Newtek Business Services Corp. Reports Third Quarter 2022

Newtek Business Services Corp. Reports Third Quarter 2022

Record SBA 7(a) Loan Fundings of $223.0 Million Increased by 36.0{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} in the Third Quarter of 2022 Over the Same Period Last Year

Raised Full Year 2022 SBA 7(a) Loan Funding Guidance to Approximately $775 Million

BOCA RATON, Fla., Nov. 07, 2022 (GLOBE NEWSWIRE) — Newtek Business Services Corp. (“Newtek” or the “Company”) (Nasdaq: NEWT), an internally managed business development company (“BDC”), announced today its financial and operating results for three and nine months ended September 30, 2022.

Third Quarter 2022 Financial Highlights

  • Total investment income of $23.6 million for the three months ended September 30, 2022; an increase of 90.0{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} compared to total investment income of $12.4 million for the three months ended September 30, 2021.
  • Net investment income (loss) of $0.2 million, or $0.01 per share, for the three months ended September 30, 2022, which represents a 103.3{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} increase, on a per share basis, compared to net investment income (loss) of $(6.7) million, or $(0.30) per share, for the three months ended September 30, 2021.
  • Adjusted net investment income (“ANII”)1 of $15.0 million, or $0.62 per share, for the three months ended September 30, 2022; an increase of 10.7{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}, on a per share basis, compared to ANII of $12.6 million, or $0.56 per share, for the three months ended September 30, 2021.
  • Debt-to-equity ratio of 1.41x at September 30, 2022; proforma debt-to-equity ratio was 1.26x after taking into account the sales of government-guaranteed portions of SBA 7(a) loans prior to September 30, 2022, which sales settled subsequent to the balance sheet date.
  • Total investment portfolio increased by 10.3{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} to $785.6 million at September 30, 2022, from $712.5 million at September 30, 2021.
  • Net asset value (“NAV”) of $391.8 million, or $16.04 per share, at September 30, 2022 compared to NAV of $16.23 per share at September 30, 2021.

Financial Highlights For the Nine Months Ended September 30, 2022

  • Total investment income of $63.2 million for the nine months ended September 30, 2022; a decrease of (24.5){ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} over total investment income of $83.7 million for the nine months ended September 30, 2021 which included $50.0 million of fee income from the Paycheck Protection Program (“PPP”), which, as previously disclosed, is not recurring.
  • Net investment income (loss) of $(1.1) million, or $(0.04) per share, for the nine months ended September 30, 2022, which represents a (103.7){ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} decrease, on a per share basis, compared to net investment income (loss) of $24.0 million, or $1.07 per share, for the nine months ended September 30, 2021, which included $50.0 million of fee income from the PPP which, as previously disclosed, is not recurring.
  • ANII1 of $50.3 million, or $2.08 per share, for the nine months ended September 30, 2022; a decrease of (26.0){ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}, on a per share basis, compared to ANII of $63.1 million, or $2.81 per share, for the nine months ended September 30, 2021, which included $50.0 million of fee income from the PPP which, as previously disclosed, is not recurring.

    Additional Third Quarter Highlights

  • On September 21, 2022, the Company announced its future rebranding strategy in anticipation of the acquisition of the National Bank of New York City (“NBNYC,” and the “Acquisition”), which is pending approval of the Board of Governors of the Federal Reserve System, the Office of the Comptroller of Currency and the U.S. Small Business Administration (“Regulatory Approvals”) and satisfaction of closing conditions.
    • Upon receipt of the pending Regulatory Approvals and the close of the Acquisition, Newtek plans to change its name to “NewtekOne®” and to rename NBNYC, the 59-year-old nationally chartered bank, “Newtek Bank, National Association.”
  • On September 7, 2022, the Company closed its twelfth small business loan securitization, with the sale of $116.2 million of Unguaranteed SBA 7(a) Loan-Backed Notes, Series 2022-1, consisting of $95.4 million of Class A Notes and $20.8 million of Class B Notes, rated“A- (sf)” and “BBB- (sf)”, respectively, by S&P Global Ratings.

2022 Dividend Declarations & Payments

  • On September 30, 2022, the Company paid a third quarter 2022 cash dividend of $0.65 per share to shareholders of record as of September 20, 2022.
  • On September 28, 2022, the Company forecasted a fourth quarter 2022 cash distribution of $0.70 per share, which includes a spillover dividend of Company retained earnings in anticipation of the Company converting from a BDC and discontinuing its election to be regulated under the Investment Company Act of 1940, subject to Regulatory Approvals of the pending Acquisition and other conditions described in the Company’s proxy statement filed with the SEC on May 2, 2022, after which the Company would no longer qualify as a regulated investment company (“RIC”) for federal income tax purposes and will no longer qualify for accounting treatment as an investment company. This dividend is subject to Board approval.2
  • If this fourth quarter 2022 distribution is declared by the Board, the Company expects to pay approximately $2.75 per share in cash dividends and distributions to shareholders in 2022.

Lending Highlights

  • Newtek Small Business Finance, LLC (“NSBF”) funded a record $223.0 million of SBA 7(a) loans during the three months ended September 30, 2022; a 36.0{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} increase over the $163.9 million of SBA 7(a) loans funded for the three months ended September 30, 2021.
  • NSBF funded a record $586.9 million in SBA 7(a) loans for the nine months ended September 30, 2022, which represents an 61.9{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} increase over $362.6 million SBA 7(a) loan fundings for the nine months ended September 30, 2021.
  • NSBF funded $64.1 million SBA 7(a) loans in October 2022.
  • From January 1, 2022 through October 31, 2022, NSBF funded a record $650.9 million of SBA 7(a) loans; a 68.3{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} increase over $386.8 million of SBA 7(a) loans for the same period last year.
  • NSBF increased its full year 2022 SBA 7(a) loan funding guidance to approximately $775 million, which would represent a 38.2{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} increase over $560.6 million of SBA 7(a) loans funded in 2021.
  • Newtek Business Lending (“NBL”), a wholly owned portfolio company, closed $101.0 million of SBA 504 loans year-to-date through October 31, 2022; an increase of 22.6{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} over $82.4 million of SBA 504 loans closed during the same period in 2021.
  • NBL forecasts closing approximately $150 million of SBA 504 loans for the full year 2022, which would represent a 66.5{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} increase over $90.1 million of SBA 504 closings in 2021.

Barry Sloane, Chairman, President and Chief Executive Officer said, “We are extremely proud of our results for the third quarter and first nine months of 2022. While 2022 has been challenging, due to the preparation for the repositioning of the Company in anticipation of converting to a bank holding company through the pending Acquisition of NBNYC, which remains subject to Regulatory Approvals; an increase in interest rates; and the impacts of inflation on our operating businesses as well as those of our clients, we are thrilled with the results we have been able to produce. We believe net investment income of $0.01 per share for the third quarter of 2022 exceeds analysts’ consensus estimates of $(0.05) per share, and we believe our ANII for the third quarter 2022 of $0.62 per share, exceeds analysts’ consensus estimates of $0.58 per share. We are pleased to have been able to beat analysts consensus estimates. In addition, it is important to remind our investor base that our results for the nine months ended September 30, 2022 compared to the same period in 2021, do not include the benefit of the extraordinary performance the Company had in funding loans under the PPP, which PPP fee income is non-recurring.”

Commenting on Newtek’s SBA 7(a) loan program Mr. Sloane said, “We had record SBA 7(a) loan fundings in the third quarter of 2022, which followed record SBA 7(a) fundings in the second quarter of 2022. In fact, year-to-date through October 31, 2022, we have funded a record $650.9 million in SBA 7(a) loans which represents a 68{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} increase over the $386.3 million SBA 7(a) loans funded for the same period last year. Furthermore, from January 1, 2022 through October 31, 2022, we funded a total of 1,037 SBA 7(a) loan units, which represents an 86{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} increase over the 557 SBA 7(a) loan units for the same period last year. With our strong SBA 7(a) funding performance thus far this year, coupled with the fact that there is less than two months left in 2022, we are raising our full year 2022 SBA 7(a) loan funding guidance to $775 million. In addition, with these record fundings, it is important to note that that the Company has been mindful in tightening its credit standards as evidenced by the weighted average FICO score in NSBF’s most recent securitization, which equaled 725 on its guarantors versus a weighted average FICO score of 704 in our SBA 7(a) loan portfolio at December 31, 2021.”

