NewtekOne Inc (NEWT) 2017 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Newtek Business Services Corporation Q2 2017 Earnings Conference Call.

(Operator Instructions) As a reminder, this conference may be recorded.

I would now like to introduce your host for today's conference, Mr. Barry Sloane, President, CEO and Chairman of the Board.

You may begin.

Good morning, everyone.

My name is Barry Sloane, President, CEO and Chairman of the Board of Newtek Business Services Corp, stock symbol NEWT on the NASDAQ.

We welcome you all to our second quarter 2017 financial results conference call.

On the call with me today, helping me throughout the presentation, will be Jenny Eddelson, our Chief Accounting Officer.

I'd like to point everyone's attention to the fact that they can follow the conference call on our website, Newtek1.com.

The PowerPoint presentation is on the site in the Investor Relations section.

It will also be archived there from an audio perspective.

With respect to that presentation, if you go to Slide #1, there is a note regarding forward-looking statements.

It's important that everybody has an opportunity to read and review that.

Going into the presentation on Slide #2, we always like to take a look at our historical stock performance.

Newtek's 12-month total return at June 30, 2017, including reinvested dividends, 41.5%.

Our total rate of return year-to-date for June 30, 2017, including reinvestment of dividends for 6 months, 7.1%.

Our 5-year return, 307% and 3-year return, 41.9%; our one-year return 27.7%, all these returns were taken off of Bloomberg.

On Slide #3, we are looking at our second quarter 2017 financial highlights.

I would like to point out with some specificity one of the things that the company does desire to do in addition to paying a dividend, growing its dividend, is seek to provide value and grow net asset value.

We'd like to point out that on a per-share basis, we had an increase of 1.7% over the course of 6 months from year-end to June 30, 2016 and over the quarter, it was 0.4%.

We had a net investment loss of $1.7 million for the 3 months ended June 30, compared to a net investment loss of $4 million for the 3 months ended June 30, 2016 on a year-over-year comparison.

Our adjusted NII and the difference between the adjusted NII primarily and the net investment loss from a GAAP perspective is most BDCs do not have regular, what we refer to as reoccurring event, which is capital gains because of our loan sales.

That's the primary difference between the GAAP net loss and the adjusted NII.

So our adjusted NII came in at $7.2 million or $0.41 for 3 months ended June 30, an increase of 44% over adjusted NII of 4.9% in the year prior.

Some of the other factors that are increasing our income, rates have risen 3x in the last 8 months.

So the increase in prime in interest income on the portfolio.

So besides the portfolio, which grown from $211 million to a little over $240 million over the course of 6 months.

So all these factors are leading to increases in overall income.

Our debt-to-equity ratio at the end of June 30, 2017, 81% and our total investment portfolio increased by 13.6% to $392 million.

Moving slower to -- moving forward to Slide #5.

In the second quarter, we announced the closing of an investment in a new wholly-owned controlled portfolio company, IPM, and information technology consulting company that provides professional services and also offers hardware and software to commercial enterprises.

We were proud to announce in the second quarter that S&P increased its rating on our loan securitization Class A notes on the 2014-1 from single A to A+.

We're also happy to announce that our servicing portfolio came in at $1.1 billion on June 30, 2017, an increase of 24.8% over the same year.

And we relaunched and redesigned our website, Newtek1.com, Tier 1 solutions company

On Slide #6, we focus on dividends.

Our second quarter dividend was $0.40 a share.

Second quarter dividend of $0.40 a share was 14% increase over the $0.35 dividend in the second quarter of 2016.

The total of the first and second quarter dividends equal to $0.76 per share, an increase of 8.6% over the total first and second quarter in 2016.

We were forecasting and reconfirming $1.57 in cash dividends per share in 2017.

Last year, 47% of our cash dividends were paid in the form of qualified dividend of -- we do expect the percentage of our 2017 dividends to qualify preferential tax treatment.

Our loan business is growing faster than the other business.

I don't think it will be at 47, a range of 30% to 40% might be appropriate going forward.

Looking at our SBA lending highlights.

For the first 6 months of the year, our fundings were up 20.7%.

