Tag: reports

Posted on

Nordstrom Reports Fourth Quarter 2022 Earnings, Announces Wind-Down of Canadian Business

Nordstrom Reports Fourth Quarter 2022 Earnings, Announces Wind-Down of Canadian Business
  • Sales and earnings in line with updated fiscal 2022 outlook
  • Entering fiscal 2023 with healthier inventory position, down 15 percent from last year and comparable to 2019
  • Company provides fiscal 2023 outlook, including plans to wind down Canadian operations to drive profitable growth and enhance shareholder value

SEATTLE, March 2, 2023 /PRNewswire/ — Nordstrom, Inc. (NYSE: JWN) today reported fourth quarter net earnings of $119 million, or $0.74 per diluted share (“EPS”), and earnings before interest and taxes (“EBIT”) of $187 million, or 4.5 percent of sales, for the quarter ended January 28, 2023.

For the fiscal year ended January 28, 2023, net earnings were $245 million and diluted EPS was $1.51, with EBIT of $465 million, or 3.1 percent of sales. Excluding a gain on the sale of the Company’s interest in a corporate office building, Trunk Club wind-down costs and a supply chain technology and related asset impairment charge, all of which were reported in the first three quarters, adjusted EBIT was $502 million, or 3.3 percent of sales, and adjusted EPS was $1.69 for fiscal 2022.1

For the fourth quarter ended January 28, 2023, net sales decreased 4.1 percent versus the same period in fiscal 2021 and gross merchandise value (“GMV”) decreased 4.2 percent. Nordstrom banner net sales decreased 2.4 percent and GMV decreased 2.5 percent compared with the fourth quarter of 2021. Net sales for Nordstrom Rack decreased 8.1 percent.

“We took decisive actions to right-size our inventory as we entered the new year, positioning us for greater agility amidst continuing macroeconomic uncertainty. We also made the difficult decision to wind down operations in our Canadian business. This will enable us to simplify our operations and further increase our focus on driving long-term profitable growth in our core U.S. business,” said Erik Nordstrom, chief executive officer of Nordstrom, Inc. “As we enter fiscal 2023, we are focused on enhancing the customer experience, improving Nordstrom Rack performance, increasing inventory productivity and continuing to advance our supply chain optimization initiatives. We remain confident in the strength of our brands and our ability to drive profitable growth and deliver long-term value to our shareholders.”

In the fourth quarter, men’s apparel had the strongest growth versus 2021. For fiscal 2022, men’s apparel, shoes and women’s apparel had the strongest growth versus 2021.

“While the incremental markdowns in the second half impacted our margins, we are better positioned for a stronger 2023. Our actions have given us increased flexibility to react more quickly to changing customer demand and provide the newness and fashion our customers love,” said Pete Nordstrom, president and chief brand officer of Nordstrom, Inc. “We want to thank our teams for all their hard work helping our customers feel good and look their best.”

As previously announced on February 28, 2023, the board of directors declared a quarterly cash dividend of $0.19 per share to be paid to shareholders of record at the close of business on March 14, 2023, payable on March 29, 2023. During fiscal 2022, the Company repurchased 2.8 million shares of its common stock for $62 million under its existing $500 million share repurchase program. A total capacity of $438 million remains available under this share repurchase authorization.

FOURTH QUARTER 2022 SUMMARY

  • Total Company net sales in the fourth quarter decreased 4.1 percent compared with the same period in fiscal 2021. Full-year revenue for fiscal 2022, including retail sales and credit card revenues, increased 5.0 percent compared with fiscal 2021. GMV decreased 4.2 percent in the fourth quarter and increased 5.0 percent in fiscal 2022 when compared with the same periods in 2021.
  • For the Nordstrom banner, net sales in the fourth quarter decreased 2.4 percent compared with the same period in fiscal 2021. GMV decreased 2.5 percent and increased 6.9 percent in the fourth quarter and in the fiscal year, respectively, when compared with the same periods in 2021.
  • For the Nordstrom Rack banner, net sales decreased 8.1 percent compared with the same period in fiscal 2021. Eliminating store fulfillment for Nordstrom Rack digital orders in the third quarter negatively impacted fourth quarter Rack banner net sales by approximately 500 basis points.
  • Digital sales in the fourth quarter decreased 13.1 percent compared with the same period in fiscal 2021. Eliminating store fulfillment for Nordstrom Rack digital orders in the third quarter and sunsetting Trunk Club earlier in fiscal 2022 negatively impacted fourth quarter digital sales by approximately 500 basis points. Digital sales represented 40 percent of total sales during the quarter and 38 percent of sales for the fiscal year.
  • Gross profit, as a percentage of net sales, of 33.2 percent decreased 525 basis points compared with the same period in fiscal 2021 primarily due to higher markdown rates, as the Company prioritized rightsizing inventory levels in a highly promotional environment.
  • Ending inventory decreased 15.2 percent compared with the same period in fiscal 2021, versus a 4.1 percent decrease in sales.
  • Selling, general and administrative (“SG&A”) expenses, as a percentage of net sales, of 31.5 percent decreased 240 basis points compared with the same period in fiscal 2021, primarily due to supply chain expense efficiencies.
  • EBIT was $187 million in the fourth quarter of 2022, compared with $299 million during the same period in fiscal 2021, primarily due to higher markdowns, partially offset by supply chain expense efficiencies. EBIT was $465 million for fiscal 2022, and adjusted EBIT of $502 million excluded a gain on the sale of the Company’s interest in a corporate office building, wind-down costs related to Trunk Club and a supply chain technology and related asset impairment charge, all of which were reported in the first three quarters.2 EBIT margin was 4.5 percent of sales for the quarter, which was 235 basis points lower than the fourth quarter of 2021. EBIT margin and adjusted EBIT margin for the fiscal year were 3.1 percent and 3.3 percent, respectively.2
  • Interest expense, net, of $27 million decreased from $33 million during the same period in fiscal 2021, due to higher interest income and reduced credit facility borrowings.
  • Income tax expense during the fourth quarter was $41 million, or 25.2 percent of pretax earnings, compared with $66 million, or 24.8 percent of pretax earnings, in the same period of fiscal 2021. The full-year income tax rate was 27.2 percent.
  • The Company ended the year with $1.5 billion in available liquidity, including $687 million in cash and the full $800 million available on its revolving line of credit, and a leverage ratio of 3.1 times.

STORES UPDATE

During fiscal 2022, the Company opened three stores:

City

Location

Square Footage

(000s)

Timing of
Opening

ASOS | Nordstrom





Los Angeles, CA

The Grove

30

May 20, 2022

Nordstrom Rack





Phoenix, AZ

Desert Ridge Marketplace

24

October 27, 2022

Riverside, CA

Canyon Springs Marketplace

30

October 27, 2022

The Company has also announced plans to open or relocate the following stores:

City

Location

Square Footage

(000s)

Timing of
Opening

Nordstrom Rack





Birmingham, AL

The Summit (relocation from River Ridge)

27

Spring 2023

Los Angeles, CA

NOHO West

26

Spring 2023

Chattanooga, TN

The Terrace at Hamilton Place

24

Spring 2023

Wichita, KS

Bradley Fair

28

Spring 2023

Delray Beach, FL

Delray Place

26

Spring 2023

Clovis, CA

Clovis Crossing

31

Spring 2023

San Clemente, CA

San Clemente Plaza

32

Spring 2023

Las Vegas, NV

Best in the West

31

Spring 2023

Union Gap, WA

Valley Mall

28

Fall 2023

Olympia, WA

Cooper Point Marketplace

32

Fall 2023

Salem, OR

Willamette Town Center

25

Fall 2023

Anaheim Hills, CA

Anaheim Hills Festival

24

Fall 2023

Overland Park, KS

Overland Crossing

27

Fall 2023

San Luis Obispo, CA

SLO Promenade

24

Fall 2023

Allen, TX

The Village at Allen

29

Fall 2023

Visalia, CA

Sequoia Mall

29

Fall 2023

Pinole, CA

Pinole Vista Crossing

23

Fall 2023

Denton, TX

Denton Crossing

25

Fall 2023

Aurora, CO

Southlands

30

Fall 2023

Kennesaw, GA

Barrett Place

25

Spring 2024

The Company had the following store counts as of quarter-end:

January 28, 2023

January 29, 2022

Nordstrom


Nordstrom – U.S.

94

94

Nordstrom – Canada

6

6

Nordstrom Local service hubs

7

7

ASOS | Nordstrom

1

—

Nordstrom Rack


Nordstrom Rack – U.S.

241

240

Nordstrom Rack – Canada

7

7

Last Chance clearance stores

2

2

Total

358

356

Gross store square footage

27,571,000

27,555,000

During the fourth quarter, the Company closed one Nordstrom Rack store.

NORDSTROM WINDS DOWN CANADIAN OPERATIONS

As part of its initiatives to drive long-term profitable growth and enhance shareholder value, and after careful consideration of all reasonably available options, the Company also announced today it has decided to discontinue support for Nordstrom Canada’s business operations.3

“We regularly review every aspect of our business to make sure that we are set up for success,” said Erik Nordstrom. “We entered Canada in 2014 with a plan to build and sustain a long-term business there. Despite our best efforts, we do not see a realistic path to profitability for the Canadian business. We want to thank our team for their performance and dedication in serving customers in Canada. This decision will simplify our structure, intensify focus on our growth and profitability goals and position us to create greater value for our shareholders.”

Accordingly, Nordstrom Canada has commenced a wind-down of its operations, obtaining an Initial Order from the Ontario Superior Court of Justice under the Companies’ Creditors Arrangement Act (“CCAA”) earlier today to facilitate the wind-down in an orderly fashion.

Nordstrom Canada intends to wind down its Nordstrom and Nordstrom Rack stores across Canada, with the help of a third-party liquidator, and its Canadian e-commerce platform. The e-commerce platform will cease operations on March 2, 2023. The in-store wind-down is anticipated to be completed by late June 2023.