Mr. Sloane continued, “The Company also anticipates NBL closing a record number of SBA 504 loans in the fourth quarter of 2022 and achieving record SBA 504 loan closings of $150 million for the full year of 2022. The performance of NBL’s SBA 504 and non-conforming conventional loan program demonstrates the ability to acquire, assemble, underwrite, fund, and manage loans of all sizes, types and credit quality among the Company’s independent business owner client base. NBL’s SBA 504 loan program, which has originated $388.4 million of SBA 504 loans since 2017, has not experienced any charge offs or defaults In addition, we have originated $132.5 million in non-conforming conventional loans since the inception of the program in 2019, and have not experienced any charge offs or defaults. Furthermore, during the third quarter of 2022, the Company entered into a new joint venture agreement with a $15 billion asset management company to provide up to $100 million of equity capital to fund non-conforming conventional loans. Additionally, the joint venture is preparing to close on a $150 million leverage facility from a well-known investment bank. We believe we will be able to fund $600 million of non-conforming conventional loans in 2023 and over $1.0 billion non-conforming conventional loans in 2024, which will be part of our forecasts going forward.”

Mr. Sloane further commented, “We also are pleased that, despite turbulent market conditions, our wholly-owned controlled portfolio companies, Newtek Merchant Solutions and Newtek Technology Solutions, are expected to generate approximately a combined $20 million of EBITDA in 2023. The Company, during this transformative period of anticipating conversion from a BDC to a bank holding company, has been limited in its ability to forecast future earnings and dividends beyond 2022 due to the pending Acquisition of NBNYC. We are reaffirming our forecast for a fourth quarter 2022 distribution of $0.70 per share, which would bring total cash dividends and distributions for 2022 to $2.75 per share. The fourth quarter 2022 forecasted distribution of $0.70 per share, which includes a spillover dividend of Company retained earnings in anticipation of the Company converting from a BDC, is expected to be paid on or about December 31, 2022.”

Discussing rising interest rates, Mr. Sloane concluded, “We have been asked regularly how increases in interest rates affect our business model. We believe that anyone stating that rising interest rates is good for business is not giving the full picture. In our case, we believe that we are well positioned as our floating rate SBA 7(a) loan portfolio primarily adjusts at Prime plus 275 basis points without a cap; moreover, new SBA 7(a) loan originations will be at Prime plus 300 basis points in accordance with new SBA rules. Prime is currently at 7.00{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}, however based on the SOFR futures market, we believe Prime will increase by an additional 50 basis points in December, and as such it’s likely our SBA 7(a) portfolio will adjust to a 10{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} to 10.5{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} coupon in January 2023. We believe converting to a bank holding company and owning a bank will carve out an attractive future for us as it will enable us to finance our growth with core deposits. We look forward to the possible Regulatory Approvals of the Acquisition in the fourth quarter of 2022. Once we have a clear path to converting to a bank holding company, we anticipate forecasting earnings as a bank holding company for the next 24 months.”

Third Quarter 2022 Conference Call and Webcast

A conference call to discuss third quarter 2022 results will be hosted by Barry Sloane, President, Chairman and Chief Executive Officer, and Nicholas Leger, Chief Accounting Officer, tomorrow, Tuesday, November 8, 2022 at 8:30 a.m. ET.

Please note, to attend the conference call or webcast, participants should register online at http://investor.newtekbusinessservices.com/events-and-presentations. To receive a dial-in number, participants are requested to register at a minimum 15 minutes before the start of the call. The corresponding presentation will be available in the ‘Events & Presentations’ section of the Investor Relations portion of Newtek’s website at http://investor.newtekbusinessservices.com/events-and-presentations. A replay of the call with the corresponding presentation will be available on Newtek’s website shortly following the live presentation and will be available for a period of 90 days.

1Use of Non-GAAP Financial Measures – Newtek Business Services Corp. and Subsidiaries

In evaluating its business, Newtek considers and uses ANII as a measure of its operating performance. ANII includes short-term capital gains from the sale of the guaranteed portions of SBA 7(a) loans and conventional loans, and beginning in 2016, capital gain distributions from controlled portfolio companies, which are reoccurring events. The Company defines ANII as net investment income (loss) plus net realized gains recognized from the sale of guaranteed portions of SBA 7(a) loan investments, less realized losses on non-affiliate investments, plus the net realized gains on controlled investments, plus or minus the change in fair value of contingent consideration liabilities, plus loss on extinguishment of debt, plus or minus an adjustment for gains or losses on derivative transactions.

We do not designate derivatives as hedges to qualify for hedge accounting and therefore any net payments under, or fluctuations in the fair value of, our derivatives are recognized currently in our GAAP income statement. However, fluctuations in the fair value of the related assets are not included in our income statement. We consider the gain or loss on our hedging positions related to assets that we still own as of the reporting date to be “open hedging positions.” While recognized for GAAP purposes, we exclude the results on the hedges from ANII until the related asset is sold and/or the hedge position is “closed,” whereupon they would then be included in ANII in that period. These are reflected as “adjustment for realized gain/(loss) on derivatives” for purposes of computing ANII for the period. Management believes that excluding these specifically identified gains and losses associated with the open hedging positions adjusts for timing differences between when we recognize changes in the fair values of our assets and changes in the fair value of the derivatives used to hedge such assets.

The term ANII is not defined under U.S. generally accepted accounting principles, or U.S. GAAP, and is not a measure of operating income, operating performance or liquidity presented in accordance with U.S. GAAP. ANII has limitations as an analytical tool and, when assessing the Company’s operating performance, investors should not consider ANII in isolation, or as a substitute for net investment income, or other consolidated income statement data prepared in accordance with U.S. GAAP. Among other things, ANII does not reflect the Company’s actual cash expenditures. Other companies may calculate similar measures differently than Newtek, limiting their usefulness as comparative tools. The Company compensates for these limitations by relying primarily on its GAAP results supplemented by ANII. Reconciliation tables showing the adjustments made to net investment income to determine NII are attached to this press release.

2 Note Regarding Dividend Payments

Amount and timing of dividends, if any, remain subject to the discretion of the Company’s Board of Directors. The Company’s Board of Directors expects that it will maintain its status as a BDC and regulated investment company (“RIC”) in the near term, and therefore expects to maintain a dividend policy with the objective of making quarterly distributions in an amount that approximates 90 – 100{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} of the Company’s annual taxable income. The determination of the tax attributes of the Company’s distributions is made annually as of the end of the Company’s fiscal year based upon its taxable income for the full year and distributions paid for the full year.

Newtek Business Services Corp., Your Business Solutions Company®, is an internally managed BDC, which along with its controlled portfolio companies, provides a wide range of business and financial solutions under the Newtek® brand to the small- and medium-sized business (“SMB”) market. Since 1999, Newtek has provided state-of-the-art, cost-efficient products and services and efficient business strategies to SMB relationships across all 50 states to help them grow their sales, control their expenses and reduce their risk.

Newtek’s and its portfolio companies’ products and services include: Business Lending, SBA Lending Solutions, Electronic Payment Processing, Technology Solutions (Cloud Computing, Data Backup, Storage and Retrieval, IT Consulting), eCommerce, Accounts Receivable Financing & Inventory Financing, Insurance Solutions, Web Services, and Payroll and Benefits Solutions.

Newtek® and Your Business Solutions Company®, are registered trademarks of Newtek Business Services Corp.

Note Regarding Forward Looking Statements
This press release contains certain forward-looking statements. Words such as “believes,” “intends,” “expects,” “projects,” “anticipates,” “forecasts,” “goal” and “future” or similar expressions are intended to identify forward-looking statements. 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, include our ability to close the pending acquisition of the National Bank of New York City (the “Transaction”), obtain required regulatory approvals for the pending Transaction, the timing of the closing of the Transaction, the timing of the Company’s discontinuance from regulation as a BDC under the 1940 Act, projections concerning or considering the pending Transaction, the timing of our our ability to originate new investments, achieve certain margins and levels of profitability, the availability of additional capital and the ability to maintain certain debt to asset ratios, 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/.    Newtek cautions you that forward-looking statements are not guarantees of future performance and that actual results or developments may differ materially from those projected or implied in these statements.

SOURCE: Newtek Business Services Corp.

