NewtekOne, Inc. (NEWT) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the NewtekOne Rebranding Strategy and Introduction of the Newtek Advantage Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Barry Sloane, President, CEO and Founder of NewtekOne. Please go ahead.

Thank you, operator, and good morning, everyone. Welcome to the NewtekOne investor and analyst conference call for our rebranding initiatives and demonstration of the Newtek Advantage. Today, we'll be unveiling of our rebranding strategy for NewtekOne as well as an unveiling for our technology-enabled bank and tool for our business customers for Newtek Advantage. Today, I'd like to welcome along with me on our presentation Dan Hendel, Director of IT for NewtekOne; and Jim Corcoran, SVP of Operations and Project Management. We're thrilled to be able to finally unveil and present what Newtek's mission statement is, which is basically to be the one company for all your business needs, the one partner to help you succeed in business and the one company that will help you enhance your business operations. We're very excited about unveiling our new rebranding strategy of NewtekOne. Our name change officially went in yesterday. We are still NewtekOne on the NASDAQ stock symbol, NEWT. Stock symbol doesn't change. The name change might take a couple of days to get through the NASDAQ. But today, we do business as NewtekOne. I'd like to go forward to Slide #1 on the presentation deck. The slide will be up on our website, newtekone.com, and I will tell everybody on the call that although the official launch date of newtekone.com's website is February 1 as well as the launch of the Advantage, we have previewed the newtekone.com site in its new format from 6:30 a.m. to about 10:30 a.m. today. So for those of you that do want to go take a look at that site, feel free to do so during that timeframe and the PowerPoint presentation should be hung. Obviously, it's available on today's webcast. So going to Slide #1 on forward-looking statements. Clearly, given yesterday's presentation and today's, we talk a lot about expectations, anticipated dates, forecast, delivery dates. Obviously, we do so and we've been doing this for over 20 years. We feel comfortable we're putting out into the market. I think everybody is familiar with these forward-looking statements and the potential variability of results going forward. On Slide #2, we're focusing on, obviously, in the initial parts of our presentation today, the reason and the rationale for NewtekOne, the rebranding. First of all, NewtekOne with the acquisition of National Bank of New York City, which had consummated on January 6, is a differentiated financial holding company. As we said yesterday, a financial holding company is a designation under a bank holding company law, which basically allows us to have a material amount of nonbanking activities and give us further latitude. This is what is one of the many things that makes NewtekOne and also a Newtek Bank National Association a major differentiated institution to provide business solutions to the independent business community all across the United States. Very important to note, we give you personal banking relationships, analytics and analytics software and transactional capability that other banks and solution-based companies simply do not. When we talk about relationships, you'll be able to see that when we demo the Newtek Advantage. For those of you that want to go online later and go to newtekbank.com, our website will be up during that limited period of time. If you go to the right-hand corner of newtekbank.com, there's a bubble in that right-hand corner. You click on that. You'll be able to get a live solution specialist. The default will be chat. If you want to be on camera, request it and all of a sudden, you will be virtually hooked up to the branchless, bankerless, brokerless, BDO-less environment that NewtekOne will present to banking and nonbanking customers. Please go forward to Slide #3. The purpose of the rebrand NewtekOne initiative. Number one, we talked about all of the enterprises that will be sitting up at the financial holding company. Newtek Merchant Solutions, Newtek Tech Solutions, Newtek Insurance Agency, Newtek Payroll Solutions as well as some of our equity-based joint ventures for the nonconforming lending product. We announced the NewtekOne rebrand in September of 2022, and we're excited to finally bring it to fruition. Part of the rebrand was based upon the fact that we now acquired National Bank of New York City, now known as Newtek Bank NA. I think that's important because what we recognize was our customers typically go to their banking relationship multiple times a week, 12 to 20x a month because they're looking at their balances, they're moving money around. That's a great focal point, which the Newtek Advantage is now wrapped around. So we're excited. We will give you a prerecorded demo of the Newtek Advantage today with help from Dan Hendel and Jimmy Corcoran. We're very excited about unveiling its capability and the full launch once again that's anticipated to be targeted around February 1. I think the rebranding strategy is consistent with what the company decided to do when we started the organization back in 1995, to have a single set of