The Company expects that Nordstrom Canada will be deconsolidated from the Company’s financial statements as of the date of the CCAA filing. The Company expects to report approximately $300 million to $350 million of pre-tax charges related to the wind-down in the first quarter of fiscal 2023, driven primarily by the write-down of the Company’s investment in Nordstrom Canada. The wind-down is expected to result in an approximately $400 million decline in total Company net sales and a $35 million improvement in total Company EBIT in fiscal 2023, relative to fiscal 2022, excluding the aforementioned charges associated with the wind-down.

Nordstrom Canada operates six Nordstrom stores and seven Nordstrom Rack stores, as well as the Nordstrom.ca website, and employs approximately 2,500 people.

FISCAL YEAR 2023 OUTLOOK

The Company is providing the following financial outlook for fiscal 2023, which includes a 53rd week. The Company’s outlook also includes the anticipated impact of the wind-down of Canadian operations:

  • Revenue decline, including retail sales and credit card revenues, of 4.0 to 6.0 percent versus fiscal 2022, including an approximately 250 basis point negative impact from the wind-down of Canadian operations and an approximately 130 basis point positive impact from the 53rd week
  • EBIT margin (including the negative impact of charges related to the wind-down of Canadian operations) of 1.2 to 2.1 percent of sales
  • Adjusted EBIT margin (excluding charges related to the wind-down of Canadian operations) of 3.7 to 4.2 percent of sales4
  • Income tax rate of approximately 32 percent, including an approximately 500 basis point unfavorable impact from the one-time Canada charges
  • EPS (including the negative impact of charges related to the wind-down of Canadian operations) of $0.20 to $0.80, excluding the impact of share repurchase activity, if any
  • Adjusted EPS (excluding charges related to the wind-down of Canadian operations) of $1.80 to $2.20, excluding the impact of share repurchase activity, if any4

CONFERENCE CALL INFORMATION

The Company’s senior management will host a conference call to provide a business update and to discuss fourth quarter 2022 financial results and fiscal year 2023 outlook at 4:45 p.m. Eastern Standard Time today. To listen to the live call online and view the speakers’ prepared remarks and the conference call slides, visit the Investor Relations section of the Company’s corporate website at investor.nordstrom.com. An archived webcast with the speakers’ prepared remarks and the conference call slides will be available in the Quarterly Results section for one year. Interested parties may also dial 201-689-8354. A telephone replay will be available beginning approximately three hours after the conclusion of the call by dialing 877-660-6853 or 201-612-7415 and entering Conference ID 13735859, until the close of business on March 9, 2023.

ABOUT NORDSTROM

At Nordstrom, Inc. (NYSE: JWN), we exist to help our customers feel good and look their best. Since starting as a shoe store in 1901, how to best serve customers has been at the center of every decision we make. This heritage of service is the foundation we’re building on as we provide convenience and true connection for our customers. Our digital-first platform enables us to serve customers when, where and how they want to shop – whether that’s in-store at more than 350 Nordstrom, Nordstrom Local and Nordstrom Rack locations or digitally through our Nordstrom and Rack apps and websites. Through it all, we remain committed to leaving the world better than we found it.

Certain statements in this press release contain or may suggest “forward-looking” information (as defined in the Private Securities Litigation Reform Act of 1995) that involves risks and uncertainties that could cause results to be materially different from expectations. The words “will,” “may,” “designed to,” “outlook,” “believes,” “should,” “targets,” “anticipates,” “assumptions,” “plans,” “expects” or “expectations,” “intends,” “estimates,” “forecasts,” “guidance” and similar expressions identify certain of these forward-looking statements. The Company also may provide forward-looking statements in oral statements or other written materials released to the public. All statements contained or incorporated in this press release or in any other public statements that address such future events or expectations are forward-looking statements. Important factors that could cause actual results to differ materially from these forward-looking statements are detailed in the Company’s Annual Report on Form 10-K for the fiscal year ended January 29, 2022, its Form 10-Qs for the fiscal quarters ended April 30, 2022, July 30, 2022 and October 29, 2022, and our Form 10-K for the fiscal year ended January 28, 2023, to be filed with the SEC on or about March 10, 2023. In addition, forward-looking statements contained in this release may be impacted by the actual outcome of events or occurrences related to the wind-down of business operations in Canada. These forward-looking statements are not guarantees of future performance and speak only as of the date made, and, except as required by law, the Company undertakes no obligation to update or revise any forward-looking statements to reflect subsequent events, new information or future circumstances. In addition, the actual timing, price, manner and amounts of future share repurchases, if any, will be subject to the discretion of our board of directors, contractual commitments, market and economic conditions and applicable Securities and Exchange Commission rules.





1Adjusted EBIT, adjusted EBIT margin and adjusted EPS are non-GAAP financial measures. Refer to the “Adjusted EBIT, Adjusted EBITDA, Adjusted EBIT Margin and Adjusted EPS” section of this release for additional information as well as reconciliations between the Company’s GAAP and non-GAAP financial results.

2Adjusted EBIT and adjusted EBIT margin are non-GAAP financial measures. Refer to the “Adjusted EBIT, Adjusted EBITDA, Adjusted EBIT Margin and Adjusted EPS” section of this release for additional information as well as reconciliations between the Company’s GAAP and non-GAAP financial results.

3Nordstrom Canada is comprised of Nordstrom Canada Retail, Inc., Nordstrom Canada Holdings, LLC and Nordstrom Canada Holdings II, LLC.

4Adjusted EBIT margin and adjusted EPS are non-GAAP financial measures. Refer to the “Fiscal Year 2023 Outlook – Adjusted EBIT Margin and Adjusted EPS” section of this release for additional information as well as reconciliations between the Company’s GAAP and non-GAAP financial expectations.

NORDSTROM, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited; amounts in millions, except per share amounts)


Quarter Ended

Year Ended

January 28, 2023

January 29, 2022

January 28, 2023

January 29, 2022

Net sales

$4,200

$4,382

$15,092

$14,402

Credit card revenues, net

119

104

438

387

Total revenues

4,319

4,486

15,530

14,789

Cost of sales and related buying and occupancy costs

(2,807)

(2,699)

(10,019)

(9,344)

Selling, general and administrative expenses

(1,325)

(1,488)

(5,046)

(4,953)

Earnings before interest and income taxes

187

299

465

492

Interest expense, net

(27)

(33)

(128)

(246)

Earnings before income taxes

160

266

337

246

Income tax expense

(41)

(66)

(92)

(68)

Net earnings

$119

$200

$245

$178






Earnings per share:




Basic

$0.75

$1.26

$1.53

$1.12

Diluted

$0.74

$1.23

$1.51

$1.10






Weighted-average shares outstanding:




Basic

160.1

159.5

160.1

159.0

Diluted

161.6

162.4

162.1

162.5






Percent of net sales:




Gross profit

33.2 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

38.4 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

33.6 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

35.1 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

Selling, general and administrative expenses

31.5 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

34.0 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

33.4 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

34.4 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

Earnings before interest and income taxes

4.5 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

6.8 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

3.1 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

3.4 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

NORDSTROM, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited; amounts in millions)


January 28, 2023

January 29, 2022

Assets

Current assets:

Cash and cash equivalents

$687

$322

Accounts receivable, net

265

255

Merchandise inventories

1,941

2,289

Prepaid expenses and other current assets

316

306

Total current assets

3,209

3,172



Land, property and equipment (net of accumulated depreciation of $8,289 and $7,737)

3,351

3,562

Operating lease right-of-use assets

1,470

1,496

Goodwill

249

249

Other assets

466

390

Total assets

$8,745

$8,869



Liabilities and Shareholders’ Equity

Current liabilities:

Accounts payable

$1,238

$1,529

Accrued salaries, wages and related benefits

291

383

Current portion of operating lease liabilities

258

242

Other current liabilities

1,203

1,160

Total current liabilities

2,990

3,314



Long-term debt, net

2,856

2,853

Non-current operating lease liabilities

1,526

1,556

Other liabilities

634

565



Commitments and contingencies




Shareholders’ equity:

Common stock, no par value: 1,000 shares authorized; 160.1 and 159.4 shares issued and outstanding

3,353

3,283

Accumulated deficit

(2,588)

(2,652)

Accumulated other comprehensive loss

(26)

(50)

Total shareholders’ equity

739

581

Total liabilities and shareholders’ equity

$8,745

$8,869

NORDSTROM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited; amounts in millions)


Year Ended

January 28, 2023

January 29, 2022

Operating Activities

Net earnings

$245

$178

Adjustments to reconcile net earnings to net cash provided by operating activities:

Depreciation and amortization expenses

604

615

Asset impairment

80

—

Right-of-use asset amortization

185

175

Deferred income taxes, net

(83)

(11)

Stock-based compensation expense

59

79

Other, net

(46)

81

Change in operating assets and liabilities:

Accounts receivable, net

23

(10)

Merchandise inventories

265

(383)

Prepaid expenses and other assets

(24)

542

Accounts payable

(190)

(400)

Accrued salaries, wages and related benefits

(94)

31

Other current liabilities

44

112

Lease liabilities

(269)

(284)

Other liabilities

147

(20)

Net cash provided by operating activities

946

705



Investing Activities

Capital expenditures

(473)

(506)

Proceeds from the sale of assets and other, net

80

(15)

Net cash used in investing activities

(393)

(521)



Financing Activities

Proceeds from revolving line of credit

100

400

Payments on revolving line of credit

(100)

(400)

Proceeds from long-term borrowings

—

675

Principal payments on long-term borrowings

—

(1,100)

Change in cash book overdrafts

(14)

(32)

Cash dividends paid

(119)

—

Payments for repurchase of common stock

(62)

—

Proceeds from issuances under stock compensation plans

29

14

Tax withholding on share-based awards

(16)

(15)

Make-whole premium payment and other, net

(4)

(86)

Net cash used in financing activities

(186)

(544)



Effect of exchange rate changes on cash and cash equivalents

(2)

1

Net increase (decrease) in cash and cash equivalents

365

(359)

Cash and cash equivalents at beginning of year

322

681

Cash and cash equivalents at end of year

$687

$322

NORDSTROM, INC.
ADJUSTED EBIT, ADJUSTED EBITDA, ADJUSTED EBIT MARGIN
AND ADJUSTED EPS (NON-GAAP FINANCIAL MEASURES)
(unaudited; amounts in millions, except per share amounts)

The following are key financial metrics and, when used in conjunction with GAAP measures, we believe they provide useful information for evaluating our core business performance, enable comparison of financial results across periods and allow for greater transparency with respect to key metrics used by management for financial and operational decision-making. Adjusted earnings before interest and income taxes (“EBIT”), adjusted earnings before interest, income taxes, depreciation and amortization (“EBITDA”), adjusted EBIT as a percent of net sales (“adjusted EBIT margin”) and adjusted EPS exclude certain items that we do not consider representative of our core operating performance. The financial measure calculated under GAAP which is most directly comparable to adjusted EBIT and adjusted EBITDA is net earnings. The financial measure calculated under GAAP which is most directly comparable to adjusted EBIT margin is net earnings as a percent of net sales. The financial measure calculated under GAAP which is most directly comparable to adjusted EPS is earnings per diluted share.