Investor Relations & Public Relations
Contact: Jayne Cavuoto
Telephone: (212) 273-8179 / jcavuoto@newtekone.com

NEWTEK BUSINESS SERVICES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(In Thousands, except for Per Share Data)
  September 30, 2022   December 31, 2021
ASSETS (Unaudited)    
Investments, at fair value      
SBA unguaranteed non-affiliate investments (cost of $502,400 and $431,970, respectively; includes $438,045 and $344,266, respectively, related to securitization trusts) $ 488,376   $ 424,417
SBA guaranteed non-affiliate investments (cost of $21,648 and $65,728, respectively)   22,949     72,970
Controlled investments (cost of $168,237 and $157,289, respectively)   272,928     260,398
Non-control investments (cost of $1,360 and $1,000, respectively)   1,360     1,000
Total investments at fair value   785,613     758,785
Cash   7,355     2,397
Restricted cash   74,777     184,463
Broker receivable   71,634     44,537
Due from related parties   947     4,395
Servicing assets, at fair value   33,530     28,008
Right of use assets   6,381     7,310
Other assets   26,298     26,666
Total assets $ 1,006,535   $ 1,056,561
       
LIABILITIES AND NET ASSETS      
Liabilities:      
Bank notes payable $ 67,500   $ 50,000
2024 Notes (par: $38,250 and $38,250 as of September 30, 2022 and December 31, 2021)   37,847     37,679
2025 6.85{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} Notes (par: $0 and $15,000 as of September 30, 2022 and December 31, 2021)   —     14,545
2025 5.00{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} Notes (par: $30,000 and $0 as of September 30, 2022 and December 31, 2021)   29,246     —
2026 Notes (par: $115,000 and $115,000 as of September 30, 2022 and December 31, 2021)   112,666     112,128
Notes payable – Securitization trusts (par: $302,253 and $249,750 as of September 30, 2022 and December 31, 2021)   298,125     246,250
Notes payable – related parties   150     11,450
Due to related parties   1,849     1,490
Lease liabilities   7,945     9,056
Deferred tax liabilities   12,908     12,733
Due to participants   34,660     146,225
Derivative instruments   —     183
Accounts payable, accrued expenses and other liabilities   11,840     10,935
Total liabilities   614,736     652,674
       
Commitment and contingencies      
Net assets:      
Preferred stock (par value $0.02 per share; authorized 1,000 shares, no shares issued and outstanding)   —     —
Common stock (par value $0.02 per share; authorized 200,000 shares, 24,425 and 24,159 issued and outstanding, respectively)   485     483
Additional paid-in capital   370,703     367,663
Accumulated undistributed earnings   20,611     35,741
Total net assets   391,799     403,887
Total liabilities and net assets $ 1,006,535   $ 1,056,561
Net asset value per common share $ 16.04   $ 16.72
NEWTEK BUSINESS SERVICES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In Thousands, except for Per Share Data)
       
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
    2022       2021       2022       2021  
Investment income              
From non-affiliate investments:              
Interest income – PPP loans $ —     $ 269     $ —     $ 49,989  
Interest income – SBA 7(a) loans   8,804       7,131       23,915       19,328  
Servicing income   3,575       2,819       9,931       8,346  
Other income   2,552       1,446       6,499       3,829  
Total investment income from non-affiliate investments   14,931       11,665       40,345       81,492  
From non-control investments:              
Interest income   —       126       —       374  
Dividend income   19       23       62       70  
Total investment income from non-control investments   19       149       62       444  
From controlled investments:              
Interest income   753       594       2,087       1,703  
Dividend income   7,205       —       19,989       51  
Other income   672       —       672       —  
Total investment income from controlled investments   8,630       594       22,748       1,754  
Total investment income   23,580       12,408       63,155       83,690  
Expenses:              
Salaries and benefits   4,772       2,351       14,380       12,727  
Interest   6,917       5,177       17,412       15,217  
Depreciation and amortization   58       72       181       236  
Professional fees   1,509       1,418       4,322       3,465  
Origination and loan processing   2,866       4,586       7,202       10,555  
Origination and loan processing – related party   5,430       3,177       14,698       10,830  
Loss on extinguishment of debt   —       —       417       955  
Other general and administrative costs   1,823       2,322       5,619       5,663  
Total expenses   23,375       19,103       64,231       59,648  
Net investment (loss) income   205       (6,695 )     (1,076 )     24,042  
Net realized and unrealized gains (losses):              
Net realized gain on non-affiliate investments – SBA 7(a) loans   14,767       19,272       49,953       38,079  
Net realized gain (loss) on derivative transactions   —       (268 )     445       (268 )
Net unrealized appreciation (depreciation) on SBA guaranteed non-affiliate investments   (297 )     123       (5,942 )     2,533  
Net unrealized appreciation (depreciation) on SBA unguaranteed non-affiliate investments   (3,611 )     998       (6,473 )     2,583  
Net unrealized appreciation on controlled investments   2,040       7,305       1,582       1,760  
Change in deferred taxes   (118 )     (2,843 )     (175 )     (2,120 )
Net unrealized appreciation (depreciation) on non-control investments   —       (3 )     —       521  
Net unrealized appreciation on derivative transactions   —       341       183       304  
Net unrealized depreciation on servicing assets   (1,624 )     (1,616 )     (3,964 )     (3,322 )
Net realized and unrealized gains $ 11,157     $ 23,309     $ 35,609     $ 40,070  
Net increase in net assets resulting from operations $ 11,362     $ 16,614     $ 34,533     $ 64,112  
Net increase in net assets resulting from operations per share $ 0.47     $ 0.74     $ 1.43     $ 2.85  
Net investment (loss) income per share $ 0.01     $ (0.30 )   $ (0.04 )   $ 1.07  
Dividends and distributions declared per common share $ 0.65     $ 0.90     $ 2.05     $ 2.10  
Weighted average number of shares outstanding   24,299       22,541       24,204       22,468  

NEWTEK BUSINESS SERVICES CORP. AND SUBSIDIARIES
NON-GAAP FINANCIAL MEASURES-
ADJUSTED NET INVESTMENT INCOME RECONCILIATION:

    Nine months ended       Nine months ended    
(in thousands, except per share amounts)   September 30, 2022   Per share   September 30, 2021   Per share
Net investment income (loss)   $ (1,076 )   $ (0.04 )   $ 24,042     $ 1.07
Net realized gain on non-affiliate investments – SBA 7(a) loans     49,953       2.06       38,079       1.69
Adjustment for realized gain on derivatives (1)     1,010       0.04       (7 )     —
Loss on debt extinguishment     417       0.02       955       0.04
Adjusted Net investment income   $ 50,304     $ 2.08     $ 63,069     $ 2.81

Note: Amounts may not foot due to rounding

(1)   The following is a reconciliation of GAAP net realized gain/(loss) on derivative transactions to our adjustment for realized gain/(loss) on derivatives on closed transactions presented in the computation of ANII in the preceding tables:

    Nine months ended       Nine months ended    
(in thousands, except per share amounts)   September 30, 2022   Per share   September 30, 2021   Per share
Net realized gain on derivatives   $ 445   $ 0.02   $ (268 )   $ (0.01 )
Hedging realized result on open hedging positions     —     —     261       0.01  
Hedging realized adjustment on hedging positions closed during current period     565     0.02     —       —  
Adjustment for realized gain on derivatives   $ 1,010   $ 0.04   $ (7 )   $ —  

Note: Amounts may not foot due to rounding

NEWTEK BUSINESS SERVICES CORP. AND SUBSIDIARIES
NON-GAAP FINANCIAL MEASURES-
ADJUSTED NET INVESTMENT INCOME RECONCILIATION:

    Three months ended       Three months ended    
(in thousands, except per share amounts)   September 30, 2022   Per share   September 30, 2021   Per share
Net investment income (loss)     205     0.01   $ (6,695 )   $ (0.30 )
Net realized gain on non-affiliate investments – SBA 7(a) loans     14,767     0.61     19,272       0.85  
Adjustment for realized gain on derivatives (1)     —     —     (7 )     —  
Adjusted Net investment income   $ 14,972   $ 0.62   $ 12,570     $ 0.56  

Note: Amounts may not foot due to rounding

(1)   The following is a reconciliation of GAAP net realized gain/(loss) on derivative transactions to our adjustment for realized gain/(loss) on derivatives on closed transactions presented in the computation of ANII in the preceding table:

    Three months ended       Three months ended    
(in thousands, except per share amounts)   September 30, 2022   Per share   September 30, 2021   Per share
Net realized gain on derivatives   $ —   $ —   $ (268 )   $ (0.01 )
Hedging realized result on open hedging positions     —     —     261       0.01  
Adjustment for realized gain on derivatives   $ —   $ —   $ (7 )   $ —  

Note: Amounts may not foot due to rounding

NEWTEK BUSINESS SERVICES CORP. AND SUBSIDIARIES
DEBT-TO-EQUITY RATIO – ACTUAL AT SEPTEMBER 30, 2022

(in thousands):

Actual Debt-to-Equity Ratio at September 30, 2022      
Total senior debt   $ 553,153  
Total equity   $ 391,799  
Debt-to-equity ratio – actual   1.41x  
       

NEWTEK BUSINESS SERVICES CORP. AND SUBSIDIARIES
DEBT-TO-EQUITY RATIO – PROFORMA AT SEPTEMBER 30, 2022

(in thousands):

Broker receivable, including premium income receivable   $ 71,634    
Less: realized gain on sale included in broker receivable     (5,893 )  
Broker receivable     65,741    
       
90{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} advance rate on SBA guaranteed non-affiliate portions of loans sold, not settled   $ 59,167    
       
       
Proforma debt adjustments at September 30, 2022:      
Total senior debt   $ 553,153    
Proforma adjustment for broker receivable     (59,167 )  
Total proforma debt   $ 493,986    
       
       
Proforma Debt-to-Equity ratio at September 30, 2022:      
Total proforma debt   $ 493,986    
Total equity   $ 391,799    
Debt-to-equity ratio – proforma   1.26x    
       

 

Kathy Griffin suspended from Twitter for impersonating Elon Musk

Kathy Griffin suspended from Twitter for impersonating Elon Musk


New York
CNN Enterprise
 — 

Twitter has suspended comic Kathy Griffin for impersonating the company’s new operator, Elon Musk.

