Net Element Reports First Quarter 2016 Results
Company Demonstrates Revenue Growth of 103% Year-Over-Year -- Positioned for Strong Growth Going Forward
/EINPresswire.com/ -- MIAMI, FL -- (Marketwired) -- 05/17/16 -- Net Element, Inc. (NASDAQ: NETE) ("Net Element" or the "Company"), a provider of global mobile payment technology solutions and value-added transactional services, reported financial results for its quarter ended March 31, 2016.
Recent Highlights:
- Net revenues were $11,261,059 for the three months ended March 31, 2016 as compared to $5,540,207 for the three months ended March 31, 2015. Revenues increased 103% year over year
- Announced $15 million credit facility and agreement to exchange up to $5 million of existing debt
- Unified Payments launched mobile point of sale solution for iOS
- Launched fully integrated omni-channel gift and loyalty platform
- Aptito restaurant point of sale solution launched in Russia: aims to lead in underserved POS software market
- Released Aptito point of sale solution for retail stores
- Unified Payments partnered with Esquire Bank, as a result of this partnership we are able to accept a wider range of merchant types in United States.
- Digital Provider entered Azerbaijan's rising mobile payments market; signed national TV network as one of the first customers.
- Launched "Sales Central On the Go" to expedite merchant approval and boarding. Sales partners and agents can now complete the on-boarding process from mobile devices and personal computers to get merchants processing immediately without completing paper applications.
"We're pleased with the result of the first quarter, which is typically one of the slowest quarters of the year," commented Oleg Firer, CEO of Net Element. "We remain focused on growth and innovation."
In an effort to present a more comparative period on period analysis, we have adjusted net loss to remove the effects of non-cash share based compensation.
Results of Operations for the Three Months Ended March 31, 2016 Compared to the Three Months Ended March 31, 2015
We reported an adjusted net loss of $1,524,611, or $0.01 per share for the three months ended March 31, 2016 as compared to an adjusted net loss of $1,646,584, or $0.04 per share, for the three months ended March 31, 2015. This resulted in a net loss decrease of $121,973 which is discussed further below.
Net revenues consist primarily of payment processing fees. Net revenues were $11,261,059 for the three months ended March 31, 2016 as compared to $5,540,207 for the three months ended March 31, 2015. The increase in net revenues is primarily a result of organic net increases in merchants. In addition, we consolidated online payments revenue for PayOnline and began reporting mobile commerce revenues for branded content.
Gross margin for the three months ended March 31, 2016 was $1,875,818 or 17% of total revenue, as compared to $949,683, or 17% of net revenue, for the three months ended March 31, 2015. Although the total gross margin remained flat at 17%, there were margin improvements in our U.S. transaction processing business and an increase from our online transaction processing business (purchased May 20, 2015), offset by lower margins from mobile solutions branded content that were not offered in the first quarter of 2015.
Three Three
Months Months
Ended March Ended March Increase /
Source of Revenues 31, 2016 Mix 31, 2015 Mix (Decrease)
----------- ---- ----------- ---- -----------
North America Transaction
Solutions $ 7,852,648 70% $ 5,177,180 93% $ 2,675,468
Mobile Solutions 1,993,504 18% 363,027 7% 1,630,476
Online Solutions 1,414,907 12% $ - 0% 1,414,907
----------- ---- ----------- ---- -----------
Total $11,261,059 100% $ 5,540,207 100% $ 5,720,852
=========== ==== =========== ==== ===========
Cost of Revenues
North America Transaction
Solutions $ 6,653,033 85% $ 4,600,433 89% $ 2,052,600
Mobile Solutions 1,814,588 91% 13,639 0% 1,800,949
Online Solutions 917,620 65% - 0 917,620
----------- ---- ----------- ---- -----------
Total $ 9,385,241 83% $ 4,614,072 83% $ 4,771,169
=========== ==== =========== ==== ===========
Gross Margin
North America Transaction
Solutions $ 1,199,615 15% $ 576,747 11% $ 622,868
Mobile Solutions 178,916 9% 349,388 96% (170,473)
Online Solutions 497,287 35% - 0% 497,287
----------- ---- ----------- ---- -----------
Total $ 1,875,818 17% $ 926,135 17% $ 949,683
=========== ==== =========== ==== ===========
Adjusted general and administrative expenses increased by $52,215 to $2,088,313 for the three months ended March 31, 2016 as compared to $2,036,098 for the three months ended March 31, 2015. This was primarily due to an increase in salaries (corporate salaries were down offset by a salary increase due to acquisition of PayOnline in May 2015), realized transaction losses and other expenses offset by decreases in professional fees and travel.