branded financial and business solutions to address the needs of independent business owners. Some people have said to me, "Gee, this is for the purpose of your cross-selling and cross-marketing." And I always wince when that is said to me because the reality is that will be a byproduct of what occurs. Because now our clientele will know we do all these things and that we could provide them these great solutions, and they can actually connect with insurance agent that's licensed with a different payroll, health and benefits person, with a different lending person, with a different payments person, all dedicated to that particular client through the Advantage. But the reality of the Newtek Advantage is we're actually giving the customer an asset that's going to give them business analytics, transactional capability that they don't get in any other institution today. What they get with other institutions is they're typically shoved into the retail system, and the institution takes their money and doesn't give them anything else. So we're excited about the rollout of Newtek Advantage 1.0. We'll be updating and upgrading it as time goes on. I think that's extremely important concept for us. When we look at our target market, independent business owners. According to the Small Business Administration, the demographic is 32 million businesses in the United States, practically 50% of non-farm GDP, 60% to 65% of net new job growth comes from this segment, a very valuable demographic. And the institutions today have not been able to connect with that customer base because of cost. They take their deposits but do very little else for them. Primarily, it's also based upon the size of the market and the size of their typical transaction. So to be able to set up what we believe is a true technology-enabled bank for this particular demographic, incredibly valuable. And we think our clients will love it and ultimately accrue great value to all of our stakeholders. We do believe that the rebranding strategy will solidify our position in the marketplace as the one solution for all your business needs for independent business owners, the one partner you need to help grow your business and the one company that enhances the value of your business and makes you more successful. We're excited, obviously, because we know that independent business owners go to their banking portal multiple times a week. And that's a game changer for NewtekOne because it's going to give us the ability to communicate with the existing clientele on multiple occasions or for white papers, podcasts, webinars to be a real destination for independent business owners. Also, with respect to the NewtekOne rebrand, from a product perspective, we have rebranded Newtek lending, Newtek Payments, Newtek Technology, Newtek Bank, Newtek Insurance, and down the road, we do have on the drawing board to be able to offer our clients Newtek Tax and Newtek Accounting. We actually want to take our clients and give them, number one, a life representative just like you see in all the other areas, but somebody to help them with their accounting, P&L, the general ledger and do tax preparation work for them. We're excited about our future. Slide #4, unlocking the value of our homegrown technology. So one of my favorite expressions we've been an overnight success, it just took us 20 years to get here. So clearly, we have built solutions in lending, in payments, in technology. Now they're all being pushed up into a single portal and a dashboard through the Advantage and giving clients direct people to talk to on a screen real human being. That's very, very valuable. There is that differentiator. Not too far down the road, and we have started to engage in conversations, unlocking the value of our homegrown technology is something that we do plan on doing. And we realize that there are many institutions in the space. They've got branding recognition. We will look at white labeling these tools for other organizations. We're excited about the Advantage, and we will be working with other institutions we actually got interest at this point in time. Once again, we've got to get our launch up and off the ground, get every little bug out of the system that we need to. And I say this with tongue and cheek, it may seem like it's easy. It's like 50x harder than it seems. There's a lot of work that needs to be done, whether it's changing over an ABA number from the New York Fed to the Atlanta Fed or making sure that the names of National Bank in New York City is eliminated when people get information from us. We anticipate that when we open up on Feb 1, all the bugs will be worked out. We -- I have actually been taking deposits as of a week to go on Monday, and that's filling up nicely. We can do this, and there's phone numbers on the site that you can call to get an operator on to help you do that. It's more of a manual process. I will say the technology today, barring things like ABA numbers and names of the bank because we switched over the name of the bank just very recently, would work today. So today, you could actually go online and in 5 or 10 minutes open up a bank account. And we're excited about that. We've tested it. It's ready to go. We look forward to our launch date. So once again, with respect to