Griffin appeared to be the 1st superstar to lose her tweeting privileges immediately after a wave of distinguished people impersonated Musk around the weekend, with the objective of underscoring possible flaws in the social media company’s options for a revised verification procedure.

Musk has built an $8 Twitter subscription approach his signature bid to bolster the company’s profits. The new prepare was unexpectedly rolled out about the weekend ahead of the corporation eventually decided to hold off the service right until just after the midterms.

The updated Twitter Blue subscription system offers spending customers the capacity to get a blue look at mark on their profiles, an alternative beforehand accessible exclusively to verified superstars, politicians, journalists and other general public figures. Musk proposed the new characteristic as a way to combat spam on the system.

But the partially rolled-out approach faced popular backlash, and in a display of defiance, some celebs on the system posed as Musk about the weekend, total with a blue test mark on their profiles.

Comic Sarah Silverman applied her verified account to troll Musk, copying his profile photograph, address picture and identify. The only detail distinguishing a tweet coming Silverman’s account was the @SarahKSilverman handle.

“I am a flexibility of speech absolutist and I try to eat doody for breakfast each individual working day,” Silverman tweeted Saturday. Her account also retweeted posts supporting Democratic candidates.

Silverman’s account was labeled as “temporarily restricted” Sunday, with a warning that “there has been some abnormal action from this account” revealed to people right before clicking by to the profile. The comic then modified her account back to its regular type, complete with her individual name and picture.

Tv actress Valerie Bertinelli in the same way transformed her account identify to the Twitter CEO’s, tweeting Friday that “[t]he blue checkmark simply intended your identification was verified. Scammers would have a tougher time impersonating you. That no for a longer period applies. Very good luck out there!” She then answered a follower who requested how the checkmark no more time applies, creating, “[y]ou can obtain a blue check out mark for $7.99 a month with out verifying who you are.”

Following changing her profile name to Musk, Bertinelli tweeted and retweeted aid for a number of Democratic candidates and hashtags, which includes “VoteBlueForDemocracy” and “#VoteBlueIn2022.”

The actress altered her account name again to Valerie Bertinelli Sunday, tweeting, “[o]vital-dokey I have had my entertaining and I believe I manufactured my stage.”

On Sunday, Musk tweeted that, “Going forward, any Twitter handles partaking in impersonation devoid of plainly specifying ‘parody’ will be forever suspended.” He also tweeted that a identify transform on Twitter will “cause non permanent decline of confirmed checkmark.”

On top of that, Musk claimed Twitter users will no for a longer time obtain warning just before getting suspended. “This will be evidently identified as a problem for signing up to Twitter Blue,” he tweeted.

Griffin’s account remained suspended Monday morning, and it was unclear how extensive it would remain in result. Musk mocked Griffin Sunday, quipping that “she was suspended for impersonating a comedian.” Musk also tweeted that Griffin could get her account back again by shelling out $8 a thirty day period for Twitter Blue, though it wasn’t clear regardless of whether Musk was significant.

CNN fired Griffin in 2017 immediately after the comic was photographed holding up a bloody head resembling that of then-President Donald Trump. Griffin had co-hosted the New Year’s Eve program together with Anderson Cooper for a decade.

The crackdown on accounts will come in the wake of Musk obtaining the company and pledging to restore the accounts of consumers who ended up beforehand banned from the system, most notably Trump. Musk has also reported he will limit the company’s articles limits and demand the compensated subscription for account verification.

In current months, Musk has shared conspiracy theories about the attack on Paul Pelosi, called Democrats the get together of “division & dislike,” in comparison Twitter’s previous CEO to Joseph Stalin and warned that “the woke thoughts virus will destroy civilization.”

Scaling the financial education program in Jordan

Scaling the financial education program in Jordan

A expanding physique of analysis has proven that economical inclusion can be a highly effective device for addressing financial progress, poverty reduction, and gender and cash flow inequality. Nevertheless there are also pitfalls connected with economic companies, and therefore, it is crucial for money inclusion to be accompanied by endeavours to boost financial literacy. Early publicity to fiscal awareness and competencies is specifically critical for encouraging youth deal with advanced economic choices and acquire healthy lengthy-phrase economic behaviors.

In recognition of the significance of financial literacy for young people, Jordan set up the National Money Training Method (FEP) as a core pillar of its Nationwide Fiscal Inclusion Tactic. The FEP features a complete curriculum committed to economic literacy that is built to be interactive, partaking, and appropriate to students’ day by day life. Considering the fact that 2014, the Ministry of Education and learning (MoE), the Jordanian nonprofit INJAZ, the Central Lender of Jordan and crucial companions from the financial and education sectors have been involved in developing, creating, and applying a phased rollout of the software across the state. Now FEP is a compulsory course for all faculty learners in grades 7-10, and an optional elective for students in grades 11 and 12.

Finding out the FEP scaling journey

The Centre for Universal Instruction (CUE) at Brookings has been investigating endeavours to scale and maintain proof-based mostly initiatives primary to substantial-scale advancements in children’s studying. CUE has been employing a sequence of collaborative motion exploration initiatives known as Serious-time Scaling Labs (RTSL), in partnership with neighborhood institutions in many countries. The goal of these RTSLs is to generate evidence and offer practical recommendations all around the course of action of scaling in global education—encouraging a stronger url in between study and observe.

This new report focuses on a single of the scaling labs in Jordan, released in 2019 in collaboration with the Central Bank of Jordan (CBJ), the MoE, and INJAZ. The lab concentrated on this partnership-led method of applying, adapting, and scaling the National Fiscal Instruction System (FEP) in grades 7-12 across the place. Though this report is concentrated on the tale of the FEP, it also serves as a circumstance study into more substantial questions of how an evidence-dependent initiative can realize progress towards national sustainable scale, with classes that are transferable outside of FEP and Jordan.

Area a person of the report gives a short history on the case, which includes an overview of the training ecosystem, motion to endorse bigger economical inclusion in Jordan, and temporary descriptions of vital actors and initiatives engaged with FEP. Section two facts the story of implementing, adapting, and increasing FEP in Jordan to date—exploring essential variables, opportunities, and troubles linked to its design and style, shipping, funding, and enabling environment.

The report delves into some of the good reasons for the thriving scaling of the FEP, like a general public-non-public partnership (PPP) product that broke with traditional strategies of working and introduced together contributions from numerous actors for funding, advocacy, and implementation a lengthy timeframe to consistently exam and refine the technique a world motion for economic inclusion and a solid local enabling environment that supported scaling and flexibility amid all functions to adapt ideas and respond to a modifying context in the wake of an intercontinental pandemic.

The report also highlights some recurring issues confronted in the scaling system, which include checking and information selection, maintaining large-quality training at scale, and preserving get-in at all levels—from the classroom up to the stakeholders in just the MoE. To try and address some of these difficulties, the RTSL identified, adapted, and tested a collection of change suggestions, such as direct instructor schooling digitizing the FEP curriculum by means of films and interactive platforms and instructor finding out circles to develop peer help, mentorship and invest in-in among FEP teachers.

The report concludes with criteria for crucial stakeholders in Jordan with regards to the future section of FEP, as very well as scaling takeaways drawn from the FEP encounter that can notify upcoming scaling attempts in education in Jordan and beyond. The Jordanian government’s attempts to scale and maintain FEP—in partnership with the CBJ, INJAZ, and quite a few other actors—has offered a interesting situation of what it will take to achieve nationwide scale, and this tale will probably proceed to give abundant insights into scaling and education and learning transformation for Jordan and many countries all over the environment in the long run.