We're going to focus a little bit on one of our controlled portfolio companies, Newtek Business Credit that provides inventory, receivable line of credits as well as fiber 4 -- 504 loans.

We funded $4.8 million of 504 loans through the first 6 months of the year.

From a referral perspective, our referrals were up this year versus last in the first 6 months, 25.7%, receiving $4.7 billion in loan referrals.

Throughout our 14-year history, we have approved over 3,000 SBA 7(a) loans totaling over $2 billion.

We're announcing today that we are increasing our SBA loan origination guidance.

Previous guidance was $400 million.

We're bumping that up to $415 million for the year.

That will represent a 31% increase year-over-year this year, referral versus last year's and a 4% increase over the previous guidance.

On Slide #8, an important factor of our success in being able to deliver value to shareholders is as we grow, demonstrate our operational capability and our financial results, we've been able to lower our cost of capital.

That's been done through increasing our Capital One Bank line from $50 million to $100 million with a rate reduction of 1.25% for the unguaranteed -- [1.8%] in the unguaranteed loans and 1.25% on the guaranteed loans.

We also increased our Goldman Sachs line from $38 million to $50 million.

And we have a range of rate declines beginning in 1% on the margin decline to 2% depending upon how much leverage we pull down on the line.

Very importantly, Newtek and that registration statement has now stale.

It's in the process of getting repositioned, reinstituted with the SEC.

We have moved to a strategy, when appropriate, to use an at the money structure for selling common shares.

We did exercise that slightly in the second quarter.

We're able to raise money at a 2% discount and right at the market.

It was a great vehicle.

This is contrast towards erasing larger blocks of money at 3% to 6% discounts from the last trade and 5 to 6 points of right commissions.

On Slide #9, we always like to point out our depreciated BEC model and why we believe, if you're looking at BC investments, a lot of investors look at us just not as a BDC, but they look at us as a general investment opportunity.

But for those investors of that are focusing just on Newtek as a BDC because we are a different BDC.

Number one, most of the BDCs are externally managed.

So we don't pay the proverbial 2 and 20 out to ourselves.

All of our expenses are fully loaded.

Importantly, from a risk perspective, in order for most BDCs to be able to pay out that market clearing dividend of 9% or 10%, whatever it might be, they've got to invest in riskier asset classes, CDO equity, mezzanine investments, subordinated debt with an equity kicker, all types of instruments that deal between 10% and 14% and they put some leverage on it.

In Newtek, our loan portfolio is primarily a senior secured loan portfolio.

The average balance of our loans is 180,000 on the uninsured.

We're currently originating between 600,000 to 700,000 if you include the guarantees.

So when you look at our loan portfolio of $240 million, you've got a tremendous diversification in loan balance, in geography, in industry type and where loans originated.

This diversification, we believe, significantly reduces our risk.

They're also all quarterly adjust, over prime and without a cap.

So as rates move up with half of our portfolio not being levered, this provides a lot of value to our shareholders in a rising rate environment.

From an interest alignment standpoint, the President and CEO owns about 5.8% of the common outstanding shares.

My interest are very much aligned with the outstanding shareholders.

No equity investments and CDOs deals.

There's no SBIC leverage.

And even though it doesn't count as leverage come, it's actually that.

We've got to pay interest.

We've got to pay the principal back one day.

So we'll look at our model and look at the rewards that were giving shareholders the levels of risk.

We just think it's better.

We think it's better because investors are investing effectively, particularly in the controlled portfolio of companies and operating businesses.

And these are businesses that we're active in.

We control them.

We manage them.

These are businesses that we typically own for over 10 years.

And in our lending business, we have really good control, great track record in history and you're dealing with senior secured loans, small balances and a lot of diversification in there.

Moving to Slide #10.

I think it's important to note, when you're investing in Newtek and a lot of people are investing in Newtek as they're hopeful and we've been able to deliver it so far, that we'll continue to increase dividend, continue to hopefully increase the NAV, our strategy is based upon continued growth in loan originations, organic growth in the operating businesses and the controlled portfolio companies and strategic investments within the business solutions footprint to enable to take our private, smaller company valuation NAVs to public company valuation NAVs.

