NewtekOne Inc (NEWT) 2007 Q4 法說會逐字稿

Good day and welcome to the Newtek Business Services fourth quarter and full year 2007 earnings conference call. Today's call is being recorded. At this time, I would like to turn the conference over to our host, Mr. Barry Sloane, Chairman and CEO.

Good afternoon everyone. Welcome to the 2007 financial results conference call. I would like to call your attention to a PowerPoint presentation that we have hung on our Investor Relations section of our Newtek Business Services website, so all of you can follow along as we go through our PowerPoint.

I am Barry Sloane, Chairman and CEO. I have with me Seth Cohen, Chief Financial Officer. And if Seth can go forward and read the Safe Harbor statement for us, we can begin.

The Safe Harbor statement, the statements in this slide presentation, including statements regarding anticipated future financial performance, NewTek's belief, expectations, intentions or strategies for the future may be forward-looking statements under the Private Securities Litigation Reform Act of 1995.

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, 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 development and similar matters. Risk factors, cautionary statements and other conditions which could cause Newtek's actual results to differ from management current expectations are contained in Newtek's filings with the Securities and Exchange Commission and available through www.SEC.gov.

Also we need to point out that our Capcos operate under a different set of roles in each of the eight jurisdictions, and these place varying requirements on the structure of our investments. In some cases, particularly in Louisiana and New York, we do not control the equity or management of a qualified business, but that cannot always be presented orally or in written presentations.

I would like to call your attention to page 3 of our PowerPoint presentation. Throughout the Company's recent history, the Company has announced its intent to deemphasize its legacy Certified Capital Company business. It has done so operationally and has executed well on this strategy, and has replaced Capcos revenue with revenue from Business Service operations which are anticipated to approach $95 million in 2008.

The Company has announced today that it is exploring the adoption of fair market value accounting for its Capco segment. We will call your attention to SFAS 159, which is a recent proclamation which became effective for financial statement issued for fiscal years beginning after November 15, 2007. The Company is exploring utilizing fair market value accounting for 2008, and has expressed its forward guidance in that form and without that form. We will talk about that a little bit later today.

I think as an important statement investors have asked us for further clarity and clarification of the way we present our Company's financial information, and we believe the potential approach to using SFAS 159 will be helpful in that endeavor.

One of the positive things that happened in 2007 is the Company's continued focus on in its Business Service operations, where revenues increased by 20% over 2006. The Company continued to execute on its strategy by growing its customer count to in excess of 87,000 business customer accounts, a 16% increase over 2006.

The Company finished its financial position December 31, 2007 with $38.3 million in cash on its balance sheet. The Company's core operating segments experienced significant revenue growth. Our Electronic Payment Processing segment recorded revenues of $55 million, a 26% increase over 2006. Our Web Hosting division recorded revenues of $16.2 million, a 19.1% increase over 2006. And our small-business SBA Lending division had a decline in revenues of 4.2%. In fiscal year 2007 we are reporting a pretax loss of $17.1 million; however, $9.4 million is attributable to Capcos non-cash losses, and depreciation and amortization also a non-cash expense of $7.4 million.

On the positive side, cash flow continues to increase at NewTek. We had $12.5 million positive cash flow from the three core operating segments. And cash flow from operations at the Holding Company was only a negative $2 million. And were it not for a onetime loss in our EPP division, it would have only been a little bit less than $1 million. The Company is in a very attractive position with growing revenues and burning a small amount of cash.

Our core segment revenue growth is growing very well. If I can point you to page five of the PowerPoint presentation, you could see that the annual revenue growth across the core segment is growing nicely, from $54 million in 2005 to $80 million in 2007. And we have a decline in the Capcos non-cash revenues from $36.7 million in 2005 to $5.3 million in 2007.

As we alluded to earlier, we have a strong cash position on the balance sheet, equating to almost $1.06 per-share in cash, and very little quantifiable debt. In today's financial markets, liquidity is key. The Company has lines of credit with General Electric, Norfork Bank and Wells Fargo. I'm happy to say that these lines have plenty of excess availability. As of 12/31/08, we only had drawn $22 million on our GE line. Our Norfolk Bank line of this moment of this date is undrawn upon. And our Wells Fargo line of credit I believe is only drawn to the tune of about $0.5 million.

What I will point out is what also is good is not so good. We would love to be able to use more of the GE line, as well as the Wells Fargo line, which means that we have got more loans and receivables in the portfolio. And frankly it is one of our issues in our Lending segment that we plan on addressing today.

Looking at some operational accomplishments for 2007, as we have talked about, we really have had a tremendous successful focus on the operational side increasing revenues, increasing customer count, and also importantly the recognition of our NewTracker System as our core business operations model.

Some of the biggest players in the U.S. and in the world, AIG, the largest insurance company in the world with $1 trillion of assets; Navy Federal Credit Union, the largest credit union in the world; Merrill Lynch, the largest investment bank bye number of brokers, have all recognized that our operating model is attractive, and has chosen to partner with us and drive their small-business customers for us for business services and financial products.

We have also continued to excel in new product and service line development. We will talk about some new products that we have in the lending business. We also continue to focus on the e-commerce segment, where a company like ours that actually has the ability to design a website, host a website, take payments and provide the gateway for customers, can all be done under one wrapper and with one professional and one company versus having to go outside the market and pick four different providers, four different applications. These are the things that we are trying to do from a new product side to enable us to have hypergrowth in these various different business lines.

As we discussed earlier, we had a 16% increase in our growth count. We clearly have enhanced and expanded our Business Service operations. I will point to what we have done in Brownsville, where we have begun construction of a 225 seat facility. This will be our primary back office processing center where we will be doing the majority of our cross selling under our CDIA platform. We will be able to take the data from all the different divisions and cross sell and cross market products into our customer base, as well as external customers.

The value proposition here is that all four key business lines, Web Hosting, Lending, Electronic Payment Processing and Insurance, all have customer service functions and business service specialists boarding customers in the Brownsville operation. We think this will be the key to our business going forward.

I would like to draw your attention to slide number nine at this point. We talked a little bit about the effect of SFAS 159. The slide to the left, which is without adoption of SFAS 159, basically shows the non-cash expense of Capco burning off over time all the way out to 2012. The right graph shows you that in the event that we adopt SFAS 159, you can see that in 2008 our loss from Capco will be as little as $964,000, declining to $505,000. The $964,000 matches against $9.4 million. So you can see that we believe by the adoption of SFAS 159 the market will begin to focus more and more on our Business Service operations and the cash flow and the value that is created from that.