Picture credit history: Abdelhadi Qallab  

Obtain the comprehensive report»

Down load the government summary»

5 things to know for Nov. 4: Twitter, Flu, January 6, Student Loans, Brittney Griner

5 things to know for Nov. 4: Twitter, Flu, January 6, Student Loans, Brittney Griner



CNN
 — 

The enormous rocket at the heart of NASA’s mission to return humans to the moon is being rolled out of its hangar today. After a series of issues and poor weather thwarted the first two launch attempts, the agency has spent weeks troubleshooting and is now gearing up for another attempt to get the rocket off the ground.

Here’s what else you need to know to Get Up to Speed and On with Your Day.

(You can get “5 Things You Need to Know Today” delivered to your inbox daily. Sign up here.)

Elon Musk will begin laying off Twitter employees this morning, according to a memo sent to staff, as several employees sue the billionaire alleging the layoffs are in violation of labor law. An email sent Thursday evening notified employees that they will receive a notice by 12 p.m. ET today that informs them of their employment status. The memo comes after previous reports said Musk had planned to lay off up to half of the company’s staff after acquiring it last week for $44 billion. Twitter had around 7,500 employees prior to Musk’s takeover. He started his tenure at Twitter by firing its CEO and two other executives, according to two people familiar with the decision. Musk also dissolved Twitter’s former board of directors.

Health officials are reinforcing their recommendations for people to get flu vaccines as this year’s strain picks up its pace across the US. There have been at least 880,000 cases of influenza, nearly 7,000 hospitalizations and 360 deaths from the flu so far this fall – including one pediatric death – according to data from the CDC. The numbers also show there haven’t been this many cases of influenza so early in the season since 2009. After recently receiving Covid-19 vaccines and boosters, some people have been waiting until later in the season to get the flu vaccine, CNN Medical Analyst Dr. Leana Wen said. However, since it takes about two weeks to reach optimal immune protection after receiving a flu vaccination, people who haven’t gotten one yet should do so now.

exp TSR.Todd.triple.threat.RSV.Covid.flu_00003501.png

Triple threat emerging: flu, Covid, RSV


02:52

– Source:
CNN

The House select committee investigating the January 6, 2021, insurrection at the US Capitol has interviewed more Secret Service witnesses, including the head of former Vice President Mike Pence’s detail. The committee is also expected to interview at least another half dozen Secret Service witnesses in the coming weeks, including current and former officials and agents, multiple sources told CNN. The panel’s efforts to secure testimony from an expanding list of current and former Secret Service agents during the closing months of its probe shows the committee is intensifying its push to learn more about what the Secret Service knew about looming threats to Pence and other government officials ahead of the attack. 

A sign with the U.S. Secret Service shield is cleaned before a briefing at the service's headquarters November 07, 2019 in Washington, DC.

Why Jan. 6 committee is asking Secret Service agent to testify again

President Joe Biden’s student loan forgiveness program remains on hold while a federal appeals court considers a legal challenge brought by six Republican-led states. The Biden administration is still accepting applications for student loan forgiveness, which is worth up to $20,000 per borrower, but it is not currently allowed to cancel student loan debt until the hold is removed. The Biden administration is also facing lawsuits from an attorney general and conservative groups that claim he does not have the legal authority to broadly cancel student loan debt. As for what happens next, an appeals court will decide whether to grant a preliminary injunction requested by the states. If granted, the student loan forgiveness program could be kept on hold while the court hears from both parties. If it’s not granted, debt cancellation may begin while the appeal plays out. The ruling could come at any time.

Cody Hounanian student debt crisis center bernal

College alum tells CNN: The only way to open the door was to take on student loan debt

US Embassy officials visited detained WNBA basketball star Brittney Griner in Russia on Thursday and “saw firsthand her tenacity and perseverance despite her present circumstances,” State Department spokesperson Ned Price said in a statement. They had not been able to visit Griner since early August but spoke with her by phone last month. After months of internal debate, the Biden administration previously offered to exchange a convicted Russian arms trafficker serving a 25-year US prison sentence as part of a potential deal to secure the release of Griner and Paul Whelan, who has been detained in a remote prison camp in Russia on espionage charges since 2018. US officials say they have continued to follow up on their offer and emphasized that the Americans’ detentions remain a top priority. 

Kyrie Irving apologizes amid Twitter controversy and suspension by Brooklyn Nets

The NBA star apologized on Instagram late Thursday, hours after the Nets announced a five-game suspension over his “failure to disavow antisemitism.”

Netflix launches a new plan with ads

After much anticipation, the platform’s cheaper plan with ads debuted in the US on Thursday. Here’s how it differs from existing plans. 

Miller Lite is selling a Christmas tree stand that doubles as a beer keg

Beer lovers are taking “holiday cheers” to a new level… This product was designed to “make it seem as if beer is being poured from the tree,” a company spokesman said. 

Jay-Z and Jeff Bezos are interested in buying the Washington Commanders together

The two billionaire businessmen already have major sports ties. Now, they’re in talks on a possible joint venture to buy an NFL team.

Iranian artist’s paintings of women take on a new sense of urgency

These symbol-laden paintings are charged with emotion and allude to issues that have recently sparked protests across Iran.

Which “extremely rare” item is expected to fetch up to $30 million at an upcoming auction?

A. George Washington’s journal

B. Key to the White House

C. First-edition copy of the US Constitution

D. Original senate gavel

Take CNN’s weekly news quiz here to see if you’re correct!

36

That’s the typical age of a first-time homebuyer in the US in 2022, up from 33 last year. A new report from the National Association of Realtors shows that first-time buyers made up just 26{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} of all homebuyers in the year ending in June – an all-time low over approximately four decades. Financial analysts say many factors have made it a challenging environment for Millennials and Gen Zers to remain competitive in the market, including rising home prices, climbing mortgage rates, and the fact that younger generations have less cash saved for a down payment.

“Violence has no place in politics.”

– White House press secretary Karine Jean-Pierre, condemning the reported assassination attempt on Thursday of Pakistan’s former Prime Minister Imran Khan. The country’s ex-leader was shot in the leg at a political rally outside the town of Gujranwala, Punjab province, Pakistani officials said. He was transported to Lahore to receive treatment and was in stable condition. An unnamed man suspected of firing shots at the rally has been detained, according to police. Khan has repeatedly claimed, without any evidence, that the US was behind his loss of power after he was ousted as Prime Minister in a no-confidence vote in April.

friday svr wx

Risk of severe storms for the South


03:08

– Source:
CNN

Check your local forecast here>>>

Indoor ocean simulator

The US Navy is testing its equipment in a massive pool that can replicate any wave situation in the world. Take a look inside. (Click here to view)

Barrett Business Services, Inc. (BBSI) Q3 2022 Earnings Call Transcript

Barrett Business Services, Inc. (BBSI) Q3 2022 Earnings Call Transcript

Barrett Business Services, Inc. (NASDAQ:BBSI) Q3 2022 Earnings Conference Call November 2, 2022 5:00 PM ET

Company Participants

Gary Kramer – President & CEO

Anthony Harris – CFO

Conference Call Participants

Christopher Moore – CJS

Jeff Martin – Roth Capital Partners

Vincent Colicchio – Barrington Research

Operator

Good afternoon, everyone, and thank you for participating in today’s conference call to discuss BBSI’s Financial Results for the Third Quarter Ended September 30, 2022. Joining us today are BBSI’s President and CEO, Mr. Gary Kramer; and the company’s CFO, Mr. Anthony Harris. Following their remarks, we will open the call for questions.

Before we go further, please take note of the company’s safe harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995. The statement provides important cautions regarding forward-looking statements. The company’s remarks during today’s conference call will include forward-looking statements. These statements, along with other information presented that does not reflect historical fact, are subject to a number of risks and uncertainties.

Actual results may differ materially from those implied by these forward-looking statements. Please refer to the company’s recent earnings release and to the company’s quarterly and annual reports filed with the Securities and Exchange Commission for more information about the risks and uncertainties that could cause actual results to differ from those expressed or implied by the forward-looking statements.

I would like to remind everyone that this call will be available for replay through December 2, 2022, starting at 8:00 P.M. ET tonight. A webcast replay will also be available via the link provided in today’s press release as well as available on the company’s website at www.bbsi.com.

Now I’d like to turn the call over to the President and Chief Executive Officer of BBSI, Mr. Gary Kramer. Sir, please go ahead.