On the acquisitions side, on Slide #11, the current pipeline.

We're currently looking at making investments in 2 PEOs.

This will be very beneficial particularly the businesses in that we're trying to cultivate that really significant's HR needs, health insurance needs and benefits needs.

We're also looking at acquiring a B2B outbound call center.

This will be a great adjunct that finally will give us the ability to professionally, systematically call out our existing client base as well as the client base of our alliance relationships.

looking at merchant processing portfolio that's a unique technological and operational platform in it.

And we're also looking at a valuated reseller and professional services provider.

always take a look at Washington, particularly in today's environment, every business should.

There's currently a bill that's come out of the House Small Business Committee sponsored by Jeff called Choice 2.0.

The choice will allow BDCs to increase their leverage from 1 to 1 to 1.5 to 1. The value for an entry like ours, as well as other BDCs, is the next approximately $120 million worth of funding that we would need prospectively to grow our business opportunities.

We will most likely have debt instead of issuing shares.

Now most people sort of ignore risk, I don't.

So when you're adding more debt, you're taking on more risk.

But the amount of risk adding 0.5% in leverage to the asset, it's very minimal, very manageable.

When you think the banks are levered 6 to 1, 8 to 1 and 10 to 1 and we're just looking to go up a little bit, very manageable.

And we think this would be very beneficial to shareholders if it occurred.

Question that is potentially for this year, does it occur next year?

This is a type of bill that will be attached to budget, economic development, you never know.

But on a positive note, small business is very bipartisan today.

So we are optimistic, frankly, in the path of former SEC Chairman was not a huge fan of BDCs.

There's a new SEC person that the President has nominated.

And we think that, that particular SEC Chair will be more favorable to several of the things on Slide #12, including the AAFE or investment companies.

This is key because it prospectively, with a change of viewpoint from the SEC, would allow BDCs to be be reincluded provided they qualify for size into the rest of 2000 for the S&P 500.

Moving to Slide #13, we're proud of the performance of our Small Business Lending group headed by our Chief Lending Officer, Peter Downs and his great management team.

We're the largest nonbank guaranteed lender in the United States, including banks, we're 17th largest.

It's important to note we're not new to the market of making loans to small or medium-size businesses.

we have a 14-year track record of loan default frequency and severity statistics.

We've issued 7 S&P rated securitizations, AA and A. And we are following in the footsteps of a business and industry where the 7 A program has been around for 16 years, 61 years and historically provided money to the U.S. Treasury.

Looking at our growth in the pipeline on Slide #14.

Our originations grew 20% over the first 6 months of this year.

Our referrals were growing by 25.7%.

And when you look at our pipeline, it is also growing.

I would like to note that the decline in loans and underwriting are really due to an improvement in process.

We have less loans sitting in underwriting for a considerable periods of time.

So we're happy that, that segment of our pipeline is actually less, could revel the cleanup of underwriting loans in section.

Slide #15, I can't tell you over the history of our calls to BDC, how many times we get the question about the rates rising affecting our business.

We've had 3.25 increases in rates for the Federal Reserve in the last 7 or 8 months.

And the prices, obviously, have not only have had on higher.

We've emphatically stated that the price changes here are driven by prepayment expectations, which are driven by voluntary and involuntary defaults.

We think that, obviously, our credits have been growing, the market credits have been good.

That doesn't change prepayment expectations unless you have a wide, hot economy where real estate values are going through the roof, business owners are getting several bids on their business.

It does not lead to a lot of repayments or transactional volume.

And Slide #16, we report on a percentage of performing loans, the percentage of portfolio, 3.5%.

On Slide #17, our charge-offs as of June 30, 2017 as a percentage, is 45 basis points.

And that's for a full 12 months period ended June 30, 2017.

Slide #18 and 19, I will not go into as they are standard slides in our presentation.

But we certainly feel that particularly new investors and we've spoken to many in the last few months, are interested in that math and they can certainly, get in the call and go over them.

On Slide #21, one of our portfolio companies, CDS, our Newtek Business Credit, which is as known as, starting to get some nice traction.

These are the quarterly pretax numbers.