I would also like to add that if, in fact, we do adopt SFAS 159 there would likely be a onetime adjustment to our retained earnings, which could drop our net worth down to about $53 million from the current level of $76.8 million. That is anticipated to be a onetime charge. As I have announced, we're currently exploring this, and hopefully we will have an answer on this in the near future.

We have clearly continued to grow our revenue growth. As you can see, we had 160% growth in revenues from 2004 to 2008, with a projected $95 million of non-Capco revenues.

We talked a little bit earlier about our new product service development. We have introduced this year a new NewTek-branded Visa and MasterCard, which would allow a small-business to borrow up to $50,000, as well as a NewTek-branded unsecured line of credit. These are both financings that are done externally. We don't have any credit risk or exposure in these particular areas. But it is consistent with our approach to be able to speak to a small-business owner and be able to offer them a $50,000 business credit card, $100,000 line of credit, receivables, finance, merchant cash advance, which is a cash advance on their Visa and MasterCard forward sales, an SBA loan, a SBA-504 loan, a commercial finance line.

And we also have applied to the USDA to participate in their government guaranteed program of small-business loans under their B&I program.

In 2007 we added payroll services to our Business Service menu. We have launched our NewTek insurance portal on the Navy Federal Credit Union website. And I point your attention to slide number 12 where our Business Service suite is on the AIG small-business website. And slide number 13 where you could see Navy Federal Credit Union, the largest credit union in the world with 2.7 million members, has just entered our insurance portal. This gives a Navy Federal Credit Union member or employee the ability to go to their website, click on any one of these boxes, get the same referral form. That referral goes right into NewTracker, and that insurance request gets processed in our back office, in Brownsville or in Washington D.C. or in some of our other locations. And we handle that customer remotely, telephonically with non-commissioned insurance agents, which gives us a much better margin and opportunity to grow and develop this business and drop cash flow to our bottom line.

We like the small-business market at NewTek. That is what we are all about. There is over 26.8 million potential customers according to the SBA. We have increased our customer count. We are clearly penetrating the market. We have developed very strong alliances with major financial institutions all across the United States.

We talked a little bit about our enhanced and expanded Business Services operations back office in Brownsville, Texas. We're building out a 20,000 square foot facility. We recently received in conjunction with the University of Texas at Brownsville, a $1.25 million federal grant to build out that state-of-the-art facility. Obviously we are bilingual and 24/7 service in Brownsville. It is part of our we do it better NewTek business strategy.

I would like to now turn your attention to slide number 18, delving into our segments. Clearly the lending market has been a challenge to all participants in this particular segment, whether it is residential lending, commercial lending, business lending. Unfortunately, for most of our competitors, lenders today have wound up on the front cover of the Wall Street Journal. We're happy to say that has not happened to NewTek.

We did decline in revenues by about 4% in 2007 over 2006. I will add that was by design. The Company has indicated that it was concerned about credit exposure, heighten lending in the credit cycle, and had adopted to take a low profile. I will tell you that in a recent conference call we indicated that the Company plans to take advantage of this segment. I will tell you that our projected guidance for 2008 does not necessarily portray that. We're projecting a $1.5 million to $2 million loss in our Lending segment.

There is some rationale for that, which I will talk a little bit about, and Seth will talk about as well. Some of the things that happened, particularly in the fourth quarter of 2007, the pricing for loans in the capital markets, the premiums that we were receiving on the government guaranteed pieces begin to drop precipitously probably mid-November through the middle of January. And you could see, we had a significant decline in the average premium that we were getting from the government sales.

In addition to that, we sold fewer loans in the uninsured loan participation market due to the decline in loan asset values. We also had historically about a 1.3% servicing income in selling our government guaranteed pieces into the market at a price of [110]. As you can see, prices dropped, where in the second half we averaged 8.34%. And that was at 100 basis points. So we almost lost 30% in the servicing spread on these assets.

So essentially, it made it incredibly challenging in 2007 to be able to meet the bottom range of the guidance that we had given. As many of you are aware of what happened in the market, these changes happened fairly quickly and fairly dramatically.

Despite the fact that we had a loss of $90,000 in the Lending segment in 2007, we actually were cash flow positive. And the lending business has generated positive cash flow. The big difference there obviously is the accounting treatment that you use for gain on sale, as well as the evaluation of the servicing asset. So we are emboldened by the fact that our lender actually has created cash which it used to pay down its borrowing line to what we call a net equity increase of $1 million in the line. We have increased our borrowing capability and capacity with our GE line of credit. So despite the fact we're showing accounting losses, however we did generate actual cash and net value in our Lending segment.

Our lending business fortunately, knock wood, is not troubled by credit quality in the underlying portfolio. Our loan portfolio was performing in line with the Company's expectations. We are adequately reserved. We have approximately 8% in loan loss reserves against the portfolio. We have plenty of capacity in our GE line of credit, with 1.5 year to go on that facility. And we are very comfortable with where we are in the lending market today.

We did have an increase in referral. We did have an increase in prequalified loans. We had an increase in loans that went into underwriting. The problem is that our current origination model, which we will talk about needing to be adjusted and modified, primarily brought us more startup and new type business loans that, frankly, historically have been bad credits in the marketplace. Therefore, our 2007 approval rate -- and this is approval from loans that went into underwriting -- decreased to 39% from 47%.

I draw your attention to slide number 20. The decreased approval rate was not a result of lack of opportunity. We actually got a lot more referrals into the system. But we made a decision to tighten our underwriting guidelines. If we were going to look at doing a startup or certain asset classes, we went from requiring a 20% equity infusion to a 35% equity infusion. On a positive note for loans that actually were approved in underwriting our closed rate increased to 89% from 77%. This is really a result of increased efficiencies in our closing process.

Going forward, we are reevaluating our primary loan origination sources. As our Brownsville back office develops, we plan on doing more outbound calling, without any incremental costs, into various existing customer bases and lists. There is no question that there is a lending appetite amongst the small and medium-sized business market. The key is to go after the customer base that you want, which is typically a business owner that has had three to seven years worth of operating experience, typically owns a piece of real estate. And we are particularly interested in providing funds into the manufacturing sector.

One of the other situations that we had in our 2008 guidance, which Seth, our CFO will talk about, is we have added our receivable financing business into our Business Lending segment. Going forward our Business Lending segment will no longer be called SBA Finance. I believe it will be called Small Business Lending -- Small Business Finance.

That added approximately $600,000 to $700,000 in a negative loss into our 2008 numbers. On a positive note, we have reduced our breakeven rate in the former company CDS, which was our accounts receivables business, which will now be changed to NewTek Business Credit. And we have decreased the breakeven rate from $9 million of monthly draw -- monthly receivable purchases to $3 million of monthly receivable purchases, which we think frankly is quite obtainable.

