Marlin Business Services Corp.
Marlin Business Services Corp.
Incorporated: 1997 as Marlin Leasing Corporation
Sales: $103.45 million (2006)
Stock Exchanges: NASDAQ
Ticker Symbol: MRLN
NAIC: 532299 All Other Consumer Goods Rental
A public company listed on the NASDAQ, Mt. Laurel, New Jersey-based Marlin Business Services Corp. operates primarily through its main subsidiary, Marlin Leasing Corporation. Marlin focuses on the leasing of “small-ticket” office equipment such as copiers (by far, the largest segment), computers, and telephones. It is also a lease provider of healthcare equipment; office furniture; computers and software; practice-monitoring software for doctors, hospitals, medical centers, dentists, and veterinarians; and restaurant equipment. In large part Marlin works through equipment vendors, essentially providing them with a financing vehicle they can offer to their own customers. Marlin’s average transaction is less than $10,000 and rarely exceeds $150,000.
Other units include Marlin Business Lending, providing business loans from $10,000 to $50,000, and Marlin Trade Receivables, which engages in factoring, or the buying of a company’s accounts receivable at a discount. In effect, this is a financial solution for companies whose cash flow is not robust enough to accommodate slow-paying customers, but who need more working capital in order fund larger inventories or expansion. In addition, the Marlin SurePayroll unit offers an online payroll service, allowing small businesses to quickly process their payrolls from anywhere at any time. In addition to its New Jersey headquarters, the company maintains offices in Philadelphia, Pennsylvania; Atlanta, Georgia; Denver, Colorado; Chicago, Illinois; and Salt Lake City, Utah.
The company was created as Marlin Leasing Corporation in June 1997 by senior managers from Advanta Business Services, a unit of Advanta Corporation, which started out in the early 1950s as a family-run credit union and became a major provider of credit cards and other services to small businesses. By the mid-1990s about four-fifths of Advanta’s revenues came from credit card operations, prompting rapid expansion. The company was soon in trouble and in the spring of 1997 there were rumors circulating that Advanta was about to be sold. It was against this backdrop that the Advanta Leasing executives decided to strike out on their own. They included Gary Kester, head of Advanta’s credit department; Gary R. Shivers, manager of Advanta’s equipment leasing division; and Daniel P. Dyer, the chief financial officer or Advanta Business Services. They formed Marlin Leasing, with Dyer serving as chief executive officer and chairman of the board, Shivers as president, and Kester as senior vice-president in charge of credit and operations.
Marlin started out as a broker, then became involved in financing after securing venture capital funds from Primus Venture Partners, Peachtree Equity Partners, and ING Capital. As the company grew, it lured away more Advanta employees, and ultimately Advanta dropped out of the equipment leasing business. The key to success was targeting small businesses, which required more support than larger companies. To reach them, Marlin relied on telephone sales representatives to make cold calls to drum up business. To motivate the sales force, the company offered bonus plans, held sales contests, and sponsored regular picnics and holiday parties.
In the first year in operation Marlin posted $615,000 in revenues. That number increased to $7.3 million in 1999 and $22.7 million in 2000, when the company also became profitable for the first time, netting nearly $1.6 million. After five years in business, Marlin sales grew to $46.7 million in 2002 and net income topped $4.5 million. Shivers told the online trade newsletter Leasing News that the key to Marlin’s success was a cohesive management team that had been working together for more than 13 years. He explained, “We combined our expertise with a quality staff that is equally committed to success. Because we focus on relationship building both internally and externally, our employees and our customers are motivated to stay with us.” Marlin hoped to double in size within three years while expanding its reach, and thereby rank among the nation’s top five small-ticket leasing companies.
Although Marlin would be able to achieve many of its goals, it would also lose some of that sense of camaraderie that was supposed to be at its core. According to Leasing News, Dyer came to dominate the company. The first of his cofounders to leave was Gary Kester. Shivers remained but his influence waned, while the importance of General Counsel George D. Pelose, who joined the company in 1999, increased.
As the relationships in the corporate suite shifted, Marlin continued to pursue its growth strategy. By 2003 the company maintained offices in Philadelphia; Nor-cross, Georgia, an Atlanta suburb; and Greenwood Village, Colorado, a Denver suburb. The Mt. Laurel headquarters, about 29,000 square feet in size, was no longer able to accommodate Marlin’s needs, and the company began looking for a new space.
To fund this and further growth, Marlin also took steps to go public and make an initial public offering (IPO) of stock. In August 2003 Marlin Business Services Corp. was formed in Pennsylvania, and then in November of that year it became the holding company of Marlin Leasing and was taken public. With U.S. Bancorp Piper Jaffray and William Blair & Company serving as underwriters, the IPO netted the company $46.6 million. In addition to the nearly 3.6 million shares sold by the company, shareholders sold another 1.5 million shares in the offering, the proceeds of which did not benefit the company. Both Primus Venture Partners and Peachtree Equity Partners cut their stakes to take some profit, while ING Capital cashed in all of its 7.4 percent interest.