These do not include any gains on sale from 504 loans in which they said.

We're optimistic that we think that business actually has an opportunity of getting into 7-figure earnings club, maybe not this year, but certainly next year.

A lot of the income off of this is based upon our inventory line of credit and receivable line of credit program.

But the 504 portfolio is also mixed into Newtek Business Credit.

When you go to Slide #22, it is a very full description of the 504 loan programs, which we have optimism that this business will be a factor and will grow over the course of time.

The 504 program is a loan program under the SBA that allows us to sell 100% of the components of the loan off.

A 40% second, which gets taken out by government debentures and a 50% commercial real estate loan first, which we've been able to sell to financial institutions in the secondary market.

Slide #23 shows how 504 loan has got up.

Slide #24 shows the return on equity and economics of 504 lending.

Rounding out our portfolio opportunities.

We have valued our payments business, which includes the merchant processing business of UPS with Clawson and Premier Payments.

We have owned and operated our Wisconsin-based business for over 10 years, premier for over 2 years.

We anticipate we will be at around 6 billion in processing by the end of the year.

We have the business on our books at 6.3x 4 adjusted EBITDA.

Looking at the public comps, they're all double digits.

As we continue to grow the business, grow the opportunity, we may be able to take advantage of the transaction that card recently did with First Data.

These businesses, when they're sizable enough, can trade in double-digit multiples.

A lot of opportunities in the payment processing space.

If you go to our website, you can see what our position in the market is.

We are a solutions based company.

We are not positioning on price.

We offer security, hardware and software initiatives, mobile payments, state-of-the-art e-commerce platform, and specific and specialized reporting for clients.

On Slide #27, we just made a recent investment in a company called IPM to add to our technology portfolio companies in addition to managed tech solutions.

Look at the valuations on Slide #27 of the public companies versus ours and our technology business is a reposition segment for us.

We still have about 99,000 business accounts, including 70,000 domains.

We believe that we are well positioned to take advantage of the transformation to cloud-based business opportunities, and we're really excited about positioning ourselves in the market.

Our strategy, which is illustrated on Slide #29, is we are the company.

Newtek is the company to manage your technology solution.

We have a 5-point plan to do this.

We go in the businesses and we listen.

We understand what they have, how their business works, what's their operation, what's their hardware?

What's their software?

What's their labor internally?

What's their labor externally?

We take note of that.

We do that for free.

We then go back to them with a plan.

It's a plann that we could charge upfront or it's a plan that we could load into a back-end solution.

We can't finance that over the course of time.

We can sell in the hardware and software, all latest, greatest, state-of-the-art solutions that are coming out of the sick trace, the M wears and the other institutions that we deal with.

We were able to implement and deploy.

So unlike going to a longline company, buying a server, buying software, where you've got to do it yourself, we can actually deploy that.

We could deploy that MYPM.

We can deploy that out of managed tech solutions.

And lastly, we manage the hardware and software for our clients.

What does that mean?

Whether they want to keep the hardware and software on-premise, which we don't think they should, where they want to move it into Amazon or Microsoft, which is a cloud-based environment, we can manage it for them 24/7 or they can put it in our environment, which is in Scottsdale and Phoenix, in New Jersey, in London and in Singapore.

We give a 5-point program.

The client can take one of the 5 points.

It could take 1. It could take 2. It could basically tell us, we want you to do the whole thing.

We want to hold you accountable and responsible.

Very different approach than some of the major consulting firms that will go in, give a plan, charge for the plan and then they're done.

We are fully accountable, responsible and will work with small to medium-sized businesses, commercial accounts, enterprise entities to manage their technology solutions and operational platforms.

On Slide #21, I want to point out to recent higheris, great talent.

Jesse Davis, co-founder and greater of Creative Mobile Technologies for those new year, Florida and a few others see-based individuals on the call when you go to the taxicab and you see that the contraption in the back that's got media the ability to take payments that's great the media Jesse help develop that in the long-standing career in developing solutions through out around business processes and operations.

Jesse has been brought in to help, number one, increase and approve the plan experience to acquire our products and services.