Slide #4, we think there's a tremendous amount of value in our technology, and we are currently in conversations with partners to white label that for themselves. Think about what we do. In payroll, in payments, in lending, we can be the agent for the organization. They can get deposits. We could provide the nonbanking service, earn significant and material revenue streams and get value out of the technology for licensing. So we've become a bureau, and that's actually been our model historically through our referral and alliance relationships through the NewTracker system. Let's go forward to Slide #5. The Newtek Advantage. Before we get to our conclusion today, we'll have a prerecorded demo of the advantage that will be coming up shortly. But once again, this gives our business clients relationship, transactional capability to other banks simply do not. We're going to be giving our clients an asset upfront that's going to enhance their business operation. Once again, they're going to get dedicated people to their account in addition to a relationship manager that might help them navigate total relationship with NewtekOne. They'll be able to get a live person on a camera. We believe that the Newtek Advantage will become a market recognize tool. We also think it's not going to be that easy to copy because we've been using these tools for 10 to 15 years. Our staff is trained. We've been solutioning clients. We believe we've got the bugs out to be able to roll this out on or about February 1. Once again, we talk about the future potential of Newtek Tax and Digital Bookkeeping, we're excited for those rollouts. Slide #7. This is the visual image of what that Newtek Advantage would look like to our customers, looking to actually get real people. And it's 2023, you get them on a screen. You see them virtual. You could do it from your home in your pajamas if you want or you can get it on an iPad, all available to you, we will be doing a demo shortly. Let's go to Slide #8. Once again, the renaming of NewtekOne. Newtekone.com, when you get a chance later you can go to newtekone.com, this is the new newtekone.com. Obviously, it's going to be up from 6:30 a.m. to 10:30 a.m. You can take a look at the Advantage. I think you'll be very impressed with what we've done here from a rebranding perspective. And the key issue here is when our clients talk to us and NewtekOne, in any one of the verticals, whether it's lending, whether it's payments, whether it's insurance, whether it's tech solutions, we will always talk to our clients whether or not they would like the advantage. And we hope the following question comes back, what is the advantage? I was hoping you would ask that, and then we can go into the dissertation of the many ways that we can help that customer in different areas, whether it's storing their documents, whether it's e-commerce efficiency, whether it's the movement of money, whether it's the unique business portfolio of loans that we have, whatever it might be, whether it's depository relationships, electronic billing, web traffic statistics. Finally, I think the market will begin to understand the breadth of offerings that Newtek has developed over the course of 2 decades. So we're excited about #8. Obviously, we've got 2.2 million of business referrals that are in our system. We've been in business over 24 years, and we'll also have various meet or beat offerings where we will guarantee that we'll be able to meet or beat their current product offering plus get the advantage or give them an upfront bonus if, in fact, we can't meet or beat their pricing. Slide #9, the web design. Obviously, you'll see this directly when you go to newtechweb.com, but this is kind of a little bit of a visual image. Slide #10. These are some snapshots of the slides. And when you go to Newtek Loans, you'll see that we've got many solutions. And they're different 10- to 25-year [ AMs ], no balloons, typically no loan covenants in 7(a), 504, nonconforming C&I. And then we've got what I call the conforming loans that will go into the bank, which will be more equity laden, lower advance rates, lower coupons, full covenant package. You're typical conforming C&I, ABL and commercial real estate type loans that other banks offer that we'll now be able to offer our clientele because we've got low-cost deposits to be able to form those with. In the payments page, you'll be able to see. We do mobile, we do e-commerce. We've got our own POS white label for them. To be able to move money through ACH [ wiring ], electronic billing, it's all there in the payment segment. People don't know we have a 50-state licensed insurance agency. So for the consumer, home, auto, umbrella, life, if it's commercial, it's workman's comp, EPLI, a BOP policy, all 50 states, all major carriers, payroll health and benefits why our solution is the best in that particular area as well as offering a dedicated person right to the account. In tech, virtual desktop offerings, Office 365 integrations, 24/7 help desk, we're able to take be an outsourced CIO, CTO for a small and medium-sized business. These are the things that you'll be able to see through the NewtekOne website redesign. Operator, I'd love to go to Slide #11 and launch the prerecorded demo of the Newtek Advantage. [Presentation]