Adjusted EBIT, adjusted EBITDA, adjusted EBIT margin and adjusted EPS are not measures of financial performance under GAAP and should be considered in addition to, and not as a substitute for, net earnings, net earnings as a percent of net sales, operating cash flows, earnings per share, earnings per diluted share or other financial measures performed in accordance with GAAP. Our method of determining non-GAAP financial measures may differ from other companies’ financial measures and therefore may not be comparable to methods used by other companies. The following is a reconciliation of net earnings to adjusted EBIT and adjusted EBITDA and net earnings as a percent of net sales to adjusted EBIT margin:

Quarter Ended

Year Ended

January 28, 2023

January 29, 2022

January 28, 2023

January 29, 2022

Net earnings

$119

$200

$245

$178

Income tax expense

41

66

92

68

Interest expense, net

27

33

128

246

Earnings before interest and income taxes

187

299

465

492

Supply chain impairment

—

—

70

—

Trunk Club wind-down costs

—

—

18

—

Gain on sale of interest in a corporate office building

—

—

(51)

—

Adjusted EBIT

187

299

502

492

Depreciation and amortization expenses

151

138

604

615

Amortization of developer reimbursements

(17)

(19)

(72)

(78)

Adjusted EBITDA

$321

$418

$1,034

$1,029






Net sales

$4,200

$4,382

$15,092

$14,402

Net earnings as a {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} of net sales

2.8 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

4.6 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

1.6 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

1.2 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

EBIT margin {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

4.5 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

6.8 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

3.1 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

3.4 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

Adjusted EBIT margin {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

4.5 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

6.8 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

3.3 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

3.4 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

The following is a reconciliation of earnings per diluted share to adjusted EPS:

Quarter Ended

Year Ended

January 28, 2023

January 29, 2022

January 28, 2023

January 29, 2022

Earnings per diluted share

$0.74

$1.23

$1.51

$1.10

Supply chain impairment

—

—

0.44

—

Trunk Club wind-down costs

—

—

0.11

—

Gain on sale of interest in a corporate office building

—

—

(0.31)

—

Debt refinancing charges included within interest expense, net

—

—

—

0.54

Income tax impact on adjustments1

—

—

(0.06)

(0.13)

Adjusted EPS

$0.74

$1.23

$1.69

$1.51

1

The income tax impact of non-GAAP adjustments is calculated using the estimated tax rate for the respective non-GAAP adjustment.

NORDSTROM, INC.
SUMMARY OF NET SALES
(unaudited; amounts in millions)

Our Nordstrom brand includes Nordstrom.com, Nordstrom U.S. stores, Canada, which includes Nordstrom.ca, Nordstrom Canadian stores and Nordstrom Rack Canadian stores, Nordstrom Local, ASOS | Nordstrom and, prior to October 2022, TrunkClub.com. Our Nordstrom Rack brand includes NordstromRack.com, Nordstrom Rack U.S. stores and Last Chance clearance stores. The following table summarizes net sales for the quarter and year ended January 28, 2023, compared with the quarter and year ended January 29, 2022:

Quarter Ended

Year Ended

January 28, 2023

January 29, 2022

January 28, 2023

January 29, 2022

Net sales:




Nordstrom

$2,955

$3,027

$10,279

$9,640

Nordstrom Rack

1,245

1,355

4,813

4,762

Total net sales

$4,200

$4,382

$15,092

$14,402






Net sales (decrease) increase:




Nordstrom

(2.4 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550})

23.3 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

6.6 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

37.8 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

Nordstrom Rack

(8.1 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550})

23.5 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

1.1 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

41.7 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

Total Company

(4.1 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550})

23.4 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

4.8 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

39.1 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}






Digital sales as {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} of total net sales1

40 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

44 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

38 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

42 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

1

Sales conducted through a digital platform such as our websites or mobile apps. Digital sales may be self-guided by the customer, as in a traditional online order, or facilitated by a salesperson using a virtual styling or selling tool. Digital sales may be delivered to the customer or picked up in our Nordstrom stores, Nordstrom Rack stores or Nordstrom Local service hubs. Digital sales also includes a reserve for estimated returns.

NORDSTROM, INC.
FISCAL YEAR 2023 OUTLOOK – ADJUSTED EBIT MARGIN AND ADJUSTED EPS
(NON-GAAP FINANCIAL MEASURES)
(unaudited)

Our adjusted EBIT as a percent of net sales (“adjusted EBIT margin”) and adjusted EPS outlook for fiscal year 2023 excludes the impact from certain items that we do not consider representative of our core operating performance. These items include the wind-down of our Canadian operations in 2023.

The following is a reconciliation of expected net earnings as a percent of net sales to expected adjusted EBIT margin included within our Fiscal Year 2023 Outlook:

53 Weeks Ending February 3, 2024

Low

High

Expected net earnings as a {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} of net sales

0.3 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

0.9 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

Income tax expense

0.1 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

0.4 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

Interest expense, net

0.8 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

0.8 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

Expected EBIT as a {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} of net sales

1.2 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

2.1 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}




Wind-down of Canadian operations

2.5 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

2.1 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

Expected adjusted EBIT margin

3.7 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

4.2 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

The following is a reconciliation of expected EPS to expected adjusted EPS included within our Fiscal Year 2023 Outlook:

53 Weeks Ending February 3, 2024

Low

High

Expected EPS

$0.20

$0.80

Wind-down of Canadian operations

2.15

1.84

Income tax impact on adjustment

(0.55)

(0.44)

Expected adjusted EPS

$1.80

$2.20

NORDSTROM, INC.
ADJUSTED RETURN ON INVESTED CAPITAL (“ADJUSTED ROIC”)
(NON-GAAP FINANCIAL MEASURE)
(unaudited; dollar amounts in millions)

We believe that Adjusted ROIC is a useful financial measure for investors in evaluating the efficiency and effectiveness of the capital we have invested in our business to generate returns over time. In addition, we have incorporated it in our executive incentive measures, and we believe it is an important indicator of shareholders’ return over the long term. 

Adjusted ROIC is not a measure of financial performance under GAAP and should be considered in addition to, and not as a substitute for, return on assets, net earnings, total assets or other GAAP financial measures. Our method of calculating a non-GAAP financial measure may differ from other companies’ methods and therefore may not be comparable to those used by other companies. The financial measure calculated under GAAP which is most directly comparable to Adjusted ROIC is return on assets. The following shows the components to reconcile the return on assets calculation to Adjusted ROIC:

Four Quarters Ended

January 28, 2023

January 29, 2022

Net earnings

$245

$178

Income tax expense

92

68

Interest expense

138

247

Earnings before interest and income tax expense

475

493



Operating lease interest1

85

87

Adjusted net operating profit

560

580



Estimated income tax expense2

(152)

(159)

Adjusted net operating profit after tax

$408

$421



Average total assets

$9,069

$9,301

Average deferred property incentives in excess of ROU assets3

(197)

(232)

Average non-interest bearing current liabilities

(3,185)

(3,352)

Average invested capital

$5,687

$5,717



Return on assets

2.7 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

1.9 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

Adjusted ROIC

7.2 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

7.4 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

1

Operating lease interest is a component of operating lease cost recorded in occupancy costs. We add back operating lease interest for purposes of calculating adjusted net operating profit for consistency with the treatment of interest expense on our debt.

2

Estimated income tax expense is calculated by multiplying the adjusted net operating profit by the effective tax rate for the trailing twelve month periods ended January 28, 2023 and January 29, 2022. The effective tax rate is calculated by dividing income tax expense by earnings before income taxes for the same trailing twelve month periods.

3

For leases with property incentives that exceed the ROU assets, we reclassify the amount from assets to other current liabilities and other liabilities on the Consolidated Balance Sheets. The current and non-current amounts are used to reduce average total assets above, as this better reflects how we manage our business.

NORDSTROM, INC.
ADJUSTED DEBT TO EBITDAR (NON-GAAP FINANCIAL MEASURE)
(unaudited; dollar amounts in millions)

Adjusted debt to earnings before interest, income taxes, depreciation, amortization and rent (“EBITDAR”) is one of our key financial metrics and we believe that our debt levels are best analyzed using this measure, as it provides a reflection of our creditworthiness which could impact our credit ratings and borrowing costs. This metric is calculated in accordance with the updates in our new Revolver covenant and is a key component in assessing whether our revolving credit facility is secured or unsecured, as well as our ability to make dividend payments and share repurchases. Our goal is to manage debt levels to achieve and maintain investment-grade credit ratings while operating with an efficient capital structure.

