Newtek Business Services Inc. (NEWT, Financial) filed Quarterly Report for the period ended 2010-03-31.
Newtek Business Services Inc. has a market cap of $55.8 million; its shares were traded at around $1.52 with and P/S ratio of 0.5. NEWT is in the portfolios of Jim Simons of Renaissance Technologies LLC.
In April 2010, the Company closed two five year term loans aggregating $14,583,000 with Capital One, N.A. which refinanced Newtek Small Business Finances $12,500,000 debt to General Electric Commercial Capital as well as the existing $2,083,000 term loan between Capital One and NTS. This financing supports the lending operations of NSBF by providing working capital. Future SBA lending operations will be funded from internal sources while the Company uses its cash flow to pay down these loans over the next five years. The Company guarantees these term loans.
The decrease in the Companys cash and cash equivalents from $12,581,000 to $9,146,000 primarily reflects effects from the resumption of lending by the Companys SBA lender for a second consecutive quarter. Partially the decline represents timing differences between the transfer of the guaranteed portions of the loans and receipt of cash thereon that increased $2,806,000 over the amount from year end and partially it reflects the Company using its cash resources rather than a financing line to support its SBA lender origination of SBA loans. Overall, we believe that throughout 2010 the Company has and will continue to enjoy improvements from increased revenues and both the full year benefit from the expense reductions made previously as well as the continuing cost cutting efforts in 2010.
Excluding electronic payment processing costs, other costs decreased $63,000 between periods. Depreciation and amortization costs decreased $44,000 between years as the result of previously acquired portfolio intangible assets becoming fully amortized between periods. Remaining costs decreased $19,000 principally as a result of a change in the mix of personnel staffing between periods.
Income before benefit for income taxes increased $121,000 to $1,084,000 in 2010 from $963,000 in 2009. An increase in the dollar margin of operating revenues less EPP processing costs due to the overall growth in sales volumes processed between periods coupled with cost reductions in other expenses resulted in the increase in income before benefit for income taxes between periods.
Total segment expenses increased by 3%, or $99,000, as compared to the 2%, or $115,000, growth in revenues for the three months ended March 31, 2010. The majority of the 3% or $99,000 increase in expenses between periods reflects an increase in other general and administrative costs of $123,000, an increase in salaries and benefits of $230,000, and an increase in professional fees of $63,000, offset by a decrease in depreciation and amortization of $302,000 and a decrease in interest expense of $15,000. The increase in other general and administrative costs was primarily due to a $61,000 increase in rent and utilities, a $15,000 increase in processing costs, an $8,000 increase in licenses and permits, a $32,000 increase in office and other costs and a $29,000 increase in bad debt expense. The increases were offset in part by a $7,000 decrease in internet and communications, a result of renegotiations of internet and telephone contracts, and an approximate decrease of $15,000 in marketing costs. Salaries and benefits increased $230,000 mainly due to a $41,000 increase in benefit costs and an approximate 25% increase in headcount relating to sales and customer service. As a result of salaries and benefits having grown at a higher rate than revenue growth, management has taken action to reduce salaries and benefits expense throughout the rest of the year. The $302,000 decrease in depreciation and amortization was primarily due to the intangible assets (the customer account and non-compete covenant from the time of acquisition) being fully amortized as of June 30, 2009 and the slowing of capital expenditures as a result of more efficient use of the already existing equipment within the datacenter and the decrease in the number of dedicated sites. The increase of $63,000 in professional fees was due to higher legal and consulting fees for the three months ended March 31, 2010. Income before income taxes increased 2% or $16,000 to $932,000 for the three months ended 2010 from $916,000 for the same period in 2009. The improvement in profitability primarily resulted from the slight increase in web site plan revenue combined with a decrease in depreciation and amortization.