So we do think that there is some significant upside in being able to turn around our assumable finance division, which I believe last year loss approximately $600,000 throughout the course of the year.

We do expect also to participate in the government guaranteed USDA loan program. We have applied for a license. The value proposition there is it operates very similar to the SBA 7A program, but the loan sizes are much bigger.

We think one of our important strategies for 2008 and going forward will be our interest in bidding on both performing and nonperforming loan portfolios. We have bids outstanding in the market, and we are currently working on adding existing loans at appropriate prices at exceptional risk rewards. As a matter of fact in today's market you can acquire portfolios at a much better yield than you can in creating them in a new origination market. The key to our lending business is to getting critical mass. We have real good underwriting. With good service and collections. We just need to add more product onto our existing capital base, and be able to drop that cash flow to the bottom line.

In our Electronic Payment Processing segment we have a banner year. Obviously it is a cash flow positive business. We had 26% revenue growth in 2007. We are forecasting $6.6 million to $7 million of EBITDA in 2008. Great operating leverage in the business. We have a tremendous potential to increase market share. Our business model is working. We pay out less than 30% of our residual income that comes into third party providers to actually give us that business, which is about 50% of what we estimate it to be on the industry averages.

I will also add the PPP segment has no debt. We look forward to continued growth in this segment. We anticipate $66 million to $68 million of revenues in 2008.

Our Web Hosting segment continues to move along exceptionally well, despite the fact that the Web Hosting segment is clearly a competitive market, with players like Yahoo, Google and GoDaddy aggressively moving into this space and going for bigger and bigger market share. We're exceptionally happy with the 19% revenue growth that we experienced in 2007. We anticipate EBITDA forecast of about $6.2 million to $6.6 million in 2008. Our Web Hosting segment also has no debt.

We have taken some cost reduction measures which we always pay attention to. Obviously in a growing business, we do not -- we're not looking to reduce our overall cost or expenses, but we are obviously looking at expenses that we incur that do not generate real cost-effective returns off of them.

In certain areas we have reduced headcount and salary related expense. At one point in time in 2007 we have a salary run rate of approximately $7.5 million. That has been dropped about $5.4 million. We're constantly looking at evaluating our personnel employees and make sure that they are being efficient and providing good value-added to our overall Company.

We have further plans to reduce other cost. There are a few facilities around the United States where we are currently housing one or two employees which are basically leftover from our legacy capital business. We could experience approximately $200,000 to $250,000 of annual savings in the event that we make those reduction.

I would now like to turn the rest of the presentation over to Seth Cohen.

We're going to go into slightly more detail on our financials for 2007. First, I would like to talk about the consolidated statements of operations included in our press release, which compares the year end December 31, 2007 with the year ended December 31, 2006.

Revenue for the year ended December 31, 2007 increased $4.9 million or 5.6% to $92.8 million over 2006. This is primarily due to an $11.3 million increase in Electronic Payment Processing revenue, a $2.6 million increase in Web Hosting revenue, and a $2.2 million increase in other income, offset by a $10.3 million decrease in income from tax credits.

We recorded a loss before benefit for income taxes and discontinued operations of $17.1 million in 2007 as compared with the loss before benefit from income taxes and discontinued operations of $3.2 million in 2006.

Over 50% of our net loss is primarily due to the non-cash loss attributable to Capcos. The remaining loss reflects increased expenses associated with corporate activities, primarily related to salaries and benefits, and losses in all other segment, and the reduction in earnings in our three core business service segments. Our net loss was $11.2 million or $0.31 per share in 2007 as compared to a $2.1 million loss or $0.06 per share in 2006.

Please turn to our balance sheet included in our press release, which compares December 31, 2007 to December 31, 2006, where I would like to point out a few items. Our total cash, restricted cash and U.S. Treasury notes totaled $38.3 million at December 31, 2007 as compared to $43 million at December 31, 2006. We reported on our balance sheet at December 31, 2007, $77 million in shareholders equity and $2.13 in net book value per share.

Total assets were $218 million and total liabilities, $136 million, a decline of $23 million and $13 million from 2006, respectively. Our shareholders equity, which has grown significantly from $27 million in 2002 to $87 million in 2006, declined to $77 million in 2007, reflecting our net loss of $11 million in 2007.

You will note that our balance sheet contains to shrink as tax credits are delivered, which reduces our credits in lieu of cash assets and our notes payable and credits in lieu of cash liability. In addition, we also have prepaid and structured insurance asset decline. That is a non-cash decline and non-cash expense related to that, also related to our Certified Capital Company. Both are a non-cash reduction to the assets and the liabilities.

Starting in the first quarter 2007, we consolidated our investments in CDS, which is a billings and receivables financing company. This has added $1.9 million in accounts receivable, $2.5 million in goodwill, $1 million in accounts payable, and $1.1 million dollars in bank notes payable to our December 31, 2007 balance sheet.

I would now like to review the performance by segments. Please turn to slide 27 in our PowerPoint presentation. That compares our full year 2007 results with our full year 2006 results. Electronic Payment Processing segment revenue increased $11.3 million, or 26%, to $55 million dollars for the year 2007. This increase came from a combination of organic sales growth and portfolio acquisitions. Growth in 2007 organic revenue was from a combination of increased number of merchants, additional process sales volume, and additional process transactions against 2006.

Income before taxes decreased 19.6% to $2.4 million for the year from $2.9 million in 2006. The decrease reflected a $1.8 million estimated loss provision related to a chargeback for a single merchant. Even excluding the impact of this loss, Electronic Payment Processing cost increased at a slightly greater rate than revenue over 2006, reflecting the addition of several higher volume lower margin merchants in 2007.

Web Hosting segment revenues increased $2.6 million for the year, or 19.3%, to $16.2 million. We increased our average number of monthly websites 20% from 2006, while average monthly revenue per site remains stable. For the 2007 year, expenses increased $3.2 million or 32% over the year ended 2006. This includes a $1.2 million increase in rents and utilities, reflecting a move required for our growing operations to a new larger data center. We do not expect to fully utilize this space in 2008.

Other major expenses that increased included $690,000 in payroll cost, $704,000 in appreciation due to the purchase of servers for customers, and a $753,000 increase in additional software licensing fees. There was a net reduction of $381,000 in interest expense compared with 2006.