Adjusted debt to EBITDAR is not a measure of financial performance under GAAP and should be considered in addition to, and not as a substitute for, debt to net earnings, net earnings, debt or other GAAP financial measures. Our method of calculating a non-GAAP financial measure may differ from other companies’ methods and therefore may not be comparable to those used by other companies. The financial measure calculated under GAAP which is most directly comparable to Adjusted debt to EBITDAR is debt to net earnings. The following shows the components to reconcile the debt to net earnings calculation to Adjusted debt to EBITDAR:

January 28, 2023

Debt

$2,856

Operating lease liabilities

1,784

Adjusted debt

$4,640


Four Quarters Ended January 28, 2023

Net earnings

$245

Income tax expense

92

Interest expense, net

128

Earnings before interest and income taxes

$465


Depreciation and amortization expenses

604

Operating lease cost1

280

Amortization of developer reimbursements2

72

Other Revolver covenant adjustments3

61

Adjusted EBITDAR

$1,482


Debt to Net Earnings

11.6

Adjusted debt to EBITDAR

3.1

1

Operating lease cost is fixed rent expense, including fixed comment area maintenance expense, net of developer reimbursement amortization.

2

Amortization of developer reimbursements is a non-cash reduction of operating lease cost and is therefore added back to operating lease cost for purposes of our Revolver covenant calculation.

3

Other adjusting items to reconcile net earnings to Adjusted EBITDAR as defined by our Revolver covenant include interest income, certain non-cash charges and other gains and losses where relevant. For the four quarters ended January 28, 2023, other Revolver covenant adjustments primarily included costs associated with a supply chain technology and related asset impairment and the wind-down of Trunk Club, partially offset by a gain on sale of the Company’s interest in a corporate office building.

NORDSTROM, INC.
FREE CASH FLOW (NON-GAAP FINANCIAL MEASURE)
(unaudited; amounts in millions)

Free Cash Flow is one of our key liquidity measures and, when used in conjunction with GAAP measures, we believe it provides investors with a meaningful analysis of our ability to generate cash from our business.

Free Cash Flow is not a measure of financial performance under GAAP and should be considered in addition to, and not as a substitute for, operating cash flows or other financial measures prepared in accordance with GAAP. Our method of calculating a non-GAAP financial measure may differ from other companies’ methods and therefore may not be comparable to those used by other companies. The financial measure calculated under GAAP which is most directly comparable to Free Cash Flow is net cash provided by operating activities. The following is a reconciliation of net cash provided by operating activities to Free Cash Flow:

Year Ended

January 28, 2023

January 29, 2022

Net cash provided by operating activities

$946

$705

Capital expenditures

(473)

(506)

Change in cash book overdrafts

(14)

(32)

Free Cash Flow

$459

$167

SOURCE Nordstrom, Inc.

Posted on

Digital Turbine Reports Fiscal 2023 Third Quarter Financial Results

Digital Turbine Reports Fiscal 2023 Third Quarter Financial Results

Third Quarter Revenue Totaled $162.3 Million

Third Quarter GAAP Net Income of $4.0 Million and GAAP EPS of $0.04; Third Quarter Non-GAAP
Adjusted Net Income1 of $30.2 Million and Non GAAP EPS of $0.29

Third Quarter Non-GAAP Adjusted EBITDA2 Totaled $40.0 Million

AUSTIN, Texas, Feb. 8, 2023 /PRNewswire/ — Digital Turbine, Inc. (Nasdaq: APPS) announced financial results for the fiscal third quarter ended December 31, 2022.

Recent Financial Highlights:

  • Fiscal third quarter of 2023 revenue totaled $162.3 million representing a 25{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} decline year-over-year as compared to the fiscal third quarter of 2022.
  • GAAP net income for the fiscal third quarter of 2023 was $4.0 million, or $0.04 per share, as compared to GAAP net income for the fiscal third quarter of 2022 of $7.0 million, or $0.07 per share. Non-GAAP adjusted net income1 for the fiscal third quarter of 2023 was $30.2 million, or $0.29 per share, as compared to Non-GAAP adjusted net income1 of $50.9 million, or $0.49 per share, in the fiscal third quarter of 2022.
  • Non-GAAP adjusted EBITDA2 for the fiscal third quarter of 2023 was $40.0 million, as compared to Non-GAAP adjusted EBITDA2 of $57.0 million in the fiscal third quarter of 2022.
  • GAAP cash provided by operating activities was $33.2 million in the fiscal third quarter of 2023. Non-GAAP free cash flow3 was $29.9 million in the fiscal third quarter of 2023.

“While nothing has changed regarding our long-term view of the digital media industry or our strategic positioning within the industry, macro headwinds are impacting our near-term results,” said Bill Stone, CEO. “We expect current macro headwinds to continue into the first half of the calendar year, but our high-level strategic vision remains intact, as advertising spending tends to be among the first items to be negatively impacted at the onset of a cyclical downturn, but is typically also among the first items to rebound. We remain laser-focused on the execution of our core growth objectives, and effectively controlling that which we can control. We are making important progress on our SingleTap licensing business, new ad tech platform enhancements, and other initiatives that opportunistically leverage our on-device presence and first-party data. The history of Digital Turbine shows that we have successfully navigated challenges far more difficult than today’s macro environment, emerging stronger and better-positioned for long-term growth. We remain optimistic that we have the right culture, team, strategy and focus to win.”

Fiscal 2023 Third Quarter Financial Results

Total revenue for the third quarter of fiscal 2023 was $162.3 million. Total On-Device Solutions revenue before intercompany eliminations was $96.3 million. Before intercompany eliminations, total revenue from our App Growth Platform was $67.4 million.

GAAP net income for the third quarter of fiscal 2023 was $4.0 million, or $0.04 per share, as compared to GAAP net income of $7.0 million, or $0.07 per share for the third quarter of fiscal 2022. Non-GAAP adjusted net income1 for the third quarter of fiscal 2023 was $30.2 million, or $0.29 per share, as compared to Non-GAAP adjusted net income of $50.9 million, or $0.49 per share, in the third quarter of fiscal 2022.

Non-GAAP adjusted EBITDA2 for the third quarter of fiscal 2023 was $40.0 million, as compared to Non-GAAP adjusted EBITDA of $57.0 million in the third quarter of fiscal 2022. The reconciliations between GAAP and Non-GAAP financial results for all referenced periods are provided in the tables immediately following the Unaudited Condensed Consolidated Statements of Cash Flows below.

Business Outlook

Based on information available as of February 8, 2023, the Company currently expects the following for the full-year fiscal 2023:

  • Revenue of between $660 million and $670 million
  • Non-GAAP adjusted EBITDA2 of between $165 million and $170 million
  • Non-GAAP adjusted EPS1 of $1.15 to $1.20, based on approximately 104 million diluted shares outstanding and an effective tax rate of 25{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

It is not reasonably practicable to provide a business outlook for GAAP net income because the Company cannot reasonably estimate the changes in stock-based compensation expense, which is directly impacted by changes in the Company’s stock price, or other items that are difficult to predict with precision.

About Digital Turbine, Inc.

Digital Turbine is the leading independent mobile growth platform and levels up the landscape for advertisers, publishers, carriers and OEMs. By integrating a full ad stack with proprietary technology built into devices by wireless operators and OEMs, Digital Turbine supercharges advertising and monetization. The company is headquartered in Austin, Texas, with global offices in New York, Los Angeles, San Francisco, London, Berlin, Singapore, Tel Aviv and other cities serving top agency, app developer and advertising markets. For additional information visit www.digitalturbine.com.

Conference Call

Management will host a conference call today at 4:30 p.m. ET to discuss its fiscal 2023 third quarter financial results and provide operational updates on the business. To participate, interested parties should dial 888-317-6003 in the United States, or 412-317-6061 from international locations, and enter access code 7637186. A webcast of the conference call will be available at ir.digitalturbine.com/events.

For those who are not able to join the live call, a playback will be available through February 15, 2023. The replay can be accessed by dialing 877-344-7529 in the United States or 412-317-0088 from international locations, passcode 4128001.

The conference call will discuss forward guidance and other material information.

Use of Non-GAAP Financial Measures

To supplement the Company’s condensed consolidated financial statements presented in accordance with GAAP, Digital Turbine uses non-GAAP measures of certain components of financial performance. These non-GAAP measures include non-GAAP adjusted net income and earnings per share (“EPS”), non-GAAP adjusted EBITDA, non-GAAP free cash flow and non-GAAP gross profit. Reconciliations to the nearest GAAP measures of all non-GAAP measures included in this press release can be found in the tables below.

Non-GAAP measures are provided to enhance investors’ overall understanding of the Company’s current financial performance, prospects for the future and as a means to evaluate period-to-period comparisons. The Company believes that these non-GAAP measures provide meaningful supplemental information regarding financial performance by excluding certain expenses and benefits that may not be indicative of recurring core business operating results. The Company believes the non-GAAP measures that exclude such items when viewed in conjunction with GAAP results and the accompanying reconciliations enhance the comparability of results against prior periods and allow for greater transparency of financial results. The Company believes non-GAAP measures facilitate management’s internal comparison of its financial performance to that of prior periods as well as trend analysis for budgeting and planning purposes. The presentation of non-GAAP measures is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

1Non-GAAP adjusted net income and EPS are defined as GAAP net income and EPS adjusted to exclude the effect of stock-based compensation expense, amortization of intangibles, change in fair value of contingent liability, transaction-related expenses and severance costs. Readers are cautioned that non-GAAP adjusted net income and EPS should not be construed as an alternative to comparable GAAP net income figures determined in accordance with U.S. GAAP as an indicator of profitability or performance, which is the most comparable measure under GAAP.

2Non-GAAP adjusted EBITDA is calculated as GAAP net income excluding the following cash and non-cash expenses: stock-based compensation expense, depreciation and amortization, net interest income/(expense), change in fair value of contingent liability, foreign exchange transaction gains/(losses), income tax provision, transaction-related expenses and severance costs. Non-GAAP adjusted EBITDA margin is calculated as non-GAAP adjusted EBITDA as a percentage of total revenue. Readers are cautioned that non-GAAP adjusted EBITDA should not be construed as an alternative to net income determined in accordance with U.S. GAAP as an indicator of performance, which is the most comparable measure under GAAP.