Number 2, make them more productive and efficient for our own staff internally to service our clients.

And three, to finally get us in the position to be able to market efficiently and properly our master central database.

Tom Wester, another recent hire, COO of Newtek Manage Solutions, working closely with John Raven to help build out our business and our 5-point technological plan.

In summary, we are a differentiated business model.

We've demonstrated really great returns of a 5 years, 3 years and 1-year.

We believe you're investing in assets that have less risk than the average BDC.

And based upon our return profile historically, have really done a good job in the marketplace.

We have a 14-year track record in lending.

So we're not new to the business.

We've been through up cycles, downcycles, up credit, down credit.

The portion of the portfolio they're investing is geographically diverse, it is industry diverse and 180,000 principal balances each, It's a floating rate portfolio that should rise as interest rates rise without the leverage portion of it incurring interest expense rising along with it.

Management's interests are very much in line with the outstanding shareholders.

I have a very large take of outstanding shares.

With that, I'd like to turn the financial presentation over to Jenny

Thanks, Barry.

Good morning, everyone, and thank you for joining today's call.

Please turn to Slide 34 to review our second quarter results.

In total, investment income was $9.9 million, a 37.1% increase over $7.2 million from Q2 2016.

The majority of this increase was from the growth in interest income year-over-year.

Interest income increased by $2.3 million period over period and was attributable to a few factors, including an increase in the primary and the average outstanding performing portfolio of SBA loans increasing to $220.7 million as of June 30, 2017 from $172.7 million for the quarter ended June 30, 2016.

In addition, interest was favorably impacted in Q2 2017 by $852,000 of interest income related to accrued nonperforming interest owed by one borrower that paid their accrued interest balance this fall.

Dividend income in Q2 2017 was $2.5 million or flat to total versus the same quarter of 2016 and represented $1.75 million from Newtek Merchant Solutions, $375,000 from Premier Payments and $350,000 from IPM.

Total expenses increased by $280,000 year-over-year.

Salaries and benefits increased by $1.4 million.

$367,000 of this increase was attributable to stock-based compensation incurred in Q2 2017 related to the issuance of restricted stock awards to employees beginning in the latter half of 2016.

The remaining increase in salaries and benefits of approximately $984,000 quarter-over-quarter primarily represented increases in headcount and payroll expenses related to lending activities and its commensurate with the increases in loan originations, underwriting, closing and servicing activities required to manage our own portfolio.

Interest expense increased by approximately $642,000 quarter-over-quarter.

The increase was due primarily to $212,000 increase in interest on the notes due 2021 as those notes were issued in April 2016 and a $470,000 increase in interest from the issuance of securitization notes in the fourth quarter of 2016.

Other general and administrative expenses decreased by approximately $1.2 million quarter-over-quarter due primarily to the $1.5 million expense we incurred in the second quarter of last year related to the exit of our (inaudible) lease.

Overall, our net investment loss for the period decreased from a loss of $4.1 million in Q2 2016 to a net investment loss of $1.7 million in Q2 2017.

The reception in loss is primarily a result of the increase in interest income and the lease loss expense recognized in Q2 2016

The company had net realized and unrealized gains of $8.6 million in the second quarter of 2017 as compared to $9.5 million in Q2 2016.

During the second quarter of 2017, we originated 134 SBA 7(a) loans for $80.5 million compared to 100 loans in the same quarter of the prior year for $75.8 million.

We sold the guaranteed portions of 121 loans for $61.1 million in the second quarter of 2017 as compared to 90 loans for $51.2 million in Q2 2016.

The net realized gain on sale was $9 million compared to $7.5 million for the 3 months ended June 30, 2017 and 2016, respectively, a 19.5% increase.

The weighted average premium increased to 12.44% for the second quarter of 2017 versus 12.17% in the same period last year.

As a reminder, premiums on SBA 7(a) loans, loan sales generate -- premiums on SBA 7(a) loan sales greater than 110% must be split 50-50 with the SBA.

Looking at the credit quality on our SBA loan portfolio, realized losses or charge-off, as a percentage of the average outstanding loan portfolio, was 0.54 -- 0.45%, a 3 basis point reduction from December 31.