For the year ended December 31, 2007, income before income taxes was $3.2 million, down from $3.8 million for 2006. SBA Lending segment revenue for 2007 decreased $386,000 to $9.1 million from 2006. Sorry, SBA (inaudible) for 2007 decreased $386,000 from 2006, due to a decrease in premium and interest income. The decrease in premium reflects that the Company sold slightly less than half as many loans formerly held for investment as it did in 2006, as opposed to the guaranteed portions of loans that we sell on a regular basis.

For sales of guaranteed portions of its loans the Company recognized a lower average premium in the second half of 2007 than it did in 2006. Should the pricing remain at this level or decline, it will continue to adversely affect revenues, and therefore the segment's performance in the future.

On a related note our lender experienced a reduction in servicing retained on the guaranteed portion of SBA loans sold. Although this reduction did not result in material decrease in servicing fee income in 2007, it will negatively impact servicing fee income in the feature.

Expenses for the year increased $21,000 due to lower interest expense of $342,000, salary and benefits declined $46,000, a reduction of $65,000 in depreciation amortization, and professional fees decreased $253,000, offset by a $435,000 increase in the provision for loan losses and an increase in other expenses of $291,000.

For the year, the Lending segment had a pretax loss of $90,000 versus income before taxes of $317,000 in 2006. For the year ended December 31, 2007, revenue in the Capco segment decreased $10.7 million over 2006. The pretax loss increased to $13.1 million by $8.1 million over 2006.

The non-cash loss represented by income from tax credits, less accretion of interest expense and amortization of prepaid insurance, totaled $9.4 million in 2007 and $340,000 in 2006.

Revenue in the all other segment increased $1.4 million for the year ended December 31, 2007, primarily due to the consolidation of CDS. The 2007 loss was $1.4 million versus a 2006 loss of $300,000. The increase in loss is primarily due to an overall increase in losses related to our Texas qualified investments, and the CDS net loss which was consolidated for the first time as of January 2007.

For the year ended December 31, 2007, corporate activities which generates revenues primarily from management fees from the Capco segment, lost $8 million as compared to $4.9 million in 2006. This is primarily due to $433,000 less in management fee revenue, coupled with a $2.7 million increase in expenses.

Salaries and benefits increased by $2.9 million, and other expenses increased by $257,000. The increase in salaries and benefits was primarily the result of the Company consolidating its marketing and sales staff from subsidiaries to the holding company to implement corporate strategy, and the addition of employees to the accounting, finance, IT and human resource departments. This was offset in part by a $583,000 decrease in professional fees from 2006.

Slide 28 in the PowerPoint compares our full year 2007 guidance with our actual results. However, you may find that there is an error in the slide, that it is not showing up as 2007 actual versus guidance. We're going to fix that, so I am just going to read to you what happened.

You will note that overall we recorded revenues of $92.8 million, which was below our guidance range of $93.8 million to $95 million. This is primarily due to the SBA Lending segment missing revenue guidance by $1.3 million.

Our pretax loss of $17.1 million was below the low end of our guidance of $16.3 million, and reflects the $1.8 million estimated loss provision related to a chargeback for a single merchant, as well as the loss rather than gain in the SBA Lending segment.

Electronic Payment Processing met it revised guidance for pretax net income and EBITDA, while Web Hosting came in slightly below expectations. Slide 29 of the PowerPoint gives you details by segment for cash flow from operating activities for the year. And shows that we burned a total of $2 million in 2007. It gives the detail for those calculations.

Slide 30 provides for informational purposes fourth-quarter 2007 actual versus fourth-quarter 2006 actual financial information. And slide 31 provides fourth-quarter 2007 guidance versus fourth-quarter 2007 actual results. Slides 32, 33 and 34 provide EBITDA reconciliation explanation of non-GAAP financial measures that we utilized.

If it is okay with Barry, I'm going to go ahead to slides 36 and 37 of the PowerPoint presentations, which provide our annual and quarterly corporate and segment guidance for 2008. Please note that in 2008, as Barry said before, CDS will be moved from the all other segment to the SBA Lending segment, which will be renamed Small Business Finance to better reflect that segment's services that it provides to our customers.

In addition, intracompany operating expenses for services provided between the operating segments will be expensed to the user of the service rather than the provider, as currently done.

The Company expects 2008 consolidated revenues to be between $100.5 million and $103.1 million. In 2008 it expects a loss before benefit for and income tax and discontinued operations of between $16.9 million and $19.3 million. If the Company adopts SFAS 159 as described above, consolidated revenue will be between $101.5 million and $104.1 million. And loss before benefits for income taxes and discontinued operations will be between $9.6 million and $12 million. Such adoption would cause an estimated onetime reduction of the Company's retained earnings balance of between $20 million and $25 million.

I would like to turn it back to Barry now.

Going forward to 2008, looking at the guidance that we have laid out, we are real happy with the continued expected progress that we see in the Electronic Payment Processing space, where we anticipate a range of revenues coming in from $66 million to $65 million, and EBITDA from $6.5 million to $7 million.

Our Web Hosting segment, we looking at full year revenues of $18 million to $18.5 million, with an EBITDA range of $6.6 million to $6.2 million.

Our small-business finance group, we have estimated with the entry of our receivable business throwing off a loss of somewhere between $1.5 million to $2 million. However that forecasting and guidance really does not anticipate any acquisitions of portfolios which we believe we have the capability, interest, and are presently in the process of bidding on.

We also look forward to the hopeful adoption of the new FASB recognition to be able to use fair market value accounting for our Capco segment, which we think will really add greater clarity to our financial statements, and give the investment community the ability to really focus on more value-added segment and component of our business, rather than the legacy Capcos business.

In 2008, clearly, the initiatives of the Company will be to develop a positive trend in our Lending segment, continue to grow our outbound marketing programs, both with project CDIA, which will allow us to cross sell and cross market our products into our existing customer base, as well as other customer lists. Look to create other bundled product offerings, with particular synergies related to our Web Hosting and Electronic Payment Processing segments in really offering a state-of-the-art e-commerce product and platform to the marketplace. And we also anticipate from a marketing perspective targeting various industries with our lending products and other products, such as supermarkets, restaurants and other types of industries where we actually have a specific interest in providing finance, such as manufacturing and things of that nature.

We look forward to a good 2008 with continued growth, despite the fact that obviously the economy is giving a lot of our competitors in the market some pretty stiff headwinds. We are very excited about the way we have been able to grow our customer base with our good business model, a lower cost of customer acquisition model, which you can see from the margins which are present in EPP and Web hosting business. And believe that we will find the sweet spot in our lending and our insurance agencies in 2008 to be able to get them as contributors to our bottom-line.