Good day today. My name is Barry Sloane, President, Chairman and CEO of NewtekOne, and welcome to our demonstration and unveiling of the Newtek Advantage. Today, I have with me Dan Hendel, Director of IT for NewtekOne; and Jim Corcoran, SVP of Operations and Business Development, also for NewtekOne, to help me with the unveiling and demonstration of the Newtek Advantage. We also have unveiled today our new branding strategy of NewtekOne. NewtekOne is the one business partner your company will ever need. NewtekOne is the one business relationship that enhances your business and makes you more successful. NewtekOne is the one place to administer and operate your business on a daily basis. We're really excited to unveil and show you all the advantages of the Newtek Advantage. For those customers that are opening up a demand deposit account, they obviously will get the Newtek Advantage, and existing customers over the course of time will also be granted access to the Newtek Advantage. Today's demonstration is to show you what we believe is 6- or 7 early-stage Newtek Advantage 1.0 advantages to using the Newtek Advantage over dealing with any other financial institution, particularly when it comes to banking. Let's first take a look at the concept of the Newtek Advantage with respect to relationships. Dan, if you could roll forward to show a snapshot of what the Advantage looks like, and then we'll go into relationships.

You got it there. Here we are. A customer is logged in into the Newtek Advantage, and they have a number of tales that tell me about their business. If we scroll down, we see us speak with a specialist section. Every Newtek customer that [ signs ] up for Advantage, gets a relationship manager, a specialists for their loans, payments, insurance, technology, payroll and banking. At a click of a button, the customer is able to connect with anyone on the Newtek team. Let's see it for the relationship manager. And here you go. I'm instantly connected with [ Rob Lockman ], played by Jim on this call. I can chat with my relationship manager, and I can have a conversation with my relationship manager about any of the product that Newtek provides.

Thank you, Dan. And to put a bow on it, the advantage of the Newtek Advantage versus banking with the 9,000 other financial institutions in the United States is you get relationships. Do any of you really know who your relationship manager is with your bank? Most of the people on this call are a little bit more sophisticated. But the average independent business owner or SMB may have nobody that they deal with a bank. With Newtek, they get 7 executives, each with specialists in different areas and importantly, a relationship manager. Dan, let's fast -forward to the benefit that you get in the area of payment processing with the Newtek Advantage.

Sounds good. Let's go back up. And here, we see that we have a merchant sales tile. We see ourselves this week compared to last week in a bar graph, and we can click the View More button to go into our merchant account details. We can see details about our merchant account, transactions, transaction by card type and over time. We can go look at our batches and drill down to the transactions that make up those batches. We can look at our statements. Finally, we can look at our deposits.

Business owners, in many cases, that are taking payments online, card present or mobile, all solutions that Newtek has looks at what they receive on a real-time daily basis is vital. They want to see their chargebacks. They want to see their refunds. They want to see their analytics same day this year, same day last year, same quarter this year, same quarter last year. The Newtek Advantage gives you real-time payment processing data for Visa Master Discover, American Express soon to be in 2.0 ACH and other things of that nature, but also gives you the analytics that will enable you to analyze your business. Very, very important, valuable feature functionality in the payment space. Dan, let's go to web traffic analytics. Businesses today live and die by that website. It's very important. So now the business owners can 3x to 5x a week, 15x to 20x a month when they're going to the Newtek Advantage, their business portal, the one tool that they're going to get to run their business from on a regular basis, they can actually see what their web traffic data is going instead of going to multiple different locations. Let's take a look at what the Advantage does for web traffic statistics.

All right. So see the customer, you can see their web traffic right there on the main page and the style. They can drill down for a little more details. The traffic they can keep a close down their competition. And finally, they can schedule a call right there with the Newtek Technology specialist that can help them with their website and their web presence.

Super. And look, I can't tell you how important e-commerce is today for the small and medium-sized business, independent business or, for that matter, just somebody posting a billboard to be able to be reached. Newtek also designs websites, host websites, does e-commerce solutions, manages people's -- business owners hardware and software, 24/7. So you'll have a technology specialist that you can go to that can help you manage your technology 24/7, and ask you for advice or use some of our solutions. Dan, let's go to payroll, very unique feature. This isn't an organization where, for example, you take bank A, they say, we can handle your payroll, and they send you to ADP. No, no, no. With the Newtek Advantage or Newtek, you can actually go to the advantage and do your payroll directly from your banking portal. Dan, a demo would be great here.

All right. So the Newtek Advantage connects directly with our payroll software. You can have a quick lens that the employees that you have on your payroll, and you can go and drill down and [ conduct ] your payroll instantly from the Newtek Advantage.

Very valuable feature. The other thing I would say relative to our payroll feature you get a dedicated customer service rep, concierge service. So you're not going into a call center, you get somebody dedicated to your account. And the Newtek Payroll solution not only helps the business owner, but also helps the employee where they can actually go and get information for their own taxes, see that the workman's comp has taken out, the health insurance, 401(k) information, all available through Newtek Payroll Solutions and the Newtek Advantage. Dan, let's go to one of my favorites, document storage. We all know that banks are custodians for documents. However, Newtek historically has developed storage digitally for its customers. Well, now at no charge, you're going to be able to store all your org documents. If you're a consumer, it could be photos, it could be driver's license. It could be rental agreement, insurance policies. If you're a visitor, a good business, it could be a buy-sell agreement. It could be your rental agreement, it could be a mortgage, it could be an organizational document, articles of incorporation. Dan, show how easy it is to store your key documents in the Newtek Advantage, all for being a depositor with the company.