Gary Kramer

Thank you, Ryan. Good afternoon, everyone, and thank you for joining the call. We had an excellent third quarter, both financially and operationally. Our performance and momentum continued across all facets of the business and resulted in us once again raising our full year outlook. We are executing on our objectives and our strategies are delivering superior results. Our growth in worksite employees resulted in better-than-expected financial results.

Regarding our client in WSE stack, we continue to execute on various strategies to increase the top of the sales funnel and I am pleased to say that we once again exceeded our expectations in Q3. This is the result of our three pronged strategy, to mature and deepen relationships with our existing referral partners, to utilize technology and digital campaigns to target and nurture new referral partners, and to utilize technology and digital campaigns to target potential clients directly.

I’d like to put a finer point on our new referral partner initiative. Through the third quarter of 2022, we have strategically targeted about 6,000 new potential referral partners and we have forged new partnerships with about 18{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} of them. This is a long term strategy. Trust is earned slowly over time. As these new referral partners see BBSI, and our product in action, we believe they will become more comfortable recommending BBSI to their clients.

On a year-to-date basis, we added 41 new accounts from these efforts, up from 15 last quarter and expect this to continue to accelerate into the future. We will continue this strategy in 2023, along with targeting new referral partners that specialize in the benefit space. The next trend that we previously discussed is that we’ve been able to sell and support larger clients with our upgraded technology stack and national PEO licenses. This continues to progress favorably and the average size of the clients that we are adding are larger than the average size of the clients that are running off.

Regarding client runoff, our retention continues to be stronger than pre-pandemic levels. I’d like to attribute that to the work we do with our clients and the value our teams provide. The results of all these efforts or what I refer to as our controllable growth is that we added approximately 4,300 worksite employees year-over-year from net new clients. We bill as a percentage of payroll and we grow as our clients grow by adding worksite employees with wage inflation and as hours worked increases.

Our client base is resilient and we exceeded our internal forecast for worksite employee growth in the quarter. Our average worksite employees were up 8{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} over the prior year quarter, which is the culmination of controllable growth as well as our clients’ hiring. We exceeded our internal forecast for our worksite employee stack.

Moving to our staffing operations. Our staffing business increased 1{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} over the prior year quarter and was less than we anticipated. There is still strong demand for labor and we are receiving more orders, we are placing more applicants and companies are increasing wages to attract employees. It is still a thin recruiting market, and we are unable to fill all orders. Anthony will give some regional color for what we’re seeing in the markets.

I mentioned previously that we made investments in our recruiting operations, and we are seeing positive results. One of our objectives was to provide recruiting services for our PEO clients. This is a valuable service to our PEO clients in a tight labor market, which also rewards BBSI. When we place a candidate, we receive a recruiting fee.

And as the candidate joins the client’s payroll, we realized PEO revenue. We have built out recruiting hubs in every region that support our branch network. On a year-to-date basis, we have placed 287 candidates with 147 PEO clients and generated $1.7 million in recruiting fees. We expect this to increase as we introduce to more clients.

Moving to the field operational updates. We are very pleased with our progress of entering new markets with our asset light model. Our first class of four is doing well, and we added 25 new accounts with about 250 worksite employees. In 2022, we started small with our first class as we were learning and refining the various aspects of our new market development program.

We are at a point now that we are confident that we can scale this program and have hired and are training the next class of 11 folks. This class is primarily located in the central states plus a few East Coast markets and will begin selling in Q1 of next year. At the end of Q3, we operated in 13 states and 68 markets, which is consistent with the prior year quarter and does not include our asset light markets. Some markets will be more profitable than others due to their maturity, but with our evolution, every market is expected to be profitable.

Regarding product updates. We successfully launched our new health benefits offering in the quarter and began selling for the 1/1/23 enrollment season. As a refresher, we entered into a strategic multiyear partnership with one of the world’s leading health insurance companies. This is a fully insured program where we take no underwriting risk. We have been derisking the workers’ compensation program over the past couple of years and it was a key objective of ours not to take underwriting risk.

We have invested in IT to allow this offering to be delivered seamlessly through our myBBSI portal and clients will find value from the ease of administration, billing, and compliance. BBSI clients will now have access to discounted products and plan designs that are not currently available to them in the traditional small group market. We will be offering health insurance plus ancillary benefits, including, but not limited to, dental, vision, life, disability, and critical illness.

In the quarter, we rolled this out to a limited number of existing clients in select markets for the 1/1/23 enrollment season. Our intent is to perfect our craft and then shift our focus to California and to new prospects. This will not move the needle for revenue or profit in 2023 as we targeted a very small cohort of clients, but we anticipate this will provide material contribution as we look to the future of BBSI.

We view this as an opportunity to diversify our clients’ profile while expanding our total addressable market. We have the people, products, operations, and technology in place and are executing to our sales plan. I am pleased with where we are with this new offering and of our sell-through thus far. In addition to our benefits offering, we have also been investing in electronic training and development.

You’ve heard me say over the past two years that we’ve invested in technology that was designed to train and develop our new market development managers. We are taking this technology and are now making it available to our clients through myBBSI. We are excited to be launching BBSIU in the fourth quarter. This is a learning management portal that our clients can purchase and contains various catalogs consisting of HR and compliance, risk and safety, leadership, and professional skills. This does not replace our experts in the field but will be a valuable tool that complements our offering.

Next, I’d like to shift and speak about the macro economy. The growth in worksite employees for our installed base during the third quarter was strong and our October numbers were equally strong. Wage inflation is still prevalent, but at a slower growth rate than 2021. As the payroll and HR company for over 8,000 clients over various states and industries, there is nothing in our data that would reflect the slowdown in the economy at this time. However, we would be remiss if we didn’t acknowledge that times are growing more challenging for business owners, given tight labor markets, record inflation, supply chain challenges, and a rising interest rate environment.

We know that labor is in high demand that the unemployment rate is still at all-time lows, that the labor force participation is lower than pre-pandemic levels. That job openings rose last month, that immigration is low. These are all unusual facts that do not fit any previous historical inflationary recession scenario. Also, layoff should be delayed due to business owners’ recent memories of how challenging it was to attract new employees post-pandemic.

Based upon all these factors, plus our higher-than-expected Q4 starting point for our installed base of clients and WSE stack and our optimism of our revamped and disciplined sales and service teams executing on controllable growth, we believe BBSI is poised for growth in 2023, even if a recessionary environment arises. As I think to the future, we have consecutive quarters of great momentum, and I don’t see it slowing.

Our client retention is the best it’s ever been, and we’re seeing more business opportunities. Our prospects continue to be larger because of our tech stack, coupled with our nationwide offering. We are executing to our plan and things are going well. Our optimism increases exponentially as we think of the opportunities that our new benefits offering brings to our existing clients, new clients, and new referral partners.

With that, I’m going to turn it over to Anthony for his prepared remarks.

Anthony Harris

Thanks, Gary, and hello, everyone. I’m pleased to report that we again had strong results for the quarter. PEO gross billings increased 13{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} over the prior year quarter to $1.9 billion, while staffing revenues increased 1{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} over prior year to $29 million. As Gary noted, our increase in PEO gross billings was driven by stronger-than-expected growth from net new clients in the quarter, continued stronger-than-expected hiring within our client base, and higher average billing per worksite employee.

Overall, worksite employees increased 8.2{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} over Q3 ’21 and average billing per WSE increased 4.2{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}. The increase in average billing per WSE was driven primarily by rising wages in our existing employee base, offset partially by continued hiring of more lower wage roles relative to the prior year.

PEO gross billings growth by region versus the prior year third quarter were as follows: Mountain states grew 21{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}, East Coast grew 20{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}. Southern California grew 14{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}, Northern California grew by 10{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} and the Pacific Northwest grew 7{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}. Staffing revenues increased 1{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} over prior year, which is a slower growth rate than we have seen recently. We monitor our staffing revenues closely for broader trends, but the slowing growth this quarter was primarily driven by client and region specific circumstances.

In the Northwest, we have agricultural clients where work has shifted from Q3 to Q4 in response to a late harvest season. And in the Mountain States, we experienced a slowdown in certain light manufacturing clients due to supply chain challenges. Both of these examples are transitory. The one market where we have seen demand contraction is in Northern California, where we support more technology clients. However, we are not seeing broader negative trends.

We continue to see stability in our workers’ compensation market and our overall pricing has remained consistent and in line with our plan. Our gross margin rate continues to trend ahead of prior year through Q3 with cost savings in payroll taxes and more significantly from lower workers’ compensation expense in the current year.