That is the end of our presentation today, and we would like to open it up to questions and answers.

(OPERATOR INSTRUCTIONS) Stephen Silk, C. Silk and Sons.

There is a lot to digest there, but first of all, looking ahead to your guidance for 2008, do you anticipate that the total depreciation and amortization to be equal for what it was in 2007? I am kind of asking that to try and get a handle for what you look for as far as cash burn or positive cash flow in those estimates for 2008?

I think that using a $7 million approximation for 2008 would be a fair approximation of depreciation and amortization at this point. Looking at cash flow from operations, and we obviously have not forecasted that, but I think that is probably going to be pretty close to a push. Last year it came in at a push, this year it is going to come in at a push.

Our feeling is that we want to utilize the cash flow that is coming off of the business to flow back into our business operations. We believe that we can create a revenue stream out of our Insurance division and out of our Lending division that will be meaningful.

If we can get those two engines moving -- if we can continue to experience the growth that we have in the Web hosting business and in the EPP business, we are going to clearly outrun the fixed expenses that we have at the Holding Company and really be able to drive a good bottom-line for Wall Street.

So I think you are looking at the -- I think you have a good way of looking at the Company. Clearly you have got a levered bet. We think that we have facilities and capabilities in four significant divisions to do big business. There is a lot of operating leverage in the business. What we are willing to do is to have a very full-blown staff up at the Holding Company in terms of providing marketing, IT, human resource, legal, accounting, all those expensive types of things that are required for a public company. And we will be able to out run that fixed expense curve up at the Holding Company. So I don't anticipate tremendous cash flows other than something plus or minus the breakeven mark for 2008.

The $30 million in cash pretty much is safe for you to -- say, maybe as a bottom as you move into profitability whenever?

Yes. If we are coming in at around the zero mark, you still have the $30 million. That is $1 a share in cash, and you could figure it out.

The salary and benefit line went up about 30% from where it was in 2005 and 2006. I know that 2007 for you really was a year of development and adding new personnel to put the business growing in new areas. And then you had said something about a reduction in headcount. So was there some severance or onetime cost of salary and benefits that would come out? The other thing is, you have ramped up and you have incurred these expenses, when are you going to start seeing revenues from some of the new initiatives?

I think that relative to some of the expenses that we put in at the Holding Company in terms of salaries, a lot of those were marketing expenses. And we brought in some senior people to help us on the marketing side. Some of those expenditures in the human side of the business work out, others don't. We are not a company that has any kind of a significant severance expense. Really we don't have any real shutdown costs of any material nature.

In terms of when do you -- I think the other part of your question is what do you think our investments in sort of infrastructure are going to pay off. We are optimistic that our Insurance division, which currently resides in the all other category, which at this point in time is not significant, which is why we have it in the all other category, will begin to hit stride in 2008.

The Lending business one quarter ago I was on this call, and I believe it might have been your question. You asked what do you think about the lending business for 2008. And my comment was that I believed we were going to be profitable and I believed we were going to deliver results in the first quarter. Obviously, that is not the case.

I would say that a lot of other lenders probably would like to exchange our results for their results, but frankly that is not a great answer. We do not accept mediocrity or slight losses as being a positive experience. On the other hand, it is very clear to us that there is an opportunity given what we have built in our Lending business to acquire portfolios at the right price, to acquire servicing assets. There are many financial institutions that are getting out of the business, are willing to do it at a discount. We have got the capital position. We have got the funding capability position to take advantage of it.

The one thing about the lending business in, you put lending opportunities on, or financial assets on with leverage, you can turn a lending business around pretty quickly, because it is a very, very levered business. So the fact we are covering our cost from a cash flow perspective, and maybe we have not done a lot in the last couple of years, does not really perturb me, because you could have very significant swings in that business.

I sit here and tell you I am hopeful and optimistic that the swings will be on the upside, but we have forecasted very conservatively, as we always try to do, to give the market comfort and confidence in our capabilities.

If we could put on sizable amounts of assets, I think that business can turnaround rather quickly. But importantly, lending and insurance are very core to our overall offering of delivering business services and financial products to small and medium-size business markets. So one of the things that I believe the financial community really has not looked at when they look at NewTek, is take a look at that AIG slide with the Business Service suite. Take a look at what Navy Federal Credit Union has now offered on their website in terms of an insurance portal. That is a very attractive offering for financial institutions that want the deposits from their business customers and they want to be able to also offer the other services without having the body count, without having the infrastructure. That is really the value of what NewTek does here today. And I think you have got a lot of upside in that, if we can ultimately execute on this strategy and deliver the results, which ultimately turn into significant cash flows.

This will be my last question. You read about what we were talking about in the last call what you seemed to have been waiting for the market to come to you, and now you are flush with cash to lend. In a sense what happened, from it sounds like, is that they did come to you to borrow more money, but you somewhat raised the bar of who you were going to lend it to. Am I right in that sense?

Then the other question would be, with your partners, if somebody comes to you through a credit union or through Merrill Lynch to borrow money, and you are not really approving that much, does that sour them on sending you referrals?

You asked a few questions. One of the things that happened to us since the last call was the market for the end product just dramatically changed. Cost of capital was changed. Waht a loan was worth six months ago the market now says it is worth much less. In addition to that, the accounting for that changed, despite the fact from a cash flow perspective that has not changed. The gain on sale that one would derive from the basic standard accounting treatment has changed.

Relative to us being able to make loans in the market, we decided that -- we evaluated within the last 90 days what is coming to us, and why we were turning it down. And the current marketing channel is bringing us opportunities that are not the kind of opportunities that we want to lend to in this market environment.

Fortunately for us, that is not effecting the overall relationship with these financial institutions because they understand that as long as you handle that client professionally and quickly, which is what we do, and give them quick yeses or quick nos, even if it is not the desired result, they fulfill their obligation to the customer.

With that said, we continue to work within our channels. We need to do a better job of targeting the kinds of client that we want to provide funding to, which are not new startup businesses or businesses without the type of operating experience that we want. We are interested in businesses that been around a longer period of time. And we will make those adjustments cost effectively to be able to keep, A., keep Newtek's name out in the market as a brand player for small-business lending. And B., we want to take advantage of the market. There times in the market where you can acquire product cheaper than you can create it on a new origination basis. And this is clearly one of those times.

You keep feeding into further questions. The lowest cost of your new customers is cross selling your products to existing customers. I know I ask this every quarter, but are you any closer to rolling out those capabilities?