Marlin came to the market at an opportune time, just as the U.S. economy was enjoying a rebound and companies that had been holding off on capital improvements were ready to invest in technology through the types of leases Marlin had to offer. Not only did the IPO find plenty of willing investors, but also, as soon as the shares began trading on the NASDAQ, they increased in value by 15 percent over the $14 offering price on the first day. By January shares crested at $19.49 before receding.
Since our inception in 1997, Marlin Leasing has quickly and steadily emerged as a leader in the equipment leasing marketplace. We measure success by providing winning business strategies and solutions to our network of approximately 11,000 origination sources and brokers.
Revenues increased to $59.8 million in 2003, thanks to the generation of 30,258 new leases, compared to 25,368 the previous year. Because of accounting requirements related to warrants exercised at the time of the IPO, Marlin experienced a drop in net income to $3.2 million. Early in 2004, Marlin expanded its geographic reach by opening a third regional office, located in Chicago to improve its position in the Midwest. The company at the end of the year moved its headquarters to a new leased Mt. Laurel facility, about 50,000 square feet in size, large enough to house more than 225 employees. When 2004 came to a close, Marlin posted revenues of $71.2 million and net income that soared to $13.5 million.
Revenues improved to $85.5 million and net income to $16.2 million in 2005. The major development of the year was the announcement that the company applied for an industrial bank charter in Utah. The bank, if approved, would operate out of a new branch office to be established in Salt Lake City. “The formation of Marlin Business Bank,” Dyer explained in a press statement, “is an important strategic initiative that should allow us to further grow our assets, expand our funding sources and lower our cost of borrowing.” According to Leasing News, the Utah bank would handle factoring, which would “also become a venue for increased leasing sales.”
The trade publication further reported that Marlin was finding it increasingly difficult to expand its small-ticket vendor business, facing tough competition from local, independent brokers who were not saddled with the high overhead of maintaining branch offices as did Marlin. Sources told Leasing News that Dyer and Shivers adopted the sales approach of Computer Discount Warehouse, which recruited college graduates to generate new accounts, and, despite a high turnover rate of employees, was still able to retain accounts. Thus, Marlin hired young sales reps on salary for a year, trained them in Philadelphia to follow a script, and then put them on a commission plan and turned them loose: “This strict sales discipline resulted in a high employee turnover. Only 20–30% of the direct reps made it after the first year.” While such turnover was not unexpected, “what Marlin found was that as sales reps left, so did many of the direct vendor accounts.”
On the surface at least, Marlin continued to show growth. In 2006 sales exceeded $100 million for the first time, and net income totaled $18.6 million. Nonetheless, as the year came to a close Shivers resigned as president, receiving a severance package that included more than $1.2 million in cash and another $5.8 million in stock. Shivers was not the only top executive to leave. The list also included the chief financial officer, the vice-president of broker services, and the head of factoring, according to press reports. In the meantime, Pelose became chief operating officer in addition to being general counsel and the company’s spokesperson.
According to Leasing News, there was concern in the company over how long it was taking to hire a new president; the position remaining unfilled six months later. A number of employees were also reported to be waiting for Shivers’ two-year noncompete agreement to expire so they could “join him in a new leasing company.” The early results of 2007 were ahead of the pace set the year before, but there remained concern whether Marlin would be able to maintain growth going forward. In the meantime, the company’s application with the Federal Deposit Insurance Corporation for a Utah industrial bank was approved. What impact the bank would have on the company’s fortunes remained to be seen.
- Marlin Leasing Corporation is formed.
- Company turns profitable.
- Marlin Business Services is formed and taken public.
- Chicago office opens.
- Approval is received for Utah industrial bank charter.
Marlin Leasing Corporation; AssuranceOne Ltd.; Marlin Business Bank; Marlin Trade Receivables Corp.
American Express Company; CIT Group Inc.; GE Commercial Finance.
Fitzgerald, Beth, “Recovery Brightens Picture for Mount Laurel Firm,” Newark (N.J.) Star-Ledger, February 11, 2004, p. 26.
Hennessey, Raymond, “Marlin Business IPO Jumps 15%,” Wall Street Journal, November 13, 2003, p. 1.
McKnight, Marshall, “Big Deals from Small Leases,” NJBIZ, February 16, 2004, p. 27.
Menkin, Christopher, “Inside Marlin Leasing,” Leasing News, January 29, 2007.
________, “Marlin Leasing Looking for President and Head of Factoring?” Leasing News, March 5, 2007.
________, “Mike Bennie—Next President of Marlin Leasing?” Leasing News, February 12, 2007.
________, “Who’s Running Marlin Leasing?” Leasing News, April 27, 2007.