Three Three
months months
ended March ended March Increase /
Category 31, 2016 31, 2015 (Decrease)
----------- ----------- -----------
Salaries, benefits, taxes and
contractor payments 1,092,073 884,674 207,399
Professional fees 524,387 790,228 (265,841)
Rent 136,244 110,506 25,738
Business development 33,443 21,532 11,911
Travel expense 57,009 86,686 (29,677)
Filing fees 16,499 17,909 (1,410)
Transaction (gains) losses 14,966 (47,728) 62,694
Other expenses 213,692 172,291 41,401
----------- ----------- -----------
Total $ 2,088,313 $ 2,036,098 $ 52,215
=========== =========== ===========
Interest expense was $150,438 for the three months ended March 31, 2016 as compared to $117,594 for the three months ended March 31, 2015, representing an increase of $32,844 as follows:
Three Three
months months
ended March ended March Increase /
Funding Source 31, 2016 31, 2015 (Decrease)
----------- ----------- -----------
RBL Note $ 147,784 $ 91,253 56,531
Other 2,654 26,341 (23,687)
----------- ----------- -----------
Total $ 150,438 $ 117,594 $ 32,844
=========== =========== ===========
Reconciliation of Non-GAAP Financial Measures and Regulation G Disclosure
To supplement its consolidated financial statements presented in accordance with United States generally accepted accounting principles ("GAAP"), the Company provides additional measures of its operating results by disclosing its adjusted net loss. Adjusted net loss is calculated as net loss excluding non-cash share based compensation and other one-time, non-recurring items not present in this year or last year results. Net Element discloses this amount on an aggregate and per share basis. These measures meet the definition of non-GAAP financial measures. The Company believes that application of these non-GAAP financial measures is appropriate to enhance the understanding of its historical performance through use of a metric that seeks to normalize period-to-period earnings.
This press release contains non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission. Pursuant to Regulation G, a reconciliation of these non-GAAP financial measures with the comparable financial measures calculated in accordance with GAAP for the three months ended March 31, 2016 and 2015 is presented in the following Non-GAAP Financial Measures Table.
Share-based Adjusted
GAAP Compensation Non-GAAP
------------ ------------ ------------
Three Months Ended March 31, 2016
Net (loss) income $ (1,885,595) $ 360,984 $ (1,524,611)
Basic and diluted earnings per
share $ (0.02) $ 0.01 $ (0.01)
Basic and diluted shares used in
computing earnings per share 112,934,343 112,934,343
Share-based Adjusted
GAAP Compensation Non-GAAP
------------ ------------ ------------
Three Months Ended March 31, 2015
Net (loss) income $ (2,247,955) $ 601,371 $ (1,646,584)
Basic and diluted earnings per
share $ (0.05) $ 0.01 $ (0.04)
Basic and diluted shares used in
computing earnings per share 46,057,972 46,057,972
Additional information regarding Net Element's results for its first quarter ended March 2016 may be found in Net Element's quarterly report on Form 10-Q, which was filed with the Security and Exchange Commission (SEC) on May 16, 2016 and may be obtained from the SEC's Internet website at http://www.sec.gov.
About Net Element
Net Element, Inc. (NASDAQ: NETE) operates a payments-as-a-service transactional and value-added services platform for small to medium enterprise ("SME") in the US and selected emerging markets. In the US it aims to grow transactional revenue by innovating SME productivity services such as its cloud based, restaurant point-of-sale solution Aptito. Internationally, Net Element's strategy is to leverage its omni-channel platform to deliver flexible offerings to emerging markets with diverse banking, regulatory and demographic conditions such as UAE, Kazakhstan, Kyrgyzstan and Azerbaijan where initiatives have been recently launched. Further information is available at www.netelement.com.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Any statements contained in this press release that are not statements of historical fact may be deemed forward-looking statements. Words such as "continue," "will," "may," "could," "should," "expect," "expected," "plans," "intend," "anticipate," "believe," "estimate," "predict," "potential," and similar expressions are intended to identify such forward-looking statements. These forward-looking statements include, without limitation, whether the Company will experience growth on a go forward basis, whether Net Element can secure any additional financing and if such additional financing will be adequate to meet the Company's objectives. All forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements, many of which are generally outside the control of Net Element and are difficult to predict. Examples of such risks and uncertainties include, but are not limited to: (i) Net Element's ability (or inability) to obtain additional financing in sufficient amounts or on acceptable terms when needed; (ii) Net Element's ability to maintain existing, and secure additional, contracts with users of its payment processing services; (iii) Net Element's ability to successfully expand in existing markets and enter new markets; (iv) Net Element's ability to successfully manage and integrate any acquisitions of businesses, solutions or technologies; (v) unanticipated operating costs, transaction costs and actual or contingent liabilities; (vi) the ability to attract and retain qualified employees and key personnel; (vii) adverse effects of increased competition on Net Element's business; (viii) changes in government licensing and regulation that may adversely affect Net Element's business; (ix) the risk that changes in consumer behavior could adversely affect Net Element's business; (x) Net Element's ability to protect its intellectual property; (xi) local, industry and general business and economic conditions; (xii) adverse effects of potentially deteriorating U.S.-Russia relations, including, without limitation, over a conflict related to Ukraine, including a risk of further U.S. government sanctions or other legal restrictions on U.S. businesses doing business in Russia. Additional factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements can be found in the most recent annual report on Form 10-K and the subsequently filed quarterly reports on Form 10-Q and current reports on Form 8-K filed by Net Element with the Securities and Exchange Commission. Net Element anticipates that subsequent events and developments may cause its plans, intentions and expectations to change. Net Element assumes no obligation, and it specifically disclaims any intention or obligation, to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by law.