Yes, we have started test marketing outbound calling in Brownsville this month. That is going to continue to a more full-fledged launch in July of 2008. And frankly as we have discussed historically with you and other investors, we wanted to make sure that we had a real good capability with trained professionals on the phone, with software connectivity between all of the divisions, that when we get on the phone with a client we can present ourselves professionally. Because there clearly is a skill and an art to being able to have a conversation with a customer and to be able to move within four or five or six or seven different products.

Now we do not believe that any one individual can be an expert in more than one product. So we have people that can have a conversation, take information and create a hot transfer to a specialist in -- a personal lines insurance specialist, a lending specialist, a payment processing specialist, or a Web hosting and technology specialist.

Our position here is to be able to get customers on the phone. Explain to them who they are. Tell them we do business with the largest institutions in the world and their customer base. These are the things that we do. Tell them what our specials are. Engage them in a conversation. Give them a talk about their business. And if they say they have an interest in insurance or payroll or digital bookkeeping or lending, drive them to that specialist immediately, and let them know that they're speaking to an AVP or a VP in that particular specialist category. What we are finding is this approach is being extremely well-received by our customer base.

[George Metraub, Caret Capital Management].

Just two quick personnel questions I want to get out of the way first. The first one concerning Jeff Rubin leaving the business. And if you could just explain why NewTek feels that position does not need to be replaced at this time?

Well, Jeff was a founder and former partner when we were private. A great individual, accomplished professional. Jeff historically had a role in the Company where he spent the majority of his time in the marketing end of our business. He helped develop the electronic payment processing space. And Jeff is a great contributor. But fortunately businesses are built, and I have to say one of Jeff's successes and NewTek's successes, is the demonstration of being able to build a successful business is to be able to build it so that any individual can come and go and you have a great business going forward.

The electronic payment processing business right now is going at great speed. Even though it is going off of bigger numbers, it is still growing in excess of 20%. Jeff spent most of his time in that particular space, not on a day-to-day operational role. And from his personal standpoint, he wanted to take the opportunity to go out and seek and build other opportunities.

From our perspective, although Jeff is a great producer, we have tremendous infrastructure and capability to bring in customers, book business. And as you are aware, there are many founders that establish businesses and go on and do other things. So I think the fact that Jeff didn't really play a day-to-day operational role, more on the marketing and development of the business, is a rationale for not replacing him. But he clearly will be sorely missed. He is a great professional, and added of value to the Company.

Speaking of the EPP side of the business, let us just go to that. There has been phenomenal growth in that segment of the business for NewTek. This year it seems that margins have been going down the past couple of years, and particularly this year. The pretax net income margin dropped about 240 basis points. And if you could comment on maybe how that $1.8 million chargeback affected the accounting in that segment?

This is Seth Cohen. I am just going over some notes which will help. The $1.8 million is related to a single merchant. And if you exclude this -- basically the way to look at it is this way. Our expenses increased by 29% in 2007 over 2006. If you exclude the $1.8 million, which is something that can happen as a part of your business, but is rather exceptional. If you exclude the $1.8 million then our expenses would have increased by 27% over 2006. Relative to the -- as opposed to the 26% gain in revenue that we saw. So you can see it was slight reduction.

In the middle of the year we added a group of supermarket and equivalent merchants. They are all fairly high volume ultra safe merchants, but they also have very little margins. As a result, we increased our revenue number when we increased our expense number by almost a similar amount. And that reduced our overall cost of goods sold -- increased our cost of goods sold and reduced overall gross margin.

We saw that trend ameliorate in the second half of 2007 as we added a more traditional mix of our merchants. There has been a slight amount of compression in our margins, but not as much as you would see if you continue to include the $1.8 million.

If you take the charge-out, Seth, I don't think our margins are down at all.

That's what I thought as well. It seemed like it all had to do with that $1.8 million.

That is correct.

I have heard you now on the call here and previously talk about a lot of opportunity in the SBA lending business, as far as purchasing portfolios. In the Web hosting business you have got the $10 million line of credit. One of the reasons cited was for use of potential acquisitions. What about in the EPP space? It is one of the biggest segments here, growing -- and despite the little down tick this year because of that charge, the margins have been relatively stable over a number of years here. What do you see in terms of acquisitions in that space to really kind of drive that as being a focus?

I think we that what have down is we have kept it disciplined to date. We've had plenty of opportunity to buy. You have a merchant business that has a evaluation that has no debt. You have a Web hosting business that has evaluation and no debt. We were -- from our perspective -- and frankly a lending business those underlevered as well.

So it is not easy to sit back here with your position. You are obviously want to keep buying. You want to show earnings, you want to show growth. But we believe that the markets would contract. Now the markets -- you can't look at the stock market, you can't look at the cost of capital of debt markets and say, hey, it has happened.

We believe that there will be enterprises, both in Web hosting, in the merchant services area, and we're seeing it now in the lending area. We're not seeing it in these other areas -- where there will be an opportunity to buy businesses. Maybe to work with banks, take the businesses off their hands. That is really where we want to be. So we're going to be selected. We are not going to have sweaty palms. We will sit back and hopefully be able to make acquisitions and take businesses off of other people's hands and integrate them.

We have not yet seen what I will call the cracking in prices yet. But I will tell you a lot of private equity firms that went into these markets and made acquisitions in the merchant processing space and the Web hosting space, because these were great cash flowing businesses, and they pushed up the prices and evaluations on these things, you get a little bit of economic downturn and all of a sudden their cash flow is turned down. They can't make their debt. And they got to get out. That's where we want to be.

In the 10-Ks of the past couple of years you have put in customer numbers. And I don't think you put it in the press release. Do you have those yet for the number of customers in the EPP, and what you processed in that business for '07?

I can give you approximates. The EPP space is about 15,000 customer accounts. The Web hosting space is 65ish, and the insurance space is probably 4,000 to 5,000, and the lending space is probably 500 or 600.

All right. On the Capco side of the business, it is so pleasing to see a clear slide like slide number nine describing the differences in the accounting treatments, and how will change the presentation of the results.

But there is a number here that you also have on slide 29 that showed cash flows from operating activities. And the cash flow segment from Capcos, obviously a big drag on the business. Really a gray cloud over what seems to be the Business Services segment just performing well. The $5 million loss there, if you could direct me as to where I would be able to reconcile that with your pro forma non-cash loss estimate of, we will call it, just about $1 million in '08. Or even more so to say, is there a way that you guys will be able to project your cash flow losses in the Capco segment going forward, regardless of what accounting treatment it is given?

I think the cash flows that come on the Capco segment, it is a little bit -- you have got management fees in there. Is that what is driving it down?

Yes, it is almost -- of the $5 million, almost $4 million is management fees.