Our workers’ compensation program continues to perform well with favorable claims frequency trends and favorable development on historical claims reserves. This quarter included an actuarially determined reduction of prior year estimated liabilities of $1.4 million compared to $0.8 million in the year ago quarter. As a reminder, we renewed our fully insured workers’ compensation program effective July 1 of this year. The prior year program has performed favorably, and our renewed program includes several enhancements, including even more cost certainty.

For the 12 month policy effective July 1, 2022, if claims developed favorably in future periods, BBSI received the benefit of those lower claims costs through return premium from carriers. If claims develop unfavorably, there is no additional premium that can be owed. That is BBSI continues to participate in all of the upside of favorable workers’ compensation customs but has no exposure to downside risk.

Turning to operating expenses. SG&A in the quarter is on plan. Our new health benefits program has launched successfully on schedule and with costs in line with our forecast. Our top line growth and profitability are ahead of expectations and we accordingly have increased employee compensation expense for profit sharing and incentives, but those increases have been offset by other savings in the quarter. As a reminder, we expect our earnings growth rate of approximately 1.5 times our top line growth rate. Even with the incremental expense in preparation for our health benefits offering, we continue to expect earnings leverage to be ahead of target for the year.

Moving to our invested assets. Our investment portfolios earned $1.6 million in the third quarter compared to $1.8 million in the prior year. With the rapid increase in interest rates, our fixed income portfolios remain in an unrealized loss position. However, we intend to hold those securities, and our portfolio continues to be managed conservatively with an average duration of four years, average quality of investment at AA, an average book yield of 2.1{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}.

Looking at the balance sheet, we had $132 million of unrestricted cash investments at September 30 compared to $111 million at June 30. The increase is primarily due to the results of operations and the timing of payroll tax payments. As a reminder, BBSI is now completely debt free. We continue to see intrinsic value in our share price relative to our profitability and growth potential and we’ve continued to repurchase shares under the Board’s $75 million share repurchase program.

In the third quarter, BBSI repurchased 130,000 shares at an average price of $81.74 per share. Year-to-date, we have now purchased more than 7{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} of the company’s shares outstanding and still have $36 million remaining on the program. The company also paid $2.1 million in dividends in the quarter and reaffirmed its dividend for the following quarter. We have paid $6.6 million in dividends year-to-date.

Given the strong results for the quarter and positive trends, we are increasing our full year outlook. We now expect gross billings for the year to increase between 12{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} and 13{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}, up from 11{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} to 13{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} previously. We expect average WSEs to increase 8{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} to 9{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}, up from 7{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} to 8{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} previously. And we expect gross margin as a percent of gross billings to be between 3.1{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} and 3.2{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}, up from 3.05{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} to 3.15{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} previously. And we expect our effective annual tax rate to be between 26{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} to 28{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}, which is consistent with our previous guide.

As we finish this year and look ahead to the next, we believe BBSI is poised for continued growth even in an uncertain economic environment. We will continue to invest in growth in products, including our new health benefit offering and new market expansion. And even with those investments, we’ll continue to benefit from leverage in our operating model. In short, we are optimistic about the future and are looking forward to the year ahead.

Now I will turn the call back to the operator to open the line for questions.

Question-and-Answer Session

Operator

Thank you. Ladies and gentlemen, at this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Chris Moore from CJS Securities. Please go ahead.

Christopher Moore

Hey. Good afternoon, guys. Congrats on another great quarter. Maybe just start on the property and casualty market side. So Hurricane Ian had a significant impact on the property and casualty market generated large losses. Is that causing more tightening of risk and rate tolerance by carriers?

Gary Kramer

Hey, Chris. Good question. It’s still early. A lot of that catastrophe was filled off seas, about 60{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} of that loss is with Lloyd’s out of London. So 40{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} on the U.S. market, which is where you would have, call it, commonality with the workers’ comp lines business. Still early days. We’re seeing the rates kind of trade in a flat band of the plus 2, minus 2, we haven’t seen any broad stroking rate increases yet from everybody. We’ve continued to see the workers’ comp market get more rational, and we expect that it will stay in that flat up range for now. We’re just not seeing — we’re not seeing the deep discounts anymore like we used to see a year or two ago. It’s more trading at where the rate should be.

Christopher Moore

Got it. Very helpful. And maybe just to staffing, I mean, over the — I don’t know how many quarters you can be talking about staffing shortages that obviously continued into Q3. After Q2, you kind of had this thesis out there. So talking about hiring skilled workers. Was it a matter of businesses not being able to find enough skilled labor or they can’t afford these workers? Just maybe any follow-up thoughts you had on that from Q3.

Gary Kramer

Yeah. So we measure our orders, right, which is really people that want us to hire, right. So we measure our orders. Our orders are not down. So we’re not seeing the orders go down, which the question is, is that the canary in the coal mine, and we’re not seeing companies are still asking us to go higher for them on the staffing side.

We’ve had a couple of seasonality things that Anthony mentioned as far as in the Northwest and in the Mountain States. But companies are asking us to hire, that hasn’t slowed down. Really, these are — our fill ratios are dripping down again just because of the availability of the workforce. So we were able to fill less orders on a ratio basis in Q3 than we were in Q2. It’s still a tight labor market out there.

Christopher Moore

Got it. And maybe just last one for me on M&A. My sense is that M&A could happen at some point, but this is not really an area you’re spending a lot of energy on currently. Is that a fair statement?

Gary Kramer

We look at anything that comes across our desk. We go out and talk to folks as well on the offensive side. We are active in the market. But ultimately, we’re going to do what we think is the best for the company for the long term and we’ve shifted, right. We honestly were trying to find a company that had benefits. We couldn’t find a company that had benefits that we wanted to buy, and then we started our own benefits department, right.

And then we’re not going to sit idly by and wait for an acquisition. That’s why we’re going with our asset light model to enter new markets. So we’re excited that, we have 11 new BBSI folks that are in the training program that are going to be selling in new markets come Q1. So that’s how we’re going to fill out the map is with the asset-light model. So if we can find somebody inorganically that fits, we will do that. If not, we will grow it on our own.

Christopher Moore

That sounds great. I will leave it there. I really appreciate it.

Operator

Thank you. Our next question comes from the line of Jeff Martin from Roth Capital Partners. Please go ahead.

Jeff Martin

Thanks. Good afternoon. Kramer, I was hoping you could give us a sense of what the initial client reaction has been to the new benefits offering and what kind of uptake rate are you seeing or is it too early to really tell that?

Gary Kramer

Good question. I’ll say that the clients have been asking for this and Anthony and I were playing back and forth about whether we put a quote in our earnings script because we had a couple of nice quotes, but we ultimately left them out where they were very complimentary of a, BBSI doing this and then b, of the product that they have. We only did this in select markets, and we only did it to current customers that have benefits, right.

So we didn’t try to go real wide with this to start. So we went with a very select group. I can say that we’re positive, we’re optimistic on the sell-through that we’ve seen. We don’t have good numbers yet. We actually just started to push the enrollment out this week. So we don’t know how many participants are going to enroll. We don’t know of the total census what it’s going to look like.

But so far, I think it’s been a good launch for us, a good learning exercise. We learned some valuable things along the way so that when we try to take this thing to scale next year and offer in California and then offer it to new clients, we’re going to have a much better conversion rate because we’ve learned some things this year.

Jeff Martin

Okay. And then tied to that, what are you seeing in terms of attractiveness to referral partners that specifically traffic within the healthcare market?

Gary Kramer

That’s going to be a focus and attention for us next year, right. Because 90{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} of our business comes from referral partners and of that 90{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}, a large portion is P&C brokers. We don’t have a lot of life and health referral partners now because we don’t sell a life and health product, right? So we look at this and say, we have a mapping of our referral partners that do both sides of the house as far as the life and health and the P&C and we’re working with them.

And then we’re going to have a strategy similar to what we did this year as far as I call it making new friends going out and advertising and attracting new referral partners, specifically in the benefit space and explaining the BBSI product. I mean we’re the broker-friendly PEO. We make sure that if they put the business with us, they’re compensated in a similar way as if they put it with the standard market.

So really, if they put it with us, their life becomes easier because we’ve got a better retention and our platform makes their life easier. There’s less administration for the broker when they put it with us. So we think we have a lot of good selling points when we go to the market to try to bring on new referral partners.

Jeff Martin

Okay. Great. And then I was curious on the placements initiative, kind of first time you’ve talked about this. Has this been something you’ve been doing all year and it’s just kind of starting to reach a material part of the business that you’re starting to talk about it? And how much of a focus is this going forward?

