NEWT - Earnings call transcript Q2 2022 | Newtek Business Services Corp.

second greatly like Executive also welcome Vice is Accounting will Nick to Chief attending Good be call. morning to appreciate Officer. this President call, everybody, results conference and and our morning, our QX the quarter Leger joining financial I'd Nick everyone who me.

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purpose with of also as are be moving bank. Newtek of of years be familiar his Solutions, Finance, who's Chief is he'll with Business Officer be Chief Jared for Small maintaining as many Peter been position Technology who's President over XX will Newtek Downs, will Technology the Mills, Newtek Peter of the President In you joining addition, and bank over Officer. Lending people all as and in involved existing of everybody our our the expense the forward of structure well. are and give for indication business introducing this going to already very are QX just approval. these acquisition that been to these The for strong QX. subject of prepared is in already a executives we Many budget have part

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in a have will from entity concerned coverage, make done let's as the a challenging decline. Our but go become we job have that analyst said, the that as as shareholders With it we transition, analysts dividend call that well dividend for, which dividend-only more this to it focused we have and little number are bit much been Slide shareholder perspectively primarily of transition does to will stellar a BDC report what X. very taxable on being also that

that's we in management on our having Newtek continue We'll less So way our shareholders June the company, a) clearly let's XXs call relates you reluctance as of cost growth team growth having to to could its well a high as a bank. cast talk that application. very over to withdraw upon the be a conservative and results which shareholders the fund proposed believes to election. the a which equity we X to the for overwhelmingly as a earnings, capital of because Company lowering cap dividends, growth growth covering in their historically, using a forward, long-term, been we've Board equity see of number. than have X, to It's as interest, of are will the transition BDC that that core of this a the cost that of debt with of and in a Act BDCs based into On that lower fact to delivered the particular had we've issue the more company grow much rationale in on Board approved going particularly in Special X as upon of leverage b) to to the a deposits in XX% business the the we this the the that and best and able XX% withdraw having rely the to opportunity be votes specific the Proxy authorization bit Statement, little described shareholders well potential voting Meeting is about the of we shareholders' quarter. In

we've we to that a company holding going So lot will and without dividends we excessive historically from importantly, a to able that our bank call grow any BDC, earnings talk the on this been we forward. a bank. in will owning structure, is as about be actually believe able or leverage Also a benefit

We has are extremely XX the excited about in unlocking value over technologies course years. built that the Newtek of

business talking clients with we about will to Advantage, tremendous which be every that giving product, their deal single owners will asset offered day, We the our our trademark Newtek through the business. dashboard, a be for

become York excited consummate to about bank potential are transaction Bank City with company. a holding very and We our National the of very, New

in to talk homegrown marketplace benefit of lot been X. technology, will we Let's great number about Slide Obviously, us has nature. move that the things financial results which a delivering [indiscernible] of the fantastic our

Advantage. we positioned now Dashboard, Newtek However, as NewtekOne the the which able going to to are and be we through technology feature that showcase

business We more their as businesses the the Newtek one one that clients We are that need also to use acquire post us without position become X,XXX grow licensing unique our to X,XXX technologies as to of will need. business which them BDOs ever day going customer will a that NewTracker, that acquisition the clients be branches, such tool brokers, help as to our allows or evaluating ourself ever to hope and well successful. patented Advantage, position dashboard is bankers, company the as

banking independent We to a on we holding that demographic everyone's the owners number our sized small advantage client is bank base. focus and Newtek as And X, that to obviously a are United Newtek really structure, client about Small approximately clients a are to through the to Administration what want Advantage. or medium I'd XX Business excited businesses, give base. once call million in and like company highlight Advantage. going the defines the It's non-farm attention the Newtek again, XX% the GDP. Slide I SBA the and Well, where of huge Advantage representing we States business in

We are personal clients to be those to relationships. going able banking give

the We six. number next that in will slide, illustrate

give are analytics. our to clients We going

them and capability. We are give going to software frictionless transactional

them them doing into push they it. do may about to take I and most Newtek That's money, them a you expression that of and We the client a retail capability client do with will to the retail client they they or four banks be taking little In base. competitors give our alone. what system they make the things their the sort Bank their course use expression deposit simply cases, in for that's its space not they where Newtek is not. of they are give bit go our base, going other what That's the take product.