Total nonperforming SBA loans totaled $8.5 million, representing 3.5% of the total unguaranteed SBA loan portfolio at quarter end as compared to $8.6 million or 4.1% of the total loan portfolio as of year-end 2016.

Overall, we had a net increase in net assets of $6.9 million for the quarter as compared to $5.4 million from Q2 2016 or a 29% increase and ended the quarter with NAV per share of $14.36, an increase of $0.06 per share from NAV per share at December 31, 2016.

With that, I'd like to turn the call back to Barry.

Thank you, Jenny.

And operator, we'd like to open up the call for questions from the audience.

(Operator Instructions) And our first question comes from Nick Grant from KBW.

All right.

So your originations guidance of $450 million, does that still include $40 million of 504?

And you had only $4.8 million year-to-date in that group.

So can you provide some color on the 504 pipeline?

I know these can be a little bit lumpier.

Yes, they are, Nick.

And obviously, the 504 pipeline is in pretty good shape, I think on a gross basis, we probably got a $50 million or $60 million in the pipeline.

We've also recently hired a specialist in that area, which we look forward to them are arriving in around 3 to 4 weeks from now that would put us in a different light.

So we feel very good about the 504 business.

It dovetails very nicely into what we do.

I think we've got probably around $10 million in loans, maybe a little more than we're sitting in.

I would say we probably got $5 million, $6 million or $7 million that perspectively could be available for gain on sale treatment.

And we've got indication on bids on parts of that portfolio that are consistent with what we've talked about.

So I think that, as we look at our business, I'd love to think it's totally linear.

Everything kind of moves along in March step.

But we feel pretty good about the sizes of the business.

That's why we went out and indicated $40 million of fundings and we'll probably have a couple of sales that we do think we have one sale than within the third quarter that we've actually completed and funded.

So we feel pretty good about the business.

And it'll be really complimentary and that will give a nice boost to CDS, which historically have not been a contributor of pretax or dividend income.

I appreciate the conservatism on your validation of the margin business.

But I mean, you're sitting at a pretty significant discount to peers.

You have nice growth in this business.

So what it take to see some multiple expansion here?

Is that all a question of scale and total volume or is that another driver?

Nick, I think it's a fair question.

I think that what the Board looks at as well as the outside valuation firms, is they have a myriad of questions and issues that the public comps clearly are out there.

And the public comps, prospectively, if that was the only factor, would lean towards being there.

I think the Board is looking for a few things to occur operationally within the enterprise before it feels real confident to begin to lean and start to push those numbers.

So I think that's the best answer that we have.

When we do these valuations, they're very -- it's a very extensive piece of work that's done.

There's discounts associated with it.

There's discounted cash flows.

There's growth, et cetera.

So I think it's something that we'd certainly like to see.

We also like to see some more acquisitions to bulk up the size.

I definitely that if we were a $10 billion versus, say, $6 billion, that would be a pretty big differentiator as well.

And then one last one for me.

Kind of agree with the point that kind of the shift in retails less the headwind, the small business and it is kind of your big-box retailers.

But if you made the decision to cut back originations to segment at all and how are you managing your current exposure?

Well, one, when we manage the exposure is in a good chunk of our retail.

I don't have the statistics has real estate associated with its.

So it's not franchises.

I mean, we are not a big franchise lender.

I would say is its a clear less than 5%, it might be live less than 2% of our portfolio.

So if a mistake is make him you've got part assets, which is really been one of the important aspects of our lending pieces.

But so far and we are the margin space as well.

So we're not seeing the smaller retailers that affected by the Internet.

Now others might look at differently and maybe something had change.

But we're not seeing it.

Now I will say, we do believe the overall trend to more and more things being done online is there.

So this is where, for example, if you're a lender, you don't want to be lending the businesses that are on the bubble.

You don't want to do the 1.15 or 1.2 loan, You really want to do the 2 to once that have got a lot of assets behind it.

And that's how you come to a differentiator.

So if you look at it $10 billion or $11 billion of opportunities to pick through, it gives you and much, much better position to be able to pick the bigger credits.

The weaker ones will die faster.