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Newtek Business Services Inc. has a market cap of $55.8 million; its shares were traded at around $1.52 with and P/S ratio of 0.5. NEWT is in the portfolios of Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:
For the quarter ended March 31, 2010, the Company substantially reduced its loss before income taxes to $(874,000) from $(2,078,000) in the same quarter of 2009. This reduction in loss resulted from continued improvements in business operations producing an increase in revenue and reductions in operating expenses other than electronic payment processing costs. We had a net loss of $(467,000), an improvement of $509,000 over 2009 primarily from the improvement in operations. Total revenues increased by $1,732,000 to $25,853,000, or 7.2%, from $24,121,000 for the quarter ended March 31, 2009 principally due to increased revenues in the Electronic payment processing and Web hosting segments offset by a decrease in revenues from our Small business finance (see below), Capco and All other segment. The reduction in the net loss from the first quarter of 2009 reflects improvements in income from operations for all segments: Electronic payment processing from a gain in margin (margin on a percentage basis continued to decrease and will continue to negatively impact profitability for the segment) and a reduction in expenses other than electronic payment processing costs; Web hosting from improved sales and reduced depreciation and amortization; Small business finance from increased loan origination and loan servicing and receivables factoring; and Capco, All other segments and Corporate from reductions in expenses.In April 2010, the Company closed two five year term loans aggregating $14,583,000 with Capital One, N.A. which refinanced Newtek Small Business Finances $12,500,000 debt to General Electric Commercial Capital as well as the existing $2,083,000 term loan between Capital One and NTS. This financing supports the lending operations of NSBF by providing working capital. Future SBA lending operations will be funded from internal sources while the Company uses its cash flow to pay down these loans over the next five years. The Company guarantees these term loans.
The decrease in the Companys cash and cash equivalents from $12,581,000 to $9,146,000 primarily reflects effects from the resumption of lending by the Companys SBA lender for a second consecutive quarter. Partially the decline represents timing differences between the transfer of the guaranteed portions of the loans and receipt of cash thereon that increased $2,806,000 over the amount from year end and partially it reflects the Company using its cash resources rather than a financing line to support its SBA lender origination of SBA loans. Overall, we believe that throughout 2010 the Company has and will continue to enjoy improvements from increased revenues and both the full year benefit from the expense reductions made previously as well as the continuing cost cutting efforts in 2010.
Excluding electronic payment processing costs, other costs decreased $63,000 between periods. Depreciation and amortization costs decreased $44,000 between years as the result of previously acquired portfolio intangible assets becoming fully amortized between periods. Remaining costs decreased $19,000 principally as a result of a change in the mix of personnel staffing between periods.
Income before benefit for income taxes increased $121,000 to $1,084,000 in 2010 from $963,000 in 2009. An increase in the dollar margin of operating revenues less EPP processing costs due to the overall growth in sales volumes processed between periods coupled with cost reductions in other expenses resulted in the increase in income before benefit for income taxes between periods.
Total segment expenses increased by 3%, or $99,000, as compared to the 2%, or $115,000, growth in revenues for the three months ended March 31, 2010. The majority of the 3% or $99,000 increase in expenses between periods reflects an increase in other general and administrative costs of $123,000, an increase in salaries and benefits of $230,000, and an increase in professional fees of $63,000, offset by a decrease in depreciation and amortization of $302,000 and a decrease in interest expense of $15,000. The increase in other general and administrative costs was primarily due to a $61,000 increase in rent and utilities, a $15,000 increase in processing costs, an $8,000 increase in licenses and permits, a $32,000 increase in office and other costs and a $29,000 increase in bad debt expense. The increases were offset in part by a $7,000 decrease in internet and communications, a result of renegotiations of internet and telephone contracts, and an approximate decrease of $15,000 in marketing costs. Salaries and benefits increased $230,000 mainly due to a $41,000 increase in benefit costs and an approximate 25% increase in headcount relating to sales and customer service. As a result of salaries and benefits having grown at a higher rate than revenue growth, management has taken action to reduce salaries and benefits expense throughout the rest of the year. The $302,000 decrease in depreciation and amortization was primarily due to the intangible assets (the customer account and non-compete covenant from the time of acquisition) being fully amortized as of June 30, 2009 and the slowing of capital expenditures as a result of more efficient use of the already existing equipment within the datacenter and the decrease in the number of dedicated sites. The increase of $63,000 in professional fees was due to higher legal and consulting fees for the three months ended March 31, 2010. Income before income taxes increased 2% or $16,000 to $932,000 for the three months ended 2010 from $916,000 for the same period in 2009. The improvement in profitability primarily resulted from the slight increase in web site plan revenue combined with a decrease in depreciation and amortization.
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