or may the know competitors not at Advantage, Let's if attached to one The six of that to they relationships the Newtek most that's know Newtek the number may going side X. with single Advantage a seven their look Advantage. banker instantly. may where They lies in relationship. get and are supposedly the go Newtek may hand to at left thing you or the the about important customers institution. almost to the our screenshot, you There have relationships Slide is person not Newtek With

or design tech a You help person licensed could a help in with with name, domain a get can that you payroll website hybrid help person, will your will get you managing can public or get with agent, you you workload solutions a private, insurance cloud. you email, will

relationship be lending specialist, with sitting get camera bankers, you'll backgrounds relationship directly. you'll Everybody to a specialist, online, year no the the brokers, specialist new And specialist No a to are and just clear entire view. payment a a everybody over to go banking these you'll on them get specialists. them to people and camera, solution XXXX a get You'll Newtek no on account. branches, BDOs talk the in able XXXX. and click get able be that and concept It's no depository speak of

So advantage. get Newtek, the through you relationships

You are get analytics. to going

this to analyze at Discover, Be going look payroll, to able You payroll year, to time year, be the this same this are those Visa, with to credit. payment last year, data, year, this quarter that your Express, American quarter trends. processing able compare be thing analyze analytics, time and last debit able this your this your versus

You effective specialist through to to capabilities. to to your traffic, in be grow look statistics your try more and get web to website going solutions and going analytics are the to the be help transactional addition able to it to at able Newtek, through through make analytics, you are and

we up smartphone. to presentation. Real open for call. going the similar that not to about is the buy the this you People what iPhones the high do. make more or savings that's are going They iPhone better be to talk is through CD, the have And can think advantage business call do. the can account. we ability more advantage smartphones you other and all because telephone to Yes, a We or Newtek you as I'll checking buy important, it go to that a the a Advantage things going yield a account, will what

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Slide future, also XXXX. we on They GL. look the to that Slide go are X.X most integrated. the also clients and Let's and integrated. payments believe These We and previously, about their number want X.X, that for these note They They tax their integration talked but deposits want be X. in be forward number will things want we to their of Newtek agenda working X integrated. want the X. into important things I offering to digital reemphasize things bookkeeping. our the number Slide could payroll in

million SBA acquisition quarter back strong the had is on quarterly programs. Let's and our funded increase in X(a) XXX% fundings, which Newtek's loans. to that flagship highlights of We of We of a for record and down refocus year $XXX a in the segue road. particular area X(a) really the the prior metrics, quarter. one over future particularly the worth

an the ended that very, XXX% time. are very We of increase quarter June in XX, funded XXX in XXXX, units the excited We period of about unit growth.

blow a this reduced presented rate month fact, $XXX funding contrary, difficult SBA competitors flat the is quarter, year, which committee. the typically XX% a the without of pipeline X(a) month, Well, million out in in the your blow are credit For again, standards quality doing reducing increase. once six Important we When the funding July, with the first out. we better? borrowers typically our you of of we when a Matter credit the loans loan to the year. to of note record doing we million, months $XX are our Why for during space funded XXXX. tighten July, approval of you

income for were million so share. be which note, Forecasting will PPP. year. increase, there will we of financial $XX.X generated $XXX have XXXX $X A a we the important in a through. $XXX to inflated million lot the last go aspects results, Also, comparisons XX% fee million second the the that PPP in of almost to XXXX quarter due income. In That's full-year,

think I six a so you the six our our We last doing For are months, million drivers with bankers, – what We've if like did $XX.X approximately creating well. brokers, that's but We core business. industry process a On we plan friction. the back months We the platform more $X, again, us mean, structure, number manner. in our almost the X, transfer We $X.XX. obviously year, a you million, call to of year our our first of no really very no share. same are almost did a look adjusted competitors. Once are no NII, of the that in into I seamless that to take Slide this, substantial the We metrics. like like overperformance getting over $X.XX to $XX.X data calendar of the versus reducing the year $X we BDOs made at that's changes lending some cost progress. operational on. will borrower enabled NewTracker from the we

will us with to ability cost talk of loan. note I money pricing make because on lending because expect a forces reduction think in. high control to X(a) originate This the really don't has to we over changes something environment premium, to market perspective, though The results are to they efficiencies drive made important We've our sale we people where a from from and their the which of it's competitors increase about actually have comes much continue gain even in technology. forced almost in this some that space us. to can't to in activities against in ability our is investors major the their our technology curtail

and per XXX,XXX of acquisition just able are will at X(a), fit to underneath CRE average aren't to management Wiley, credit, those they they lines of to we've are great National We they and to Important continue Virginia non-conforming are Justin loans for conforming of into conforming C&I their that and of are for referrals Pablo, X(a), underneath book great standing are Gavin, still. approximately the team doing some conventional receive go York to made them. not will job. they into senior Peter and for for City. for the quarter bank. referrals on note, Important made be staff a we the New Bank are we referrals changes XXX, Management changes Downs subject note, major Anna Those that level.