Our next question comes from Casey Alexander from Compass Point Research.

Nick asked my questions about the 504.

But the 4.7 billion in loan referrals from NewTracker, can you break that out between how much you received in Q1 versus Q2?

I don't have that data, Casey.

But the first quarter was bigger than the second quarter.

And I will tell you that's not a trend.

That's just the situation that we had with an alliance partner that has been, I didn't have one, but a couple of alliance partners that we have repositioned ourselves with.

So I would indicate to you from a trending perspective.

And we -- by the way, I greatly appreciate the question because a lot of analysts, it is your job function to look at those trends.

We feel very confident that we're looking at $10 billion to $11 billion of gross referrals this year.

So we tried to position the market to look at us annually and not quarterly.

And when you say you reposition, whether alliance partners that you felt were underperforming either from a qualitative or quantitative standpoint that you kind of moved out?

I think the answer to that is that position is always shifting.

Some people are coming in, some people are coming out.

We add new ones that come onstream.

Some of them are out of contract, but they haven't -- it hasn't been at the top of their vocalist.

So we go in there.

We work of the relationship and the stuff starts to flow through in a significant manner.

So it does fluctuate.

Have alliance partners that prospectively give us lots of units but they're smaller.

So we are constantly working and massaging that pipeline of referring agents because one thing that you know, if all of a sudden I've got somebody giving me a lot of opportunities but there's nothing coming out of them, that's just the costs without a return.

So it's always a bit of a ebb and flow for us.

It'll always be a little bit notchy.

We try to...

Yes, I'm sure, qualitative is just as important as quantitative.

Big time, yes.

(Operator Instructions) And our next question comes from Lisa Springer from Singular Research.

I notice recently the company has really stepped up at the advertising on television.

Could you talk about that our bit in terms of the investment and how we are measuring the success of that and is that something would likely to see continuing to the second half?

Particularly given that I lost 20 pounds, I think I'm going to (inaudible).

It's fun because I've had people come up and say, I haven't seen you take off.

No, it's the same spend.

We really have not changed the spend much.

We don't advertise what the spend is but it's very low 7 figures.

I'll leave it at that.

And it's CNN.

It's Fox.

It's pretty much 6 a.m.

to 8:00 p.m.

We have a great media company that we work with, does a fantastic job.

I just think maybe it is kind of random as to when it appears within those windows.

But it is really good (inaudible).

We have not put more money into it.

It's been the same spend for 3 years.

And I'm showing no further questions from our phone lines.

I would now like to turn the conference over to Barry Sloane for any closing remark.

Thank you, operator.

I really appreciate it.

The one closing remark I'd like to make to the group, we recently went out for a proxy for a vote on a discount to NAV, a very sensitive subject to shareholders and to myself.

And we extended that vote.

We are very, very, very very highly confident we will get the vote with management's suggestions and proposal.

I will also add that ISS, Glass Louis any Egan Jones also put out recommendations to vote with managements.

We're very thankful for shareholders that actually voted, whether you voted yes, you voted no or you abstain.

I know it's kind of a pain.

We have to make a few calls here and there.

We needed another -- we're a couple of 100,000 shares vote of a -- a couple 100,000 shares short of quorum.

But we're in great shape.

We're not closed out.

It's not done, but we feel very confident.

I see My COO told me I could say that.

So I want to thank everybody that did put their votes in.

And it's important to note, we don't want to sell stack below NAV.

There's no reason to sell stock between NAV.

We're 20% premium to NAV.

But we want to make sure we have that tool if we need somebody in an emergency.

We are internally managed BDC.

We have no desire to grow assets for asset's sake.

We don't get bigger bonuses.

We don't get bigger management fees, but we thank shareholders that understand what it is that we're trying to do and gave us -- give us the tool to effectively manage our business.

If you're owning the stock, you should own it because you have trust and faith in management.

We appreciate that, and we appreciate your efforts.

With that, I'd like to conclude the call today and look forward to reporting next quarter.

Thank you very much.

Ladies and gentlemen, thank you for participating in today's conference.

This does conclude the program, and you may all disconnect.

Everyone, have a wonderful day.