3Non-GAAP free cash flow, which is a non-GAAP financial measure, is defined as net cash provided by operating activities (as stated in our Condensed Consolidated Statements of Cash Flows), excluding transaction-related expenses and severance costs, reduced by capital expenditures. Readers are cautioned that free cash flow should not be construed as an alternative to net cash provided by operating activities determined in accordance with U.S. GAAP as an indicator of profitability, performance or liquidity, which is the most comparable measure under GAAP.

4Non-GAAP gross profit is defined as GAAP income from operations adjusted to exclude the effect of product development costs, sales and marketing costs, general and administrative costs and depreciation of software. Readers are cautioned that non-GAAP gross profit should not be construed as an alternative to income from operations determined in accordance with U.S. GAAP as an indicator of profitability or performance, which is the most comparable measure under GAAP.

Non-GAAP adjusted EBITDA, non-GAAP adjusted net income and EPS, non-GAAP free cash flow and non-GAAP gross profit are used by management as internal measures of profitability and performance. They have been included because the Company believes that the measures are used by certain investors to assess the Company’s financial performance before non-cash charges and certain costs that the Company does not believe are reflective of its underlying business.

Forward-Looking Statements

This news release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements in this news release that are not statements of historical fact and that concern future results from operations, financial position, economic conditions, product releases and any other statement that may be construed as a prediction of future performance or events, including financial projections and growth in various products are forward-looking statements that speak only as of the date made and which involve known and unknown risks, uncertainties and other factors which may, should one or more of these risks uncertainties or other factors materialize, cause actual results to differ materially from those expressed or implied by such statements. These factors and risks include:

  • a decline in general economic conditions nationally and internationally
  • decreased market demand for our products and services
  • market acceptance and brand awareness of our products
  • risks associated with indebtedness
  • the ability to comply with financial covenants in outstanding indebtedness
  • the ability to protect our intellectual property rights
  • risks associated with adoption of our platform among existing customers (including the impact of possible delays with major carrier and OEM partners in the roll out for mobile phones deploying our platform)
  • actual mobile device sales and sell-through where our platform is deployed is out of our control
  • risks associated with our ability to manage the business amid the COVID-19 pandemic and difficult macroeconomic environment
  • the impact of COVID-19 and the macroeconomic environment on our partners, digital advertising spend and consumer purchase behavior
  • the impact of COVID-19 and the macroeconomic environment on our results of operations
  • risks associated with new privacy laws, such as the European Union’s GDPR and similar laws which may require changes to our development and user interface for certain functionality of our mobile platform
  • risks associated with the activities of advertisers
  • risks associated with the timing of our platform software pushes to the embedded bases of carrier and OEM partners
  • risks associated with end user take rates of carrier and OEM software pushes which include our platform
  • new customer adoption and time to revenue with new carrier and OEM partners is subject to delays and factors out of our control
  • risks associated with fluctuations in the number of our platform slots across US carrier partners
  • required customization and technical integration which may slow down time to revenue notwithstanding the existence of a distribution agreement
  • risks associated with delays in major mobile phone launches, or the failure of such launches to achieve the scale
  • customer adoption that either we or the market may expect
  • the difficulty of extrapolating monthly demand to quarterly demand
  • the challenges, given the Company’s comparatively small size, to expand the combined Company’s global reach, accelerate growth and create a scalable, low-capex business model that drives EBITDA (as well as adjusted EBITDA)
  • ability as a smaller company to manage international operations
  • varying and often unpredictable levels of orders; the challenges inherent in technology development necessary to maintain the Company’s competitive advantage such as adherence to release schedules and the costs and time required for finalization and gaining market acceptance of new products
  • changes in economic conditions and market demand
  • rapid and complex changes occurring in the mobile marketplace
  • pricing and other activities by competitors
  • technology management risk as the Company needs to adapt to a rapidly developing mobile device marketplace, complex specifications of different carriers and the management of a complex technology platform given the Company’s relatively limited resources
  • system security risks and cyberattacks
  • risks and uncertainties associated with the integration of the acquisition of AdColony, including our ability to realize the anticipated benefits of the acquisition
  • risks and uncertainties associated with the integration of the acquisition of Fyber, including our ability to realize the anticipated benefits of the acquisition
  • challenges and risks associated with our rapid growth by acquisitions and resulting significant demands on our management and infrastructure
  • challenges and risks associated with our global operations and related business, political, regulatory, operational, financial, and economic risks as a result of our global operations
  • other risks including those described from time to time in Digital Turbine’s filings on Forms 10-K and 10-Q with the Securities and Exchange Commission (SEC), press releases and other communications.

You should not place undue reliance on these forward-looking statements. The Company does not undertake to update forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Investor Relations Contact:

Brian Bartholomew

Digital Turbine, Inc.

[email protected]

Digital Turbine, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Income / (Loss)

(Unaudited)

(in thousands, except per share amounts)



Three months ended December 31,


2022

2021

Net revenue

$                162,310

$                216,818

Costs of revenue and operating expenses



License fees and revenue share

73,370

109,053

Other direct costs of revenue

9,324

9,090

Product development

14,218

13,755

Sales and marketing

16,469

15,857

General and administrative

39,132

39,924

Total costs of revenue and operating expenses

152,513

187,679

Income from operations

9,797

29,139

Interest and other income / (expense), net



Change in fair value of contingent consideration

—

(18,200)

Interest expense, net

(6,913)

(2,195)

Foreign exchange transaction gain

17

2,122

Other income / (expense), net

8

(86)

Total interest and other income / (expense), net

(6,888)

(18,359)

Income before income taxes

2,909

10,780

Income tax provision / (benefit)

(1,153)

3,718

Net income

4,062

7,062

Less: net income attributable to non-controlling interest

43

48

Net income attributable to Digital Turbine, Inc.

4,019

7,014

Other comprehensive income / (loss)



Foreign currency translation adjustment

10,144

(8,389)

Comprehensive income / (loss)

14,206

(1,327)

Less: comprehensive income / (loss) attributable to non-controlling interest

59

(11)

Comprehensive income / (loss) attributable to Digital Turbine, Inc.

$                  14,147

$                  (1,316)

Net income per common share



Basic

$                       0.04

$                       0.07

Diluted

$                       0.04

$                       0.07

Weighted-average common shares outstanding



Basic

99,108

96,548

Diluted

103,348

103,287

Digital Turbine, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except par value and share amounts)



December 31, 2022

March 31, 2022


(Unaudited)

ASSETS



Current assets



Cash

$               79,307

$           126,768

Restricted cash

554

394

Accounts receivable, net

231,001

263,139

Prepaid expenses and other current assets

31,912

20,570

Total current assets

342,774

410,871

Property and equipment, net

38,759

31,086

Right-of-use assets

10,973

15,439

Intangible assets, net

395,181

440,589

Goodwill

560,340

559,792

Other non-current assets

4,648

732

TOTAL ASSETS

$         1,352,675

$        1,458,509





LIABILITIES AND STOCKHOLDER’S EQUITY



Current liabilities



Accounts payable

$             154,320

$           167,858

Accrued license fees and revenue share

75,380

95,170

Accrued compensation

16,206

28,775

Acquisition purchase price liabilities

—

50,000

Current portion of debt

—

12,500

Other current liabilities

43,460

30,960

Total current liabilities

289,366

385,263

Long-term debt, net of debt issuance costs

422,310

520,785

Deferred tax liabilities, net

18,786

19,976

Other non-current liabilities

14,586

16,270

Total liabilities

745,048

942,294

Commitments and contingencies (Note 13)



Stockholders’ equity



Preferred stock



Series A convertible preferred stock at $0.0001 par value; 2,000,000 shares
authorized, 100,000 issued and outstanding (liquidation preference of $1)

100

100

Common stock



$0.0001 par value: 200,000,000 shares authorized; 99,901,328 issued and
99,143,203 outstanding at December 31, 2022; 97,921,826 issued and
97,163,701 outstanding at March 31, 2022

10

10

Additional paid-in capital

810,994

745,661

Treasury stock (758,125 shares at December 31, 2022 and March 31, 2022)

(71)

(71)

Accumulated other comprehensive loss

(44,201)

(39,341)

Accumulated deficit

(161,183)

(191,788)

Total stockholders’ equity

605,649

514,571

Non-controlling interest

1,978

1,644

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$         1,352,675

$        1,458,509

Digital Turbine, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)



Three months ended December 31,


2022

2021

Cash flows from operating activities:



Net income

$              4,062

$              7,062

Adjustments to reconcile net income to net cash provided by operating activities:



Depreciation and amortization

20,137

15,965

Non-cash interest expense

211

202

Stock-based compensation expense

7,620

5,739

Change in fair value of contingent consideration

—

18,200

Right-of-use asset

(211)

1,319

Deferred income taxes

(266)

4,621

Foreign exchange transaction gain

(31)

(1,603)

(Increase) / decrease in assets:



Accounts receivable, gross

22,900

(42,680)

Allowance for doubtful accounts

760

443

Prepaid expenses and other current assets

(6,789)

(843)

Other non-current assets

(60)

(21)

Increase / (decrease) in liabilities:



Accounts payable

(16,484)

(13,209)

Accrued license fees and revenue share

(3,458)

27,995

Accrued compensation

1,978

12,188

Other current liabilities

2,378

(1,529)

Other non-current liabilities

458

1,859

Net cash provided by operating activities

33,205

35,708





Cash flows from investing activities



Equity investments

(4,000)

—

Business acquisitions, net of cash acquired

(2,708)

(136)

Capital expenditures

(5,668)

(5,281)

Net cash used in investing activities

(12,376)

(5,417)