We moving are forward.

is It year innovation particularly On tremendous very, tailwinds a value and you we've XX, got a asset of X(a) in Newtek space. the are this infrastructure. XXX all over half We more with growth. Slide going second the of tremendous Business are take can are that number into we our Obviously, in pipeline in pipeline, to be look clear owners a at our the challenging. bit parties little the going beneficial growth innovating. getting very the

basis. we important can to end closings is on on us of which about we number XX, the to the which our in our continue conventional closing, see get of $XXX are to On talk million an to about pending non-conforming excited approved the you aggregated the later will And notice please However, Slide be very year. able presentation. business, between

every that process sauce XX, we On tax referrals and the referrals, loan second business very still and do, given branchless very got utilizing economy everything better the forward is very, good aspect We've our market the are that about you look frictionless payment say BDO half tougher but and the bankerless growth the talk the outperforming a clients, across or us view we and processing, we we and numbers solutions, are as a your loan get good I in environment, of our are in to we aspects Being broker, and to overall? demand the NewTracker for pipeline guidelines, selective all referral focus credits, – and put just but able manner. loans books. in number secret Well, very the we lending. down find of to tightening of more Slide There's payroll, the demand system strong. years up being strong now. in a XX year. on obviously business loan would a Our on Is

are applications. very our improved materially excited lending very, We about technological We've it.

continue NewTracker. We to upgrade

able We continue mine to help really data, to great in the will be be future, to is get which we able which to business. going our

number to After Let's reporting to acquisition, XXX be this important to look note, an staff well, on payroll. at third companies reductions, we is not XXX, bank Slide when out our our other to outsource opportunities want XX, of and Slide employees you on labor business. is currently to forward expect headcount. we not so north we number parties. I the move point headcount the adding are XX. also the are that outsourcing Newtek are are Also, There

are I'm are looking companies cutting at reducing. lot So headlines, staff, a of they the

to future. good what adding looks position excited, Obviously, very management ourselves number headwinds look slide. it's as advantage looking XX, that at face. the are could expectations and are attractive it optimistic of other that people you as in Slide We that staff. into sense opportunity look their have a important We an and has for take to

not in really X(a) in talked conference on income. in focus which what prices, that I'm little differences sorry, this affect affect see did gain more. call, some would you'll which on to begin on where wanted would and changes program about sale We lending actually last these changes a we the the number road there are we to bit XX. is, the down that believe our So of Slide

So we'll wait a little bit.

consensus were But but still note in a sale second one, on meet number important were gain think be is we to and six-month in quarterly adjusted bit actually NII the and came second to more will we reduced our $X.XX, numbers about beat the able we which in had quarter, it's at we street We $X.XX. there quarter, projection out that patient. I adjusted projection the beat NII the the tremendously for

have sure history of years operating we So nimble, pandemic and the XX through making that ourselves being correctly. looking over a of we position XXXX XXXX, through ahead

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If was know we here It's us you because look third price, that and fourth when we precision difficult attractive for the a forecast dividend current don't that conversion to quarter. yield occur. at forecasted the for very for versus with will the and a shareholders cumulative exact

going We about we when are expect call when to will approval, shortly thereafter. the this close bank to on talk get

the that guidance try QX. we as as to in will So give and QX wanted a in we much dividend to BDC to pay expectation could be able we investors with

for that we year, of lower deal the the $X a are At the shareholders. When We about $X.XX. presentations. We $X.XX of will we be to August at of in for $X.XX clearly tremendous a end previous in end a transformation year. of the XXXX, upper had the of back range range, the announced a the talked there range, forecasting

$X.XX in since So date. dividends this particular we've to out that time paid

dividend $X dividend that, upset were to They they at their another actually almost You $X.XX midpoint $X.XX table. weren't $X, close people get to on a to top going on for $X.XX the it's like a left a it's of put lot that that of to anymore.

believe the like great remaining dividends, of last forward acknowledge the to XXXX. business that going talks cash six are we months that we optimistic $XX XX six PPP we in five we've forecast don't of. growth difficult, way we've in into slope particularly bank that year quarter, the in pipeline. an a particularly comparative and nicely yield to four the given position the financials, We income in months we of said, attractive of last able forward. announced going the are the about which do versus the transitioned our we the we've on with great that So months with core shareholders get There's first year given the been since benefit Slide generate presents and deal, a that think about million back with number

about good very in that have financial QX. the reported feel results we and we So QX

