Newtek Business Services Corp. :NEWT-US: Earnings Analysis: Q3, 2017 By the Numbers : November 17, 2017

Newtek Business Services Corp. reports financial results for the quarter ended September 30, 2017.

We analyze the earnings along side the following peers of Newtek Business Services Corp. – CBIZ, Inc., Ares Management LP and Realogy Holdings Corp. (CBZ-US, ARES-US and RLGY-US) that have also reported for this period.


  • Summary numbers: Revenues of USD 19.54 million, Net Earnings of USD 8.08 million.
  • Gross margins narrowed from 99.49% to 92.12% compared to the same period last year, operating (EBITDA) margins now 38.06% from 60.19%.
  • Year-on-year change in operating cash flow of 84.39% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Narrowing of operating margins contributed to decline in earnings.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2017-09-30 2017-06-30 2017-03-31 2016-12-31 2016-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 19.54 18.82 17.68 18.18 16.57
Revenue Growth (%YOY) 17.94 27.52 35.15 18.04 21.3
Earnings (mil) 8.08 6.93 5.9 6.29 10.04
Earnings Growth (%YOY) -19.55 29 5.35 -60.96 111.41
Net Margin (%) 41.34 36.83 33.4 34.59 60.6
EPS 0.46 0.4 0.36 0.43 0.69
Return on Equity (%) 3.19 2.79 2.59 3.01 4.87
Return on Assets (%) 6.59 6.04 5.59 6.24 10.28

Access our Ratings and Scores for Newtek Business Services Corp.

Market Share Versus Profits

Revenues History
Earnings History

NEWT-US’s change in revenue this period compared to the same period last year of 17.94% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that NEWT-US is holding onto its market share. Also, for comparison purposes, revenues changed by 3.83% and earnings by 16.55% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s year-on-year decline in earnings was influenced by a weakening in gross margins from 99.49% to 92.12%, as well as issues with cost controls. As a result, operating margins (EBITDA margins) went from 60.19% to 38.06% in this time frame. For comparison, gross margins were 92.75% and EBITDA margins were 37.34% in the previous period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

NEWT-US’s change in operating cash flow of 84.39% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.


The company’s decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from 59.68% to 37.51% and (2) one-time items that contributed to a decrease in pretax margins from 60.60% to 41.34%

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for Newtek Business Services Corp.

Company Profile

Newtek Business Services Corp. is an non-diversified closed-end management investment company, which engages in the provision of wide range of business services and financial products under the Newtek brand to small-and-medium sized business market. It operates through the following segments: Electronic Payment Processing, Managed Technology Solutions, Small Business Finance, All Other, Corporate Activities, and Capco. The Electronic Payment Processing segment markets third party credit card processing and check approval services to the small and medium sized business market under the name of Newtek Merchant Solutions. The Managed Technology Solutions segment offers shared and dedicated web hosting, data storage and backup services, cloud computing plan and related services to the small and medium sized business market. The Small Business Finance segment originates, sells and services loans to qualifying small businesses. The All Other segment includes results from businesses formed from investments made through Capco programs and others which could not be aggregated with other operating segments, including insurance and payroll processing. The Corporate Activities segment implements business strategy, directs marketing, provides technology oversight and guidance, coordinates and integrates activities of the segments, contracts with alliance partners, acquires customer opportunities, and owns its proprietary NewTracker referral system. The Capco segment consists of twelve certified capital companies which invests in small- and medium-sized businesses. The company was founded by Barry Sloane in 1998 and is headquartered in New York, NY.

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