Is management fees. So the Capcos as a segment pay a management fee to the Holding Company, which would be income on the overhead segment, but an expense for the Capco segment. So it is really an offset. It probably cost us around $1 million a year to keep these Capcos going. And that is accounting, it is legal, and other expenses to keep 16 subsidiaries in compliance with legal statutes.

And with that SFAS 159, what kind of a timeframe could we expect on that? Is it something that we can see as early as like a Q2 '08 or is this more like fiscal year '09?

I think -- we can't comment on that, but what I would tell you is we clearly put it out there because we believe it is something that if we did not, it would be imprudent. We are obviously going to go out and report our first quarter in about 55ish days from now. And obviously we are looking at this very seriously. If we did not think that it had a possibility, we were not discuss it. We also think that if we did not discuss it at this point, it would be imprudent. We have reviewed it. We have researched it. I will just leave it at that at this point in time. I think you can --.

It is fair to see that at least we are making headway, because before it was always just kind of talking about hoping that would be something to do on the accounting side. Now at least there is an actual rule out there we can take advantage of.

It really fits to what we're doing here. In other words, it works, it makes sense. Obviously we are just finishing up with our annual, and I guess in about an hour. Seth and I will start working on the first quarter. And with that, as you understand, what public companies do, we get out there, we get clearance from the accountants, etc. So I think it is something that you can anticipate an answer from this Company in the near future. And I will leave what the near future is open.

One comment on your cash balance. Barry, I know ask this all the time about repurchasing stock. You have talked about investing in the EPP business, the Web hosting business, the Lending business. And it seems to me, you are listed here $1.06 in cash at the end of this year. And the stock closed at $0.99 today. If you could comment on why investing in your own Company in NewTek stock would not be the best investment at this time?

We have invested. We have purchased just about 200,000 shares out of 1 million. And this is a market where capital is very precious, and we are selective. So as we sit here today, we look at all of our opportunities, which would be buying back shares, maybe using some of that capital to finance an inexpensive loan portfolio, or to acquire a Web hosting company, or merchant processing.

So we look at that all day long. At the end of the day when you buy back your shares, obviously it reduces your outstanding, it drives your EPS. On the other hand, we also look at where we get our biggest bang for the buck. We believe our biggest bang for the buck will be continued growth, other resources and demonstrating to the market that the model works. Not necessarily a financial play in reducing the number of outstanding shares, which is good for the short-term, but isn't quite as good for the long-term.

I think the Company clearly has a bias toward things like share buybacks, which you can interpret -- and you can interpret whether that means we like buying back or we don't like buying back. We have bought back at much higher levels because we are comfortable with the stock prize. On the other hand, we use our cash sparingly, particularly in a market that is capital short.

One last thing, back all the way around to the personnel question. Nice to see that you brought Jayne Cavuoto for IR functions. I was wondering if you could comment on your plans at all to do a roadshow soon or investor conferences, or become more active in engaging with the Street.

I think that SFAS 159 will provide the Company, and obvioulsy we indicated that we would like to use an accounting treatment that would provide more clarity, will actually give the Company a very good return on its time to be able to out to investors to discuss and focus on what we are doing in the business service market, which we believe has a real inherent value.

So I think some of the timing relatives to brining Jayne in, hiring the Rubenstein firm, a world-class PR and IR type firm, to draw attention to investors will be rewarded. So I think we will begin to get out there and start to talk about more about what we're doing, now that there is a real clearer path to what investors are interested in talking about and what they can see.

Evan Greenberg, Meadowbrook Capital Management.

My major question was answered, so I will switch to the second question which has to do with Crystal Technology and what is going on with the gross margins there? And as it is a very competitive environment, how has the churn been at Crystal Tech? It seems as though revenues are still growing. Has there been a lot of CapEx spending expenses at Crystal Tech to account for the follow-up in gross revenue, gross margins there?

CapEx expenses are fairly steady. They primarily are driven by the sale of dedicated, which is increasing, but I think the margin pressure is based upon the fact that, number one, the business has got to grow in a step function. So when you fill up your NOC center with servers and you need more room, you can't just go buy another 5% or 10% capacity.

So last year we went and we moved. Not an inexpensive thing to do. We moved into a new facility, which is approximately at 50% of capacity. So we hope to go out and sell a lot of dedicated product. That should improve the margins again, because you have got the fixed expense, but now you have got the cash flow coming in at the top.

That is relative to the operating margins. Relative to the gross margins it is a competitive environment. We need to develop our marketing strategy to let greater numbers of resellers and wholesalers know that we are very good in this business. And that we are a much better alternative from a service perspective then the brand X, Y and Z, who maybe advertising on the Super Bowl or maybe all over the Internet. But when you call them up and you have a service question or an issue, you cannot get anything done.

You have got 24/7 365 that they don't.

They have it too. The problem is they just don't really do a good job at it. They take their money and they spend it in advertising. We have used our dollars to make sure that we have got the best and the brightest answering the phones, and pay a lot of attention to customer service issues.

So I think those are the two differences. But I am optimistic about where we are in that space. I am particularly optimistic in trying to create a very logical synergy and relationship between the Electronic Payment Processing division and Web Hosting division, because at the end of the day, everyone is taking payments on the net. And if you can give a customer the ability to deal with one person, to supply the gateway, the Web hosting, the design, and fit them for EPP, you have a winner. Rather than half have that client or that webmaster deal with three or four different providers. And we believe we have got the capability to do it. And that is clearly a focus of ours going forward. And we think those are the emerging markets where you have got more payments and you have got more growth.

Would you acquire a Web designer if it was the right fit?

We are currently designing websites. We do not love Web design. And that is not done out of Crystal Tech. At least I don't love it. It is art, and we are not really in the business of heterogeneous products. We really don't want to be in the art business. We want to stamp stuff out. So, no, I would say no. I would we design very inexpensive websites for clients that a need, where we can completely add them together with our Web hosting business, and to give people an e-commerce solution. But we are not in the Web design business, and we clearly don't want to compete with our customers.

It is too customizable. How much was the cost -- let me just ask one more question. How much was the cost of getting that new NOC in the move? How much was the overall cost for the year?

We have not laid those numbers out. But I think you could interpolate it yourself by looking at the jump in the expenses of Crystal Tech. There is clearly moves -- increases in rent, cost of moves. It was significant. It was not an insignificant move.

Because you normally -- it is something you could have recorded as I guess a onetime charge, but chose not to, just to expense it, which is good. Much cleaner accounting. That is a onetime charge as a facility shutdown and a facility ramp up, and all of those kinds of things are onetime expenses.