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important adjusted put of first NII of it's year. six to the for $X.XX think a an I the note, months we up

midpoint feel up $X.XX, able very good we to are a so Our on are the we are to the with end we that. get respect of beat was And we where wrapping about year.

close forward. over is reconciliation government a debt-to-equity the we to the focus hopeful show a are few OCC and is. get of efforts Slide what number end going quite pro to quarter. the use forma to financial a We sell on the the approval we can And a guarantees begin structure from typically transaction. We slide we our bank Fed new that XX

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from transaction as to get very should per very income is to as carry share. really a could little presentation be we able generate X, XX structure. holding typically in slide we're financial be So earnings to for really to bank over up Owning see bank, beneficial able leverage, to really this a with you much a yields, Slide number on basis good presentation. obviously attractive which company XX we'll from

history year. we've doing two now XX with is the note done securitizations, number a we down. of unguaranteed anticipate between important to or record going That average and XX-year and Very one retained track down note important the it's think keeps balance. to frequency, and the I greater obviously balances, diversification default end XXX,XXX that and smaller

really prime Our any loans typically the in quarter. that It's real X.X. two are a two like we three comes quarters, sale. number rate. important think space if major us made get. versus prime. on and Bank great to treasuries another years, XX and Slide rate three three don't which competitors real to And that of Oak the address That's a the lag and difference Live quarters. plus from are. environment [software] between and concessions we've this That's other XX that max plus in I loans rate able gain begins points rates, obviously originates see anticipated It's on to have prime slide, lower on for process to But know just rate or to quarters lower where this not. significantly to BDOs. utilizing on net margin. XX has four issue We'll of a model using sale. a a the to in attractive brokers and up different a banking have basically and bankers, is is prime and a adjustment, model. full a basis totally business. interest the We're gain acquire hiked There's the and that eight just They're be through We and to Prime attempts brokered technology basically raise. address

was the curve. July example, treasury just we government which on give has of the Prime the fact, sell Matter an been bonds with occurred XX behind software what's that X.XX%. into floaters. are Fed respect market, prime-based you So guaranteed lagged has the to to because

quarters Software yesterday, Prime as on Prime and of yesterday, X.X%. four July X.X%. three XX. was

full that determinant. when you the bonds could why prime market, XX arrears we're the down change down on through, XX, to full are go loans that in a and days on the our our to into adjust bonds price the government for you not when had Now we year. at sale these the we're able so rate That's X.X% that guaranteed a gain gain tremendous selling quarter because sell number went at floaters. coupon. in Slide from XX.XX% when the in you calendar from the first if proud look XX.XX% We of our But but in take our in not sale We do history back. diminution adjust quarter see in guess. we're able thought, a income QX do gain this fact that on that's was we think But prime determinants. one On number aspects other there once could again, but that XX% helping interest our a with hopefully be believe our that rebound That's maybe to in even primary That's sale of when net is numbers almost will decline that's a trend. opinion, our QX, of be are make the There our begins of prices, to opinion. in premiums. our Slide XX,

interest $X.X million, sequentially from see So to could almost gross $X $X.X by million. with up million XXXX, XXXX from a you going [$X.XX income for net QX QX income to from up million] $X.X million, very gain nice

interest our credit a lag but interest change will because our loans based upon our monthly. income quarterly, improve change of net income that Now with lines

the very of refers number defaults in very note, the work So default taken number of The up month. to important are next a function of Slide have loans, XX rate that look XX, That's curve. a we're to NERC do This hard aggressive that advantage XX%. important our and note, we should currency be us to seasoning with sure Slide at a is We catch of I'll behind most nice credits, PPP. in our that of, IDR the customers. clients that's believe have portfolio. to making liquid amounts excessive We led $X to and with don't over leverage. keep as because high unlike of operational portfolio that and them servicing and an decline. XXXX, are client don't the our our leverage have work base. customers, that to people have professionally as with XX rate. We We regularly well have currency it, call servicing extremely the about XXXX XX financial personally, typically professionals current, them recession Many billion area. are concerned clients

