Business Context and Reporting Period
This Form 8-K was filed by Newtek Business Services Corp. on April 10, 2017, reporting events that occurred on April 6, 2017. The filing discloses a strategic investment in the IT consulting sector.
Key Financial Metrics and Transaction Details
The Company closed an investment in International Professional Marketing, Inc. ("IPM"), a wholly owned portfolio company. Key transaction metrics include:
- Total Consideration: $11,119,688
- Valuation Multiple: 4.0x IPM's 2016 EBITDA
- IPM 2016 Sales: $35.9 million
- Payment Structure:
- $1,000,000 in restricted shares of Newtek common stock
- $8,751,735 in cash paid at closing
- $1,367,953 in contingent cash payments (two equal installments in 2018 and 2019)
The filing text does not provide specific values for Newtek's overall revenue, profit, cash flow, margins, debt, or liquidity for the reporting period.
Material Changes
The primary material change is the acquisition of IPM, which expands Newtek's portfolio into IT consulting. IPM brings over 30 years of experience, 45 full-time employees, and a virtual bench of 80 IT subcontractors. The business will be held in a separate wholly owned entity named Sidco, LLC.
Guidance, Outlook, and Risks
Outlook: Management intends to discuss this new investment during the second-quarter earnings call. The contingent portion of the purchase price is tied to IPM attaining specific EBITDA levels for fiscal 2017 and 2018.
Risks: The filing includes standard forward-looking statement disclaimers. Risks include intensified competition, operating problems impacting revenues and margins, legislative developments, and the uncertainty of future business strategies. Actual results may differ materially from expectations.
Investor Verification Checklist
- Verify the specific EBITDA targets required for IPM to trigger the $1.37 million contingent payment.
- Confirm the impact of the $8.75 million cash outflow on Newtek's current liquidity position.
- Review the second-quarter earnings call for integration plans and projected synergies with Sidco, LLC.
- Assess the valuation multiple (4.0x EBITDA) against current market comparables for IT consulting firms.