Cash flows from financing activities



Proceeds from borrowings

18,000

102,779

Payment of debt issuance costs

(94)

(1,056)

Payment of deferred business acquisition consideration

—

(98,175)

Options and warrants exercised

156

659

Payment of withholding taxes for net share settlement of equity awards

(273)

(7,587)

Repayment of debt obligations

(43,000)

(6,367)

Net cash used in financing activities

(25,211)

(9,747)





Effect of exchange rate changes on cash and cash equivalents and restricted cash

1,030

(1,321)





Net change in cash and cash equivalents and restricted cash

(3,352)

19,223





Cash and cash equivalents and restricted cash, beginning of period

83,213

96,217





Cash and cash equivalents and restricted cash, end of period

$            79,861

$          115,440

REVENUE BY SEGMENT

(in thousands)

(Unaudited)









Three months ended December 31,


2022

2021

{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} Change

On Device Solutions

$           96,316

$         133,594

(28) {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

App Growth Platform

67,407

89,113

(24) {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

Elimination

(1,413)

(5,889)

(76) {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

Consolidated

$         162,310

$         216,818

(25) {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

GAAP INCOME FROM OPERATIONS TO NON-GAAP GROSS PROFIT

(in thousands)

(Unaudited)







Three months ended December 31,


2022

2021

Net revenue

$      162,310

$      216,818

Income from operations

9,797

29,139

Add-back items:



Product development

14,218

13,755

Sales and marketing

16,469

15,857

General and administrative

39,132

39,924

Depreciation of software included in other direct costs of revenue

1,618

753

Non-GAAP gross profit

$        81,234

$        99,428

Non-GAAP gross profit percentage

50 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

46 {ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}










GAAP NET INCOME TO NON-GAAP ADJUSTED NET INCOME

(in thousands)

(Unaudited)







Three months ended December 31,


2022

2021

Net income

$          4,062

$          7,062

Add-back items:



Stock-based compensation expense

7,620

5,739

Amortization of intangibles

16,120

13,773

Adjustment to estimated earn-out liability

—

18,200

Transaction-related expenses

1,297

6,167

Severance costs

1,110

—

Non-GAAP adjusted net income

$        30,209

$        50,941

Non-GAAP adjusted net income

$            0.29

$            0.49

Weighted-average common shares outstanding, diluted

103,348

103,287

GAAP NET INCOME TO NON-GAAP ADJUSTED EBITDA

(in thousands)

(Unaudited)







Three months ended December 31,


2022

2021

Net income

$              4,062

$              7,062

Add-back items:



Stock-based compensation expense

7,620

5,739

Depreciation and amortization

20,137

15,965

Interest expense, net

6,913

2,195

Other income / (expense), net

(8)

86

Change in fair value of contingent consideration

—

18,200

Foreign exchange transaction gain

(17)

(2,122)

Income tax provision / (benefit)

(1,153)

3,718

Transaction-related expenses

1,297

6,167

Severance costs

1,110

—

Non-GAAP adjusted EBITDA

$            39,961

$            57,010

GAAP CASH FLOW FROM OPERATING ACTIVITIES TO NON-GAAP FREE CASH FLOW

(in thousands)

(Unaudited)







Three months ended December 31,


2022

2021

Net cash provided by operating activities

$            33,205

$            35,708

Capital expenditures

(5,668)

(5,281)

Transaction-related expenses

1,297

6,167

Severance costs

1,110

—

Non-GAAP free cash flow provided by operations

$            29,944

$            36,594

SOURCE Digital Turbine, Inc.

Posted on

WD-40 Company Reports First Quarter 2023 Financial Results

WD-40 Company Reports First Quarter 2023 Financial Results

SAN DIEGO–(BUSINESS WIRE)–WD-40 Company (NASDAQ:WDFC), a global marketing organization dedicated to creating positive lasting memories by developing and selling products that solve problems in workshops, factories and homes around the world, today reported financial results for its first fiscal quarter ended November 30, 2022.

Financial Highlights and Summary

  • Total net sales for the first quarter were $124.9 million, a decrease of 7 percent compared to the prior year fiscal quarter.
  • Translation of the Company’s foreign subsidiary results from their functional currencies to U.S. dollars had an unfavorable impact on sales for the first quarter. On a constant currency basis, total net sales would have been $134.4 million for the first quarter.
  • Net income for the first quarter was $14.0 million, a decrease of 25 percent from the prior year fiscal quarter.
  • Diluted earnings per share were $1.02 compared to $1.34 in the prior year fiscal quarter.
  • Gross margin percentage was 51.4 percent compared to 50.8 percent in the prior year fiscal quarter.
  • Selling, general and administrative expenses were up 4 percent in the first quarter to $40.0 million compared to the prior year fiscal quarter.
  • Advertising and sales promotion expenses were down 5 percent to $5.3 million compared to the prior year fiscal quarter.

“Today we are happy to report that in the first quarter gross margin improved sequentially by 400 basis points compared to the fourth quarter of fiscal year 2022,” said Steve Brass, WD-40 Company’s president and chief executive officer. “This is evidencing the positive impact of the gross margin restoration plan we put into place to combat the current inflationary environment.”

“While we saw topline growth in our Asia-Pacific and Americas segments, our EMEA segment reported sales that were softer than we would like to see. In EMEA, we’ve experienced significant headwinds from fluctuating currency exchange rates, a lower level of customer orders, weaker economic conditions, and a reduction in sales linked to our decision to suspend sales in Russia in 2022.”

“Though sales volumes were soft in some regions due to disruptions in the market linked to the pricing actions we recently executed, underlying volumes remain in line with our expectations. We shared with investors last quarter that we expected much of our topline growth in fiscal year 2023 would be weighted toward the second half of the fiscal year. We expect volume performance to improve in the second half of the fiscal year as price-related disruptions abate, and accordingly, today we are reiterating our guidance for the full fiscal year,” Brass concluded.

Net Sales by Segment (in thousands):

 

Three Months Ended November 30,

 

2022

 

2021

 

Change

Americas

$

58,014

 

$

56,288

 

 

3

{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

EMEA

 

40,772

 

 

 

57,555

 

 

 

(29

){ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

Asia-Pacific

 

26,107

 

 

 

20,903

 

 

 

25

{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

Total

$

124,893

 

 

$

134,746

 

 

 

(7

){ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

  • Net sales by segment as a percent of total net sales for the first quarter were as follows: for the Americas, 46 percent; for EMEA, 33 percent; for Asia-Pacific, 21 percent.
  • Net sales in the Americas increased 3 percent in the first quarter due primarily to higher sales of maintenance products in the United States, which increased 15 percent compared to the prior year fiscal quarter. Higher sales of maintenance products in the United States were primarily driven by strong sales of WD-40® Multi-Use Product, WD-40 Specialist®, and 3-IN-ONE® due to the impact of price increases, as well as increased production capacity, and improved availability as our supply chain continues to strengthen. These increases were significantly offset by a lower level of customer orders and promotional programs as customers adjust to the price increases, which resulted in decreased sales volumes. In Canada, sales remained constant period over period. Higher sales in the United States were mostly offset by lower sales of WD-40® Multi-Use Product in Latin America. Sales of maintenance products were down 31 percent in Latin America compared to the prior year fiscal quarter due primarily to the timing of marketing distributor orders from period to period.
  • Net sales in EMEA decreased 29 percent in the first quarter due to lower sales of maintenance products in both the EMEA direct and distributor markets, which decreased 22 percent and 43 percent, respectively. Changes in foreign currency exchange rates had an unfavorable impact on sales for the EMEA segment in the first quarter. On a constant currency basis, EMEA sales for the first quarter would have decreased by 15 percent compared to the prior fiscal year quarter. Lower sales of maintenance products in the EMEA direct markets were also due to a lower level of customer orders partially offset by the favorable impact of price increases. In addition, lower sales were due to reduced demand driven by weaker markets and economic conditions. Lower sales of maintenance products in the EMEA distributor markets were primarily attributable to the suspension in sales of our products to our marketing distributor customers in Russia and Belarus in March of 2022.
  • Net sales in Asia-Pacific increased 25 percent in the first quarter due to higher sales of maintenance products in the Asia-Pacific distributor markets and China, which increased 41 percent and 22 percent, respectively. In the Asia-Pacific distributor markets, higher sales of maintenance products were primarily attributed to successful promotional programs and the easing of COVID-19 lockdown measures in the region. Higher sales of maintenance products in China were primarily due to successful promotional programs as well as the timing of customer orders. In Australia, sales remained constant period over period. Changes in foreign currency exchange rates had an unfavorable impact on sales for the Asia-Pacific segment. On a constant currency basis, Asia-Pacific sales would have increased by 31 percent compared to the prior year fiscal quarter.

Net Sales by Product Group (in thousands):

 

Three Months Ended November 30,

 

2022

 

2021

 

Change

Maintenance products

$

116,312

 

$

126,030

 

 

(8

){ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

Homecare and cleaning products

 

8,581

 

 

 

8,716

 

 

 

(2

){ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

Total

$

124,893

 

 

$

134,746

 

 

 

(7

){ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}

  • Net sales of maintenance products, which are considered the primary growth focus for the Company, decreased 8 percent in the first quarter when compared to the prior year fiscal quarter. This decrease was primarily due to lower sales of WD-40® Multi-Use Product, which decreased 12 percent compared to the prior fiscal year quarter. This decline was driven by lower sales volumes linked to recent pricing actions which resulted in a lower level of customer orders and promotional programs. Sales declines were also due to unfavorable changes in foreign currency exchanges rates and weaker economic conditions in some regions. These sales declines were partially offset by the sales price increases implemented over the last twelve months.
  • Net sales of homecare and cleaning products decreased 2 percent in the first quarter compared to the prior year fiscal quarter. The homecare and cleaning products, particularly those in the United States, are considered harvest brands providing healthy profit returns to the Company and are becoming a smaller part of the business as net sales of maintenance products grow in alignment with the Company’s strategic initiatives.

