not have any debt
eCommerce : Single most important corporate initiative and identifier
NewtPay
“Meet or Beat”
campaign launch
8 |
 Managed Technology Solutions Initiatives
Q1 2011 versus Q1 2010:
Revenue up 1%
Pre-tax income up 32%
Continue to evaluate expenditures versus productivity, particularly in
marketing, seeking additional cost savings where applicable
Continued growth despite challenging market
Continue to invest in Managed Technology Solutions segment to support
future growth
Currently above 50% real estate capacity in our data center
Q1 2011 Managed Technology Solutions segment EBITDA of $1.6 million
versus Q1 2010 of $1.4 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 U.S. 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 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):
3/31/2011
12/31/2010
Increase
Servicing for our loans
$190,731
$ 179,894
$ 10,837
Servicing for others
$ 75,365
$ 73,062
$ 2,303
Total servicing portfolio
$ 266,096
$ 252,956
$ 13,140
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
$16.9 million
Credits in lieu of cash
$29.0 million
Total assets
$144.2 million
Liability on SBA loans transferred, subject to premium recourse
$16.5 million
Notes payable in credits in lieu of cash
$29.0 million
Total liabilities
$88.2 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%
Alabama reached 100% investment threshold in December 2010
18
Capco
% Investment
threshold
$ Investments needed
to reach 100%
DC
60%
5,059,000
TX
74%
6,047,000
LA2
50%
1,808,457
LA4
95%
315,205
AL
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 |
 Small Business Authority
Branding Achievements
We anticipate Forbes publishing daily Small Business Authority
Blog
We anticipate Forbes publishing monthly Small Business
Authority Index
We anticipate Forbes publishing monthly Small Business
Authority Market Sentiment Survey
21 |
 Small Business Authority
Branding Achievements
Small Business Authority Hour
All shows podcast on thesba.com and wabcradio.com
2/5/11 –
Show on Business Entrepreneurship
3/5/11 –
Show on Healthcare and Health Insurance effects on
small businesses
4/2/11 –
Show on Small Business Lending
5/7/11 –
Show on eCommerce
6/4/11 –
Show on Cloud Computing
22 |
 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
23 |
 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
24 |
 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
25 |
 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 1,200 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
26 |
 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
27 |
 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
The Company Corporation
Humana Insurance Company
29 |
 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
30 |
 In Conclusion
31 |
 Annual Pretax Income (Loss) Trend
-$18
-$12
-$6
$0
$6
2007
Actual
2008
Actual
2009
Actual
2010
Actual
2011
Forecast
Midpoint
32
Pretax Income
(Loss)
$(17.5)
$(13.1)
$(4.0)
$0.9
in millions
$2.8 |
 2011 Current Segment
Guidance 33
*Note: totals may not add due to rounding
In millions of dollars
Electronic
Managed
Small
Payment
Technology
Business
All
Corporate
Processing
Solutions
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
34 |
 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. 36 |
 Selected Balance Sheet Items
Balance at
March 31, 2011
Balance at
December 31, 2010
Cash and cash equivalents
$13,851
$10,382
Restricted cash
$7,686
$10,747
Broker receivable
$4,081
$12,058
SBA loans held for sale, at fair value
$5,559
$1,014
Total short term liquidity
$31,177
$34,201
Notes payable
$28,001
$28,053
37
In thousands of dollars |
 Q1 2011 Actual vs. Q1
2010 Actual 38
In millions of dollars
Revenue
For The
Quarter Ended
March
31, 2011
Actual
Revenue For The
Quarter Ended
March 31, 2010
Actual
Pretax
Income (Loss)
For The Quarter
Ended
March 31, 2011
Actual
Pretax
Income (Loss)
For The Quarter
Ended
March 31, 2010
Actual
EBITDA For
The Quarter
Ended
March 31, 2011
Actual
EBITDA
For
The Quarter
Ended
March 31, 2010
Actual
Electronic
Payment
Processing
20.089
18.763
1.204
1.084
1.585
1.500
Managed
Technology
Solutions
4.829
4.790
1.231
0.932
1.634
1.440
Small
Business
Finance
5.053
1.322
1.271
(0.110)
2.093
0.435
All Other
0.354
0.337
(0.296)
(0.348)
(0.275)
(0.303)
Corporate
Activities
0.335
0.708
(1.965)
(1.531)
(1.907)
(1.441)
CAPCO
0.340
0.780
(0.611)
(0.901)
Interco
Eliminations
(0.477)
(0.847)
Total
30.523
25.853
0.834
(0.874) |
 2011
Current Segment Guidance 39
*Note: totals may not add due to rounding
In millions of dollars
Electronic
Managed
Small
Payment
Technology
Business
All
Corporate
Processing
Solutions
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 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 Income (Loss)
3.0
6.1
(1.8)
(1.8)
-
1.2
4.3 |
 Going Forward: 2011
Barry Sloane -
CEO |
 Questions & Answers |
 Addendum |
 43
Pretax Income
(Loss) for Q1 2011
Interest Expense
for Q1 2011
Depreciation
and
amortization for
Q1 2011
Q1 2011
EBITDA
Electronic Payment Processing
1.204
-
0.381
1.585
Managed Technology Solutions
1.231
0.028
0.375
1.634
Small Business Finance
1.271
0.630
0.192
2.093
All Other
(0.296)
-
0.021
(0.275)
Corporate Activities
(1.965)
-
0.058
(1.907)
Pretax Income
(Loss) for Q1 2010
Interest
Expense
for Q1 2010
Depreciation
and
amortization for
Q1 2010
Q1 2010
EBITDA
Electronic Payment Processing
1.084
-
0.416
1.500
Managed Technology Solutions
0.932
0.018
0.490
1.440
Small Business Finance
(0.110)
0.333
0.212
0.435
All Other
(0.348)
-
0.045
(0.303)
Corporate Activities
(1.531)
-
0.090
(1.441)
EBITDA Reconciliation
EBITDA Reconciliation from Net Income (Loss)
For the three months ended March 31, 2011
In millions of dollars
EBITDA Reconciliation from Net Income (Loss)
For the three months ended March 31, 2010
In millions of dollars |