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Net Element, Inc. (NETE) Executives Discuss Q3 Results in Recent Earnings Call

Following a strong third-quarter performance, key members of Net Element’s executive team conducted an earnings call to discuss the company’s quarterly financial and operational results as well as expectations moving forward. Company Chief Executive Officer Oleg Firer began the call with a review of significant third-quarter achievements that resulted in a stronger balance sheet and suite of merchant solutions.

Read the full transcript here:

Net Element, a technology-driven group specializing in mobile payments and value-added transactional services for consumer convenience, in the third quarter alone eliminated more than $15 million of debt from its balance sheet via a debt exchange transaction with Crede Capital. The company also secured $11 million in financing from Alfa-Bank, which the company intends to use to accelerate its growth in the Russian market, and announced the availability of Apple Pay to merchants using the company’s Unified Payments offering.

“We are pleased with our third-quarter performance, which includes significant debt reduction and narrowed quarterly loss. In Russia, we have successfully restructured the business and are confident in a significant quarter-over-quarter growth an ongoing basis,” said Firer.

“Pivoting from a strong balance sheet, our activities and improvement have set the pace for continued growth and demonstrate our commitment to increasing company value. Third quarter of 2014 was very busy quarter for us which I believe had positive impact on both operations and financials of the company. And we are well-positioned to continue to growth trend for the remainder of 2014 and into 2015.”

Net Element reported an adjusted loss (non-GAAP) for the third quarter at $2.2 million, or a loss of $0.05 per share, compared to a loss of $3.4 million, or a loss of $0.11 per share, for the comparable quarter of 2013. Revenues were approximately $6 million compared to $6.5 million a year ago. The company attributes the decrease in revenues primarily to its business in Russia, which Chief Executive Officer Jonathan New said “is now back and poised for future growth.”

“That business continues to rebuild and we are rebuilding it with more control and a lot less risk. So we are so far pretty pleased with what’s happening,” New commented.

For the nine months ended September 30, 2014, Net Element reported cash provided by operating activities at nearly $3 million and debt at $3.3 million vs. $21 million at December 31, 2013.

In response to inquiry from Zacks Investment Research senior equity research analyst Lisa Thompson during the Q&A session of the call, New discusses the company’s gross margins, which are currently in the 14%-17% range. He also comments on the company’s interest expenses of approximately $120,000-$160,000 per quarter, an improvement over the figures prior to the company’s significant debt reduction.

After brief discussion about Net Element’s recently launched version 2.0 for Aptito, which Firer said is already being picked up by independent resellers, the CEO commented on the company’s activities in the mobile payments market in Russia.

“Well, we are seeing actually an increase in mobile payment in Russia,” said Firer. “Obviously the conversion of a dollar to ruble is affecting the top line. We are however finished with the complete restructuring of the company and are currently growing our business that we believe that we are going to see tremendous growth on quarter-over-quarter basis … we have used our own funds in growth in Russia. So we have not been borrowing money on a daily basis from various facilities. And we believe the access to capital that we have in Russia is going to give us an ability to grow the business beyond levels that we have been showing to everybody’s delight.”

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