Dividend and Share Repurchase Update

As previously announced, WD-40 Company’s board of directors declared on Tuesday, December 13, 2022, a quarterly dividend of $0.83 per share reflecting an increase of more than 6 percent compared to the previous quarter’s dividend. The quarterly dividend is payable on January 31, 2023 to stockholders of record at the close of business on January 13, 2023.

On October 12, 2021, the Company’s board of directors approved a share buy-back plan that became effective on November 1, 2021. Under the plan, the Company is authorized to acquire up to $75.0 million of its outstanding shares through August 31, 2023. The timing and amount of repurchases will be based on terms and conditions acceptable to the Company and in compliance with applicable laws and regulations. During the period from November 1, 2021 through November 30, 2022, the Company repurchased 160,982 shares at a total cost of $33.2 million under this $75.0 million plan. During the first quarter, the Company repurchased 22,420 shares at a total cost of $4.1 million under this $75.0 million plan.

Reiterated Fiscal Year 2023 Guidance

The Company reiterated the following guidance for fiscal year 2023:

  • Net sales growth is projected to be between 5 and 10 percent with net sales expected to be between $545 million and $570 million.
  • Gross margin percentage for the full year is expected to be between 51 and 53 percent.
  • Advertising and promotion investments are projected to be between 5.0 and 6.0 percent of net sales.
  • The provision for income tax is expected to be around 22 percent.
  • Net income is projected to be between $69.0 million and $71.0 million.
  • Diluted earnings per share is expected to be between $5.09 and $5.24 based on an estimated 13.6 million weighted average shares outstanding.

This guidance is expressed in good faith and is based on management’s current view of anticipated results. Net sales guidance was calculated using recent foreign currency exchange rates and reflects currency headwinds of approximately 5 percent. This guidance does not include any future acquisitions or divestitures. Unanticipated inflationary headwinds, COVID-19 related impact, and other unforeseen events may further affect the Company’s financial results.

Webcast Information

As previously announced, WD-40 Company management will host a live webcast at approximately 5:00 p.m. ET / 2:00 p.m. PT today to discuss these results. Other forward-looking and material information may also be discussed during this call. Please visit http://investor.wd40company.com for more information and to view supporting materials.

About WD-40 Company

WD-40 Company is a global marketing organization dedicated to creating positive lasting memories by developing and selling products that solve problems in workshops, factories, and homes around the world. The Company owns a wide range of well-known brands that include maintenance products and homecare and cleaning products: WD-40® Multi-Use Product, WD-40 Specialist®, 3-IN-ONE®, GT85®, 2000 Flushes®, no vac®, 1001®, Spot Shot®, Lava®, Solvol®, X-14®, and Carpet Fresh®.

Headquartered in San Diego, California, USA, WD-40 Company recorded net sales of $518.8 million in fiscal year 2022 and its products are currently available in more than 176 countries and territories worldwide. WD-40 Company is traded on the NASDAQ Global Select Market under the ticker symbol “WDFC.” For additional information about WD-40 Company please visit http://www.wd40company.com.

Forward-Looking Statements

Except for the historical information contained herein, this press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements reflect the Company’s current expectations with respect to currently available operating, financial and economic information. These forward-looking statements are subject to certain risks, uncertainties and assumptions that could cause actual results to differ materially from those anticipated in or implied by the forward-looking statements. These forward-looking statements are generally identified with words such as “believe,” “expect,” “intend,” “plan,” “could,” “may,” “aim,” “anticipate,” “target,” “estimate” and similar expressions.

Our forward-looking statements include, but are not limited to, discussions about future financial and operating results, including: growth expectations for maintenance products; expected levels of promotional and advertising spending; anticipated input costs for manufacturing and the costs associated with distribution of our products; plans for and success of product innovation; the impact of new product introductions on the growth of sales; anticipated results from product line extension sales; expected tax rates and the impact of tax legislation and regulatory action; the length and severity of the current COVID-19 pandemic and its impact on the global economy and our financial results; changes in the political conditions or relations between the United States and other nations; the impacts from inflationary trends and supply chain constraints; and forecasted foreign currency exchange rates and commodity prices.

The Company’s expectations, beliefs and forecasts are expressed in good faith and are believed by the Company to have a reasonable basis, but there can be no assurance that the Company’s expectations, beliefs or forecasts will be achieved or accomplished. All forward-looking statements reflect the Company’s expectations as of January 9, 2023. We undertake no obligation to revise or update any forward-looking statements.

Actual events or results may differ materially from those projected in forward-looking statements due to various factors, including, but not limited to, those identified in Part I―Item 1A, “Risk Factors,” in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2022, and in the Company’s Quarterly Report on Form 10-Q for the period ended November 30, 2022, which the Company expects to file with the SEC on January 9, 2023.

Table Notes and General Definitions

(1)

 

The Company markets maintenance products under the WD-40®, GT85® and 3-IN-ONE® brand names. Currently included in the WD-40 brand are the WD-40® Multi-Use Product, WD-40 Specialist® and WD-40 BIKE® product lines.

(2)

The Company markets the following homecare and cleaning brands: X-14® automatic toilet bowl cleaners, 2000 Flushes® automatic toilet bowl cleaners, Carpet Fresh® and no vac® rug and room deodorizers, Spot Shot® aerosol and liquid carpet stain removers, 1001® household cleaners and rug and room deodorizers and Lava® and Solvol® heavy-duty hand cleaners.

(3)

The Americas segment consists of the U.S., Canada, and Latin America.

(4)

The EMEA segment consists of countries in Europe, the Middle East, Africa and India.

(5)

The Asia-Pacific segment consists of Australia, China and other countries in the Asia region.

(6)

Constant currency represents the translation of the current quarter results from the functional currencies of the Company’s subsidiaries to U.S. dollars using the exchange rate in effect for the corresponding period of the prior fiscal year.

WD-40 COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited and in thousands, except share and per share amounts)

 

 

 

 

 

November 30,

 

August 31,

 

2022

2022

Assets

 

Current assets:

 

Cash and cash equivalents

$

36,882

 

 

$

37,843

 

Trade and other accounts receivable, net

 

87,285

 

 

 

89,930

 

Inventories

 

119,067

 

 

 

104,101

 

Other current assets

 

12,122

 

 

 

17,766

 

Total current assets

 

255,356

 

 

 

249,640

 

Property and equipment, net

 

65,658

 

 

 

65,977

 

Goodwill

 

95,277

 

 

 

95,180

 

Other intangible assets, net

 

5,362

 

 

 

5,588

 

Operating lease right-of-use assets

 

8,435

 

 

 

7,559

 

Deferred tax assets, net

 

629

 

 

 

679

 

Other assets

 

10,776

 

 

 

9,672

 

Total assets

$

441,493

 

 

$

434,295

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

$

31,826

 

 

$

32,852

 

Accrued liabilities

 

24,728

 

 

 

27,161

 

Accrued payroll and related expenses

 

14,251

 

 

 

11,583

 

Short-term borrowings

 

42,537

 

 

 

39,173

 

Income taxes payable

 

301

 

 

 

51

 

Total current liabilities

 

113,643

 

 

 

110,820

 

Long-term borrowings

 

107,902

 

 

 

107,139

 

Deferred tax liabilities, net

 

10,715

 

 

 

10,528

 

Long-term operating lease liabilities

 

6,629

 

 

 

5,999

 

Other long-term liabilities

 

11,234

 

 

 

11,185

 

Total liabilities

 

250,123

 

 

 

245,671

 

 

 

 

 

 

 

Commitments and Contingencies

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Common stock ― authorized 36,000,000 shares, $0.001 par value; 19,896,477 and 19,888,807 shares issued at November 30, 2022 and August 31, 2022, respectively; and 13,587,596 and 13,602,346 shares outstanding at November 30, 2022 and August 31, 2022, respectively

 

20

 

 

 

20

 

Additional paid-in capital

 

168,092

 

 

 

165,973

 

Retained earnings

 

459,439

 

 

 

456,076

 

Accumulated other comprehensive loss

 

(34,873

)

 

 

(36,209

)

Common stock held in treasury, at cost ― 6,308,881 and 6,286,461 shares at November 30, 2022 and August 31, 2022, respectively

 

(401,308

)

 

 

(397,236

)

Total stockholders’ equity

 

191,370

 

 

 

188,624

 

Total liabilities and stockholders’ equity

$

441,493

 

 

$

434,295

 

WD-40 COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited and in thousands, except per share amounts)

 

 

 

 

 

 

 

Three Months Ended November 30,

 

2022

 

2021

 

 

 

 

 

 

Net sales

$

124,893

 

 

$

134,746

 

Cost of products sold

 

60,638

 

 

 

66,276

 

Gross profit

 

64,255

 

 

 

68,470

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

Selling, general and administrative

 

39,984

 

 

 

38,423

 

Advertising and sales promotion

 

5,339

 

 

 

5,624

 

Amortization of definite-lived intangible assets

 

253

 

 

 

363

 

Total operating expenses

 

45,576

 

 

 

44,410

 

 

 

 

 

 

 

Income from operations

 

18,679

 

 

 

24,060

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

Interest income

 

44

 

 

 

25

 

Interest expense

 

(1,169

)

 

 

(620

)

Other income (expense), net

 

150

 

 

 

(329

)

Income before income taxes

 

17,704

 

 

 

23,136

 

Provision for income taxes

 

3,707

 

 

 

4,581

 

Net income

$

13,997

 

 

$

18,555

 

 

 

 

 

 

 

Earnings per common share:

 

 

 

 

 

Basic

$

1.03

 

 

$

1.35

 

Diluted

$

1.02

 

 

$

1.34

 

 

 

 

 

 

 

Shares used in per share calculations:

 

 

 

 

 

Basic

 

13,590

 

 

 

13,716

 

Diluted

 

13,609

 

 

 

13,752

 

WD-40 COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited and in thousands)

 

 

 