Gary Kramer

Internally, we’ve promoted somebody to run our staffing vertical, and this was one of the objectives, was to bring recruiting to our PEO clients. So we started in Southern Cal with the recruiting branch to be a hub for Southern Cal. Good results there, we took it to Northern Cal, and then we took it to Portland and we took it to the Mountain States. And now we have a recruiting hub on the East Coast as well that supports all of our PEO clients.

So we tried it, it worked, and then we took it to all the other markets, and it’s working in all the other markets. So now we’re at a point of where we say we can do this nationally. And it’s a good value add, right. We do recruiting for our PEO clients. When we do the recruiting, we get paid a fee and then they go on PEO payroll and we make PEO revenue. So it’s a win-win.

Jeff Martin

Yes. Sounds very interesting. And then last question in terms of your workers’ compensation outlook as a percentage of gross billings next year, are you thinking it will — has the opportunity to come down from the 3{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} to 3.1{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} range this year? Does it have further room next year to decline?

Anthony Harris

Yeah. Thanks, Jeff. The answer is we always think we can continue to improve, and we will. So at this point, we see positive trends. As I noted in my remarks, nothing worrisome coming through Q3 into Q4. That rate that we’re paying now on the fully insured program will continue, obviously, into the first half of next year, and then we would reset that next July 1. But we’ll continue to monitor that. And frankly, we’re optimistic so far in these first two years of our fully insured program that we’re more on the return premium side of that equation, right. We’ll get money back. So it’s still early to tell, but the trends are positive.

Jeff Martin

Okay. And then last one for me is in the absence of a significant falloff in the economy, what do you think the opportunity to start to grow worksite employees at double-digit rate is and over what time frame?

Gary Kramer

Yeah, that’s… We’re trying to stay away from ‘23. We feel — we said it in my remarks and Anthony said in his, that even if this is a weird recessionary environment, right, because of how tight the labor market is. We feel even if there is a pullback, we can put up growth next year. We feel like we can put up respectable growth. I don’t want to really give a range because we’re going to wait until we get through Q4 but we feel like we’ve got the controllable piece going, right.

The sales machine and the retention machine are going in a positive direction. We’ve said that quarter-over-quarter. This quarter, we did over 4,000 more WSEs, right, which is good controllable growth. And then we think we can grow on that. And then really the question becomes of what are our clients going to grow like in this environment. But we feel comfortable that all scenarios point to good growth for us in ’23.

Jeff Martin

Great. Thanks for taking my questions.

Operator

Thank you. [Operator instructions] Our next question comes from the line of Vincent Colicchio from Barrington Research. Please go ahead.

Vincent Colicchio

Yes, Gary. Nice quarter. I came on the call a bit late. So sorry if this was already said. I’m curious how the PEO sales pipeline changed sequentially and how your traditional sales engine is working relative to your digital campaign.

Gary Kramer

Yes. I mean we think of these as — really, we’ve got, call it, three channels that we monitor. Our direct channel, our referral partner channel, and our client referrals, right. Our client referrals are a big piece of our prospecting. All three are up and to the right. That’s the trend we continue to see. We’ve got more leads that come in every quarter over quarter, and then it’s the scrubbing of those leads to get them through the prospecting and the discovery.

The one thing I would just say is, our clients now on average, are larger than the clients we’ve had historically. So we’re adding larger clients and the clients that runoff are a little on the smaller side. So we’re being able to attract bigger business and retain all of our larger clients, which is a good positive trend, which is a tailwind that’s helping support our earnings and WSE growth.

Vincent Colicchio

And on the staffing side, you’ve got some transitory issues you had mentioned. Will those sort of burn off next quarter or in Q4? And so will we see a nice sequential improvement?

Gary Kramer

Yeah. I think for the Northwest specifically, we’ll see that pick up because of the late harvest, the supply chain ones. There’s a couple on sites we have, where we do light manufacturing and light assembly. They’re the ones that may persist a little bit depending upon the supply chain challenges. I do think the recruiting that we did in Northern Cal is going to continue to slow down specific to the IT tech sector. As you know, IT is probably the one industry that’s under pressure right now.

Vincent Colicchio

And the sales and training capability, you’re adding to your service, was there sort of a minimal investment in that? Is it sort of let’s see how this goes and maybe we’ll invest more heavily in this over time? What is your thinking there?

Gary Kramer

Yeah. It’s a small investment for the company. And really, we made this investment when we developed the product to train our internal employees. So we built it to train our internal employees to kind of shorten the learning curve, and it’s worked well for us. And now we’ve kind of made some modifications and spun it up so that we can sell to our clients and put some different content in there for them to review.

This is not going to be a needle mover as far as revenue or earnings. This is something that the clients have been asking for, and ultimately, we think it will help with retention. So we’re going to charge for it. We’ll cover our costs, make a little spread but ultimately, it’s a tool that we think will help retain our clients.

Vincent Colicchio

Okay. And then as you’ve said before, clients were asking for health care, which you’re fixing now, and also a bookkeeping service. Is that the sort of the bookkeeping side, sort of a back burner or is this something you’ll consider doing in the next year or so?

Gary Kramer

We have a parking lot of full of products that we would look to add. Bookkeeping is one of them, but we have many of them. And as we think of our product roadmap, we’re not going to advertise our playbook to the competitors right now.

Vincent Colicchio

All right, Gary. Nice job.

Gary Kramer

Thanks.

Operator

Thank you. Ladies and gentlemen, at this time, this concludes our question-and-answer session. I would now like to turn the call back over to Mr. Kramer for closing remarks.

Gary Kramer

Sure. Thank you. I’d like to just thank the whole BBSI team for working tirelessly to help our clients thrive. It’s been a very good quarter of a very good year for BBSI and we’re proud of where we are, and we’re really proud of where we’re going. So with that, I will call it quits, and thank you, everybody.

Operator

Thank you. The conference of Barrick Business Services, Inc. has now concluded. Thank you for your participation. You may now disconnect your lines.

Uber whistleblower says current business model ‘absolutely’ unsustainable

Uber whistleblower says current business model ‘absolutely’ unsustainable

LISBON, Nov 2 (Reuters) – Mark MacGann, the whistleblower behind the so-called Uber Data files, mentioned on Wednesday that the journey-hailing organization appeared to be taking techniques towards strengthening its perform lifestyle, but that its enterprise model was nonetheless “definitely” unsustainable.

The Guardian and Le Monde newspapers noted in July that Uber Systems Inc (UBER.N) broke laws and secretly lobbied politicians as aspect of an aggressive travel to extend into new markets from 2013 to 2017. read a lot more

MacGann, who led Uber’s lobbying efforts to win in excess of governments, determined himself as the resource who leaked the a lot more than 124,000 enterprise data files.

MacGann mentioned he made a decision to communicate out since he considered Uber knowingly flouted regulations and misled people today about the positive aspects to drivers of the firm’s gig-overall economy product.

Uber claimed in July, in reaction to the Guardian and Le Monde stories: “We have not and will not make excuses for past behaviour that is obviously not in line with our existing values.”

MacGann said Uber’s latest CEO, Dara Khosrowshahi, and his govt group “have finished a ton of great issues, but they have so, so much to go.”

When questioned for a comment, an Uber spokesman on Wednesday referred Reuters to a 2020 New York Instances impression piece by Khosrowshahi in which he reported “our current employment system is out-of-date and unfair.”

Khosrowshahi had mentioned gig employees would eliminate the flexibility they have nowadays if they became staff and that rides would be extra high priced. The CEO wrote that personnel want the two overall flexibility and benefits and added that new legal guidelines are required to enable them.

“I am proposing that gig economy organizations be demanded to set up rewards resources which give personnel hard cash that they can use for the positive aspects they want, like health and fitness insurance plan or paid time off,” Khosrowshahi wrote in the op-ed.

“My message to Uber is: ‘you’ve carried out effectively, (but) you can do it so substantially superior (because) the present design is unquestionably not sustainable,'” MacGann explained to a information convention for the duration of Europe’s premier tech conference, the Internet Summit, in Lisbon.

He claimed Uber not too long ago reiterated that the “core of its business product is impartial contractors, since everybody desires to be self-employed, everyone wishes flexibility.”

He reported the details, nonetheless, contradict this watch as there are Uber drivers suing the corporation in many nations around the world to “have a primary minimum amount of social defense these types of as ill pay.”

“Uber is pumping tens of thousands and thousands of bucks in Europe, United States, other sections of the entire world combating legislation,” he said.

Reporting by Sergio Goncalves in Lisbon
Supplemental reporting by Nivedita Balu and Ann Maria Shibu in Bengaluru Enhancing by Matthew Lewis and Sherry Jacob-Phillips

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