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Our loan business an is important us. XXX business

substantial Capital One XX to XXX half We forward Bank, business We the with a second Slide of Bank, talks lines works. number Florida year. having have of look Bank. that good Deutsche One about credit how

and We the the business. XXX business, off typically the are Unlike make entire in loan we a X(a) books. moves loan our

high how and bank. high XX%. of X(a) demonstrate is the as in equity talk secondary ROEs debentures, business the we'll return XX%, typically on to ROAs Second, the And we the through gets on taken also, shortly equities. And Slide we able at the a business, XXX This sold high sale return tangible number XX are north but into talks BDC, a on on first, on that about return market. gets equity BDC. illustration a ROAs in equity, gain generate as north as out SBA common generate return of about the the as

versus credit in is a assets we because talk liquidity, of that does a shareholders. the future, equity than that the too understand SBA elsewhere in type people XX-year our some with basically XX% on inexpensive this great lowering only the financing credit cases, off good because XX, In businesses, test. our that fail some about $X experience less a fact doesn't excited borrower generate loan fit for our real cases good. We these cost with call and to we risk occupies greater XX-year XXXX, generating fit very estate. has of are conventional Slide history million, capability particularly but too returns credit funds, start because us are much number It on our reward some have loan. program. about criteria. In in business. of The in We doesn't much with assets and it borrower it's non-conforming originate this familiar Many it than X(a) cases the the is would too in began loan the

million. So as program, In government complete guarantee. loans no of there's a There's June January DBRS in is securitization, this XX, of this program, conventional XXXX, And did balance first vaguery the under originated but rated. our $XX.X some of we loan. the

excited very saying number about about are are transaction, currently couple the that We JV we're slides. negotiating of we XX, which additional On Slide talk in agreements. we'll next

venture this warehouse for XXX the They in loans are points the operating asset leverage loan. great We are liability in loan the of of on benefits for pipeline $XXX partner program the allows week XXXX. In the We the typically can Slide full fit particular million give with them facility. of And additional anticipating forward because an joint basis and non-conforming us we up institutional us of non-conforming service diversified leverage don't income, XX, balance and getting that match $XXX servicing hedged. conventional origination ABL enterprise, basis, existing final The XXX, its These us really streams income in fit. we gives on fees, a go our million origination the loans we Newtek additional to platform. to can believe investor, number signatures this going loans the to as this equity X(a), capital. to fund area. loans to X.X% went The the A X.X%. The approximately basically in we We It X%. Business equity bank venture $X $XXX A We close XX% north did modeled $XXX million joint XXXX. bond, and billion average and NCL the That's note is coupon other notes and in number for million our point weighted Trust. our Slide joint NCL XXXX net bond that equity venture by on that had weighted we are XXXX XXXX. a the to here approximately to at do in securitization average the Notes, coupon X.X%. think interest partners, of XX. loans is will into in X.X% which securitization coupon. $XXX January, between million Class Loan that capital. securitization, the of Morningstar. important invested $XX.X gross was The rated to million the partner And margin forecast, net A us is [Newtek’s]

default here's a of and important net cumulative We've in points equity fees. double-digit the when and Newtek expected Newtek partners aspect And to returns the the on and of JV So loans the of of as originator got for are business very you look we for take able a side servicing origination severity lending, this. income its at basis attractive get XXX in the portfolio whole Newtek frequency. for

another business. holding We us beneficial complete as to engine company this nice transaction, bank income are the that very and we gives expect is experienced going believe to this. be we and even us going about some forward this excited the to bank acquisition, BDC, This from we've and benefits

to our record growing expertise non-performing to plan we and X(a) XXX on portfolio, programs. track focused levering So and securitization remain continue on our while infrastructure, loan conventional grow our operational loan

June solutions technology, Newtek conservatively on This and forward a become XXx comparative types issues anticipate is been Merchant Moving all about first that value number chain we an company Solutions I to independent which for our our advantages cloud XX, difficult attractive. become marked our customer valuation. believe first are Supply us, we providing million as the technology and company, months. This important number a six us. have company. bank the holding a very $XXX EVO, standpoint, of XX, one From the that feel EBITDA, Newtek business about believe aware traded acquired as by combined good fair Global. our multiple is we XX. public of equity you many with a of businesses, of Slide We of important a and half Slide base. and for has provider, to materially service hope Technology results affect to is computing particularly business Solutions,

rate We year. of expect second to half the improve run the the in

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excited, solutions cloud about cloud and very obviously services. are We

shows You products could a marketplace number through our some into we Slide XX, Slide take Newtek Solutions. POS which aware, what at XX. provider own we a Technology are of look the solution. can Many on provide number of you

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Barry Sloane	Chairman, President and Chief Executive Officer
Nicholas Leger	Executive Vice President and Chief Accounting Officer
Paul Johnson	Keefe, Bruyette & Woods, Inc.
Adam Morton	RBC Capital Markets, LLC

Newtek Business Services (NEWT) 4 Aug 222022 Q2 Earnings call transcript