Sure. So right there on the main page, you're able to download your recent documents. You can also go to the document storage section, where you can search for your documents, see all the documents, you've uploaded that have put there for you or you can click the upload button and go and add more documents.

Great. So it's very easy. It's drop and drag and click and you could put documents and store them right with Newtek technology solutions through the Newtek Advantage, and there's no charge for that at this point in time. Is that right, Dan?

That's correct.

Great. I think for a business owner to know that their banking portal can keep all their documents in one place very valuable. This is typically what we do historically in lending. By the way, everything you're seeing today, it's built, it exists. It's what we've been using for 10 or 15 years in our business operations. Now it's all being pushed up into a banking portal for our clients through the Newtek Advantage. We actually give our clients an asset, not just take their deposits or, in the business vernacular, [ hope they get a loan ], we actually become a business partner to our clients. Dan, let's go to sort of the services that go along with us owning Newtek Bank, such as banking as a service for depository functions. So we will be able to open up bank accounts on mobile phone. You'll be able to do your banking online. Everything is now connected into our core operating system, the Pfizer Premier core. So there's no core conversion at Newtek. And the Advantage and NewtekOne website should be launched on or about February 1. That's a schedule date. We've got to move over our ABA number because we moved districts from the Fed New York, Fed Atlanta. So we've got some things moving around here. Obviously, National Bank of New York is now Newtek Bank. So we're doing some name changing. So with that point in time, we have set our rollout date for the launch of the Advantage and the NewtekOne website on Feb 1. Today is just our unveiling of all of our tools. Danny, Newtek Banking as a Service?

Sure thing. Here, we have our banking tile. We can go and click this button to open up an account, and that will get us to the digital account opening for Newtek Bank. If you already have an account with Newtek, you can hit this button, that will connect your bank account. And here on the tile, you'll see the balances for all the accounts have with Newtek Bank. And of course, you'll also be able to go to your digital banking straight from the tile.

That's great. And Dan, I assume we have remote deposit capture. So our clients could easily put a check right on an iPhone or an iPad to be able to deposit.

Absolutely. You can interact with Newtek Bank from the website or from the iOS and Android apps.

So a brokerless, branchless, [ BDO -less ] banking environment is what we're positioning Newtek Bank plus all these other solutions and services. Now many of you are aware, Newtek Bank is and was the largest non-bank government-guaranteed lender in the United States by loan volume was in the top 2, 3 largest government-guaranteed lenders, including banks. So obviously, we will be making a full menu of loans. So in addition to SBA 7(a), SBA 504 and our nonconforming loan product, which went up at the holding company, the bank will also be making conforming C&I loans and conforming commercial real estate loans. We use the term conforming, conforming the bank underwriting standards, AAA+ type credits, much narrower margins. However, the ability to do that business is based upon our ability to get core deposits and to grow the business that way instead of commercial finance. So maybe you could show us, Dan, some of the tools that a borrower would see relative to their loan information if they have a loan with us?

You got it there. Let's go back to the main page of the Advantage and the first tile right here tells us about the balance of our loans with Newtek. You see the balance, the next payment due date, and if we can click through to see the payments on that account.

And Dan, I guess the Advantage business portal or dashboard, we'll also be able to send notices and communicate with our clients on a regular basis. I want to thank everybody for attending our brief but hopefully informative session on the Newtek Advantage. This Newtek advantage is a differentiator. And Newtek's dedicated to continue to improve the Advantage, improve that client experience, the ability to margin pool, the ability to offer same-day financing, for payment processing, the ability to move money and transfer to employees same day, if they take our payroll service and solution, it just goes on and on and on. The nice thing about the Newtek Advantage is our business clients will no longer have to wonder, "Gee, I didn't know that I can buy my insurance through you, "Gee, I didn't know that I do payroll, "Gee, I didn't know that I can do electronic invoices." Wow, I've got 6 people in that organization or 7 that I could speak to on a regular basis to answer any question that I might have. We also forward to future releases such as Newtek Tax and Newtek Accounting because our clients really would like to have the data from payment processing, payroll, deposits and lending, all rolled into their accounting packages. So we look forward to further growth in the Newtek Advantage. We appreciate your time today. Thank you very much. Dan, Jim, thank you for joining us.

All right. Thank you, everyone. Before we go to the investment summary, maybe this is a good point to open up the Q&A session. We welcome questions from analysts and investors today. Anybody that would like to ask a question, we appreciate the opportunity to answer anything based upon what we presented or anything else for that matter.