NET ELEMENT, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE
SHEETS
March 31, December 31,
2016 2015
------------- -------------
ASSETS
Current assets:
Cash $ 724,509 $ 1,025,747
Accounts receivable, net 4,424,761 5,198,993
Prepaid expenses and other assets 1,311,979 1,106,016
------------- -------------
Total current assets, net 6,461,249 7,330,756
Fixed assets, net 151,212 162,123
Intangible assets, net 4,969,863 5,423,880
Goodwill 9,643,752 9,643,752
Other long term assets 389,680 353,050
------------- -------------
Total assets 21,615,756 22,913,561
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable 5,075,959 5,858,837
Deferred revenue 572,002 743,910
Accrued expenses 3,131,234 2,975,066
Notes payable (current portion) 570,017 518,437
Due to related parties 1,239,856 329,881
------------- -------------
Total current liabilities 10,589,068 10,426,131
Notes payable (net of current portion) 3,469,983 3,446,563
------------- -------------
Total liabilities 14,059,051 13,872,694
------------- -------------
STOCKHOLDERS' EQUITY
Series A Convertible Preferred stock ($.0001
par value, 1,000,000 shares authorized, no
shares issued and outstanding at March 31,
2016 and December 31, 2015) - -
Common stock ($.0001 par value, 300,000,000
shares authorized and 113,168,685 and
112,619,596 shares issued and outstanding
at March 31, 2016 and December 31, 2015,
respectively) 11,317 11,262
Paid in capital 154,782,677 154,351,558
Accumulated other comprehensive loss (1,595,563) (1,565,822)
Accumulated deficit (145,802,767) (143,955,048)
Non-controlling interest 161,041 198,917
------------- -------------
Total stockholders' equity 7,556,705 9,040,867
------------- -------------
Total liabilities and stockholders' equity $ 21,615,756 $ 22,913,561
============= =============
NET ELEMENT, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
Three months ended March 31,
----------------------------
2016 2015
------------- -------------
Net revenues
Service fees $ 9,363,820 $ 5,540,207
Branded content 1,897,239 -
------------- -------------
Total Revenues 11,261,059 5,540,207
Costs and expenses:
Cost of service Fees 7,598,184 4,614,072
Cost of branded content 1,787,057 -
General and administrative (includes
$360,984 and $601,371 of share based
compensation for the three months ended
March 31, 2016 and 2015 respectively) 2,449,297 2,637,469
Bad debt expense 251,741 9,331
Depreciation and amortization 888,118 438,769
------------- -------------
Total costs and operating expenses 12,974,397 7,699,641
------------- -------------
Loss from operations (1,713,338) (2,159,434)
Interest expense, net (150,438) (117,594)
Other (expense) income (21,819) 29,073
------------- -------------
Net loss before income taxes (1,885,595) (2,247,955)
Income taxes - -
------------- -------------
Net loss (1,885,595) (2,247,955)
Net loss attributable to the non-controlling
interest 37,876 8,747
------------- -------------
Net loss attributable to Net Element, Inc.
stockholders (1,847,719) (2,239,208)
------------- -------------
Foreign currency translation (29,741) (108,167)
------------- -------------
Comprehensive loss attributable to common
stockholders $ (1,877,460) $ (2,347,375)
============= =============
Loss per share - basic and diluted $ (0.02) $ (0.05)
Weighted average number of common shares
outstanding - basic and diluted 112,934,343 46,057,972
------------- -------------
NET ELEMENT, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Three months ended March 31,
----------------------------
2016 2015
------------- -------------
Cash flows from operating activities
Net loss $ (1,847,719) $ (2,239,208)
Adjustments to reconcile net loss to net cash
used in operating activities
Non controlling interest (37,876) (8,747)
Share based compensation 360,984 601,371
Deferred revenue (171,908) (34,858)
Depreciation and amortization 888,118 438,769
Changes in assets and liabilities
Accounts receivable 436,453 131,020
Prepaid expenses and other assets 334,291 278,319
Accounts payable (865,158) 667,819
Accrued expenses (44,186) 356
------------- -------------
Net cash used in operating activities (947,001) (165,159)
------------- -------------
Cash flows from investing activities
Purchase of fixed and other assets (396,819) (6,849)
------------- -------------
Net cash used in investing activities (396,819) (6,849)
------------- -------------
Cash flows from financing activities
Proceeds from indebtedness 75,000 650,000
Repayment of indebtedness - (8,710)
Related party advances 910,045 125,000
------------- -------------
Net cash provided by financing activities 985,045 766,290
------------- -------------
Effect of exchange rate changes on cash 57,537 (331,346)
------------- -------------
Net (decrease) increase in cash (301,238) 262,936
Cash at beginning of period 1,025,747 503,343
------------- -------------
Cash at end of period $ 724,509 $ 766,279
============= =============
Supplemental disclosure of cash flow
information
Cash paid during the period for:
Interest $ 150,438 $ 118,910
============= =============
Taxes $ 86,770 $ 30,505
============= =============
Contact:
Net Element, Inc.
media@netelement.com
+1 (786) 923-0502
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