We were in another facility that was off of a long-term lease with a lower rent. We're know in a new facility with a market rent. This is where you have changes.

Ed Antoian, Chartwell.

This is going to sound like a controversial question, and I don't mean it to be, but maybe I do. So I guess it is a statement and then a question. The statement, you know, the Company has had EBITDA (inaudible) for two years that they have not met. It doesn't really generate any net cash. In has one business that in my opinion is valuable, the EPP business. And a bunch of other businesses that you are hoping to integrate, but probably aren't nearly as valuable. Is there a timeline where you say at the end of '08 or at the end of '09 that if the Company does not show progress in meeting their estimates or generating free cash that you would put the Company up for sale?

Well, there is always a timeline. And there is always a discussion that we have at the Board level to develop our plan and execute our plan. I think that if you are looking at our Company, and it is pretty clear from how we have discussed strategy and our market what we're trying to do. And we have pretty said this on calls. If you are looking at an investment where the month-to-month, the quarter-to-quarter, that straight line, that beautiful picture is real important to you as an investor, then NewTek may not be the stock for you.

I'm looking over the last two years, so not quarter-to-quarter. The last 24 months.

Well over the last 24 months you have got the merchant business that keeps growing. And I had people two years ago that said you should sell the merchant business.

No, the revenues are growing, but cash flow is not growing.

You got $6.6 million to $7 million of EBITDA forecasted for 2008. And if you wouldn't have had the onetime loss in the one special account, you would have beaten the EBITDA and the revenue guidance for EPP in 2007.

Only if you lowered twice during the year.

On EPP?

Yes.

That was lowered to reflect the onetime loss.

No, no, you lowered your EPP guidance. You can go back and look at your last three quarters -- I have them in a file -- but you lowered your EPP guidance in Q3 and you lowered it in Q2.

I don't agree, Ed. I think the only time we lowered EPP was based -- in Q2 it was lowered to reflect -- the first time it was lowered was to reflect a $300,000 loss relative to that onetime situation. And then we lowered it again one more time and we were able to account for the full amount of the loss.

Then if you go back to '06, you didn't meet your EPP guidance in '06. But I don't want to distract from the overall comment. My overall -- because I don't want to make it controversial. And I will apologize again.

You don't need to apologize. We appreciate you and we appreciate your comments.

My real question is, so I think EPP a valuable asset. And the idea and attempt to integrate it with these other businesses is probably more difficult than any of us imagine. And I don't if you agree or not, but there has to be some timeline where you say, hey, this strategy of being the small-business provider, integrating with all of these other businesses does not work. You say, you know what, we have this nice asset here that people would buy. We sell it. Web hosting, you would be able to sell it not for a lot. The other businesses you would probably have to shut down. And it would all be worth a lot more than the stock is trading for. Not a lot more, but $2.

Ed, this won't surprise you, but I have heard that from others. I don't know how to answer your question.

One way would be -- to my first question would be, yes, there is a timeline and by --.

I did say that. Listen, I think that what we have got to do, as a Board, what I have got to do as the Chairman of the Board and CO of the Company -- and I think we're been very clear as to what we believe and what our mandate is.

I have got a disagreement with you, which is fine, as to what is working and what is not, and what a realistic timeline is. That may be the difference between someone trying to build a business and someone trying to get appreciation out of the stock. I understand that.

I'm also a shareholder like you. And I said -- I am sitting in front you. I will sit in front of my Board and say that there's no question in my mind that the Company has built and developed itself over the course of the last two years. So you can comment that we missed this, we missed that. That is okay. I see what is going on internally within the organization. I see what our customers are telling us, and how they're coming to us.

It doesn't necessarily show through the numbers. Maybe not clearly or maybe you don't view it that way. I think the answer to your question, and I want to be pretty concise is, we have to run this Company for shareholders. We're sensitive to shareholders' wants and needs. And I think that one of the things that we have been able to accomplish today is the introduction of an accounting procedure that will make what we are doing more transparent. And from your prospective you are saying, hey Barry, we need to see the cash flows that are coming out of this business. And that is ultimately what is going to drive the stock price.

We do not have our head in the sand. We look at things -- our base timeline may be different than yours. We do not currently have any timeline. We like what we are doing. We are building value every day. We're building a customer base, and we believe we are going to be successful.

Okay. Keep working hard for us.

We will do it. And I appreciate the question. We always appreciate your interest.

(OPERATOR INSTRUCTIONS). Paul Solit, Potomac Capital.

First of all, I would say like most other people on the call, I applaud your effort to share the value of the businesses ex the Capcos. And while I agree that capital is scarce in this market environment, and I like a lot of the opportunity to bid on some portfolios in the financial business, but the current at price you are buying $0.30 dollars at least. And you could argue that EPP or the Web business is worth a lot more than the current market cap. So I guess it is a long winded way of saying that I think you should be more aggressive on the buyback. Don't go and spend $15 million on it, but you could spend $3 million, $3.5 million and buy 10% of the Company here, with no integration risks. Businesses that you obviously know. And it is incredibly accretive, and the situation is not going to last. The stock is not going to stay trading around cash here with no value to the businesses. And I think the moves you're making will do that, but why not take advantage of people selling here and building value for the rest of us that are sticking around?

We understand your comments, P.J. I think we expressed our position on share buyback. It is something we have done recently on a selective basis. We have an $800,000 authorization to do more. And I am trained by legal counsel not to talk about price or evaluations, so I cannot comment on them more than you already know.

All right. Well, I think most of the shareholder base would like to see you wrap up the $800,000. It is not significant in terms of your cash balance, and then you can decide after that if you think it is worth doing more.

I appreciate it. I appreciate you coming on and voicing that.

Thank you.

That is important to me and valuable for my Board and shareholders to be aware of.

Good to hear. Thanks.

That does conclude our question and answer session. Mr. Sloan, I would like to turn the call back over to you for any further comments or closing remarks.

I wanted to thank everybody for their participation. And to be candid and honest, we appreciate all of the questions, the tough ones, the softballs, the meat balls, they're valuable to me. We have a lot of interested parties that listen in on these calls. We are respectful of these opinions. They are very valid. We appreciate people that have invested in the Company, are seeking to invest in the Company. And these types of comments and concerns help us shape our thinking and our philosophy and our strategy.

We are appreciative of the patience investors has experienced in difficult times, as well as this Company's transition out of it Capcos business into its new business. And we're going to work hard for you and we thank you once again for your participation.

Thank you. Ladies and gentlemen, that does conclude today's conference call. We would like to thank everyone for their participation in today's call. Have a great rest of your day.