 

 

 

 

Three Months Ended November 30,

 

2022

 

2021

Operating activities:

 

 

 

 

 

Net income

$

13,997

 

 

$

18,555

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

1,896

 

 

 

1,987

 

Net gains on sales and disposals of property and equipment

 

122

 

 

 

9

 

Deferred income taxes

 

271

 

 

 

738

 

Stock-based compensation

 

2,719

 

 

 

2,891

 

Unrealized foreign currency exchange losses (gains)

 

(1,481

)

 

 

541

 

Provision for credit losses

 

30

 

 

 

30

 

Changes in assets and liabilities:

 

 

 

 

 

Trade and other accounts receivable

 

2,847

 

 

 

(7,980

)

Inventories

 

(14,203

)

 

 

(13,054

)

Other assets

 

4,573

 

 

 

(1,793

)

Operating lease assets and liabilities, net

 

26

 

 

 

2

 

Accounts payable and accrued liabilities

 

(3,336

)

 

 

4,126

 

Accrued payroll and related expenses

 

2,627

 

 

 

(7,324

)

Other long-term liabilities and income taxes payable

 

349

 

 

 

325

 

Net cash provided by operating activities

 

10,437

 

 

 

(947

)

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

Purchases of property and equipment

 

(1,458

)

 

 

(2,434

)

Proceeds from sales of property and equipment

 

158

 

 

 

72

 

Net cash used in investing activities

 

(1,300

)

 

 

(2,362

)

 

Financing activities:

 

 

 

 

 

Treasury stock purchases

 

(4,072

)

 

 

(7,386

)

Dividends paid

 

(10,634

)

 

 

(9,905

)

Repayments of long-term senior notes

 

(400

)

 

 

(400

)

Net proceeds (repayments) of revolving credit facility

 

3,364

 

 

 

–

 

Shares withheld to cover taxes upon conversions of equity awards

 

(600

)

 

 

(4,246

)

Net cash used in financing activities

 

(12,342

)

 

 

(21,937

)

Effect of exchange rate changes on cash and cash equivalents

 

2,244

 

 

 

(1,196

)

Net (decrease) increase in cash and cash equivalents

 

(961

)

 

 

(26,442

)

Cash and cash equivalents at beginning of period

 

37,843

 

 

 

85,961

 

Cash and cash equivalents at end of period

$

36,882

 

 

$

59,519

 

 

Posted on

Newtek Business Services Corp. Reports Third Quarter 2022 Financial Results

Newtek Business Services Corp. Reports Third Quarter 2022 Financial Results
Newtek Business Services Corp.

Newtek Business Services Corp.

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

 

 

 

 

 

 
Posted on

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    
       

 

Posted on

Newtek Business Services Corp. Reports Record SBA 7(a) Loan Fundings for the Second Quarter 2022 | News

Newtek Business Services Corp. Reports Record SBA 7(a) Loan Fundings for the Second Quarter 2022 | News

BOCA RATON, Fla., July 05, 2022 (Globe NEWSWIRE) — Newtek Company Expert services Corp., (NASDAQ: NEWT), an internally managed business enterprise progress company (“BDC”), declared currently that Newtek Little Business enterprise Finance, LLC (“NSBF”) has funded a file volume of SBA 7(a) loans for the 3 and 6 months ended June 30, 2022. For the 3 months ended June 30, 2022, NSBF funded a file $200.6 million in SBA 7(a) loans, which signifies a 112.7{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} increase in excess of $94.3 million SBA 7(a) loan fundings for the a few months finished June 30, 2021. For the 6 months finished June 30, 2022, NSBF funded a document $363.9 million in SBA 7(a) loans, which signifies an 83.2{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} boost more than $198.6 million SBA 7(a) mortgage fundings for the six months finished June 30, 2021. In addition, for the six months finished June 30, 3022, the Organization reaffirmed its forecasts for web expenditure revenue (decline) (“NII”) in a range ($.01) for each share to $.00 for each share and adjusted net expenditure earnings (“ANII”) in a assortment of $1.40 for every share to $1.50 per share.

Barry Sloane, Chairman, President and Main Executive Officer claimed, “We could not be extra happy to announce document SBA 7(a) fundings for the second quarter 2022. We think these record fundings are testament to a seasoned administration group and personnel, and it is rather obvious that the men and women, course of action, and program that we have been ready to put in spot has given us sturdy momentum in the 2nd quarter and we believe that will continue on in the numerous quarters in advance. In addition, we look ahead to reporting a escalating and robust pipeline of lending opportunities on our second quarter earnings conference call. Also, and critical to take note, is that the calendar year-in excess of-12 months improve in next quarter 2022 bank loan fundings was not driven by any reduction in the credit rating excellent of the borrowers we shut and funded loans for, as we do not imagine in sacrificing credit rating excellent for the sake of development. In actuality, throughout the 2nd quarter 2022, the acceptance charge of all bank loan requests submitted and decisioned at the mortgage-committee degree was decrease than it has been in past quarters which indicates a modest tightening of financial loan approvals.”

Mr. Sloane ongoing, “We beforehand forecasted that we predicted to comprehend some margin compression in 2022 when compared to the higher margins in 2021 during which we understood file gain-on-sale and margins. Whilst we did expertise margin compression in the next quarter of 2022, we want to observe we have been even now capable to meet up with our forecasts. We feel the drop in value margin we are observing in the profits of assured portions of SBA 7(a) bank loan is largely driven by the Federal Reserve Bank (“Fed”) lagging driving the Treasury industry in limited-expression rates, which has caused a lag in cost adjustment on the floating-price Primary, adjusted quarterly dependent coupon of SBA 7(a) financial loans, which impacts the pricing on govt guaranteed personal loan product sales and in the unguaranteed parts of SBA 7(a) loans held in our portfolio. Having said that, dependent on commentary offered by the Fed, we consider the Fed will elevate fascination charges, which we believe that really should translate into additional normalized pricing during the 3rd quarter 2022, holding all else consistent.”

Mr. Sloane further said, “Based upon improvements in our approach and men and women, we assume that going ahead we will continue to know increased productivity in our SBA 7(a) and SBA 504 lending, as nicely as our non-conforming regular lending method. In addition, we also are hopeful to obtain regulatory acceptance to transform to a financial institution keeping business as very well as approval to acquire the Nationwide Financial institution of New York City in the course of the 3rd quarter 2022, which we believe that will help us in constructing lender lending merchandise and spherical out our lending menu, growing productiveness in conforming C&I lending and effectively as conforming CRE lending.”

Mr. Sloane concluded, “We are particularly happy that even with the improved current market instability and adjustments, we proceed to be in a position to produce dividends to our shareholders which always have been and continue to be paid out of taxable profits. We continue to emphasis on creating a diversified stream of earnings from our portfolio corporations which can help help our overall company model with the intention of providing reoccurring streams of income and revenue with out the related cash investment in the payments, technological innovation, payroll and insurance plan agency corporations. We search ahead to reporting our total second quarter 2022 earnings in the to start with or next 7 days of August. We hope to continue to exhibit that our 24-yr-outdated firm, publicly traded for 22 yrs, which has been by way of the 2008-2009 credit disaster and the pandemic, through strong and weak credit history environments, and large and minimal curiosity level environments, has been ready to navigate all current market environments and supply higher than-regular results to shareholders, will carry on to do so. We thank our shareholders for their ongoing support and most importantly, thank all Newtek staff members and the Newtek administration staff for offering on our system and terrific final results to all stakeholders.”

Newtek Organization Providers Corp., Your Enterprise Options Company® , is an internally managed BDC, which together with its controlled portfolio organizations, presents a vast assortment of organization and financial remedies under the Newtek® model to the modest- and medium-sized small business (“SMB”) market. Since 1999, Newtek has presented state-of-the-art, cost-economical products and solutions and productive company methods to SMB interactions throughout all 50 states to help them expand their product sales, control their bills and reduce their danger.

Newtek’s and its portfolio companies’ items and services contain: Organization Lending, SBA Lending Remedies, Digital Payment Processing, Technological know-how Remedies (Cloud Computing, Facts Backup, Storage and Retrieval, IT Consulting), eCommerce, Accounts Receivable Financing & Stock Funding, Insurance Alternatives, Internet Expert services, and Payroll and Benefits Solutions.

Newtek® and Your Small business Alternatives Company® are registered logos of Newtek Company Companies Corp.

Take note Regarding Forward Hunting Statements

This push release incorporates selected ahead-seeking statements. Phrases these types of as “believes,” “intends,” “expects,” “projects,” “anticipates,” “forecasts,” “goal” and “future” or equivalent expressions are intended to identify ahead-searching statements.All ahead-on the lookout statements entail a variety of threats and uncertainties that could bring about precise success to vary materially from the options, intentions and expectations mirrored in or instructed by the ahead-wanting statements. These types of dangers and uncertainties incorporate, among the other people, include our potential to close the pending acquisition of the National Bank of New York City (the “Acquisition”), get hold of necessary regulatory approvals for the pending Acquisition, as properly as projections regarding or contemplating the pending Acquisition, our capability to originate new investments, attain particular margins and concentrations of profitability, the availability of added funds and the capability to keep certain personal debt to asset ratios, intensified opposition, running issues and their impact on revenues and gain margins, expected long run business enterprise approaches and economical functionality, anticipated upcoming quantity of customers, business enterprise prospective customers, legislative developments and related matters. Danger components, cautionary statements and other problems, which could induce Newtek’s genuine results to differ from management’s present anticipations, are contained in Newtek’s filings with the Securities and Exchange Commission and obtainable by means ofhttp://www.sec.gov/.   Newtek cautions you that forward-seeking statements are not assures of potential efficiency and that actual effects or developments may well differ materially from these projected or implied in these statements.

Resource: Newtek Company Products and services Corp.

Investor Relations & General public Relations

Contact: Jayne Cavuoto

Telephone: (212) 273-8179 / jcavuoto@newtekone.com