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SeeThruEquity Issues Company Update on Net Element, Highlighting Strong Revenue Growth in 1Q16

NEW YORK, NY / ACCESSWIRE / May 23, 2016 / SeeThruEquity, a leading independent equity research and corporate access firm focused on smallcap and microcap public companies, today announced that it has issued a company update on Net Element, Inc. (NETE).

The note is available here: NETE May 2016 Update Note. SeeThruEquity is an approved equity research contributor on Thomson First Call, Capital IQ, FactSet, and Zack's. The report will be available on these platforms. The firm also contributes its estimates to Thomson Estimates, the leading estimates platform on Wall Street.

"For the quarter, revenues climbed by 103% to reach $11.3mn, versus $5.4mn in the year ago period. The key barometer of growth for the company is the NA Transactions Segment, which has the fewest moving pieces and showed robust 51.7% YoY growth, rising from $5.2mn in 1Q15 to $7.9mn in 1Q16. We continue to see NETE as an intriguing high risk / high reward growth company in the financial technology space. We expect to review our price target following the company's pending reverse share split, which will likely need to be completed in June," commented Ajay Tandon, CEO of SeeThruEquity.

Additional highlights of the note are as follows:

Net Element has made substantial progress since our last update. Most importantly, the company announced a substantial capital commitment, which should mitigate pressures from concerns over financial distress and allow investors and the company to return to focusing on growth and scale. Highlights since our April update on the company include:

  • 1Q16 revenues grew by 103% YoY to reach $11.3mn, versus $5.5mn in 1Q15
  • The company's largest segment, NA Transactions, experienced organic revenue growth of 50%+
  • NETE announced a new financing commitment of up to $15mn and a $5mn debt exchange, which should ease balance sheet pressures

NETE revenues climb by 103% in 1Q16

Even with management focused on securing financing commitments to fund growth and operations, NETE was able to turn in strong growth in a seasonally slow quarter. NETE's growth came primarily from its NA Transactions segment, which grew by 51% to reach $7.9mn. The company also benefitted from the inclusion of PayOnline, which contributed $1.4mn in the quarter. PayOnline was consolidated into operations beginning May 20, 2015. NETE's Mobile Solutions segment added 1.6mn to growth, but this was largely a function of an accounting change that took place last year and has year to roll off YOY comps.

Balance sheet improving, expect reverse split

NETE has continued to work on its balance sheet. The company ended the quarter with debt of $4.0mn and cash on hand of $0.7mn. Importantly, the company announced financing commitments of up to $15mn in May and a $5mn debt exchange, which should ease the financial stress on the company and allow it to focus on growth. The financing is summarized later in this report, but highlights include a $15mn revolving credit facility with RBL and a debt exchange for up to $5mn with Crede CG III, Ltd, in which NETE has control over when debt is authorized to be exchanged for new equity issuances. We note that, with debt at $4mn, the company has come a long way since we initiated coverage two years ago. NETE has $28.6mn in financial debt in 1Q14. We continue to expect NETE to execute a reverse split to maintain its NASDAQ listing. The reverse split has been approved by the Board of Directors and we would expect it to take place in mid-June, assuming it does not obtain another extension.

Price target remains $1.50 at this time

We are leaving our price target on NETE unchanged at this time. While shares have increased at a faster pace than we initially forecast in 2014, the company may be approaching the end of a long financial restructuring, and we are hoping to see an acceleration of growth in 2016E, driven by organic growth in NA Transactions and PayOnline, as well as the possibility of new acquisitions, funding permitting. We continue to see NETE as an intriguing high risk / high reward growth company in the financial technology space.

Please review important disclosures on the company's website at www.seethruequity.com.

About Net Element, Inc.

Net Element (NETE) is a global payments-as-a-service, technology provider with an integrated mobile and transactional services platform serving millions of emerging market clients. Its wholly owned subsidiary, TOT Group operates Unified Payments, a U.S. focused transaction processing and value-added services brand, Aptito, a next generation, cloud-based point of sale payments platform and TOT Money, a leading mobile payments service provider that is gaining significant traction in the mobile payments market in Russia and for two consecutive years, has been ranked in the Top 3 mobile payments providers by Beeline, Russia's second largest telecommunications operator.

Further information is available at www.netelement.com.

About SeeThruEquity

SeeThruEquity is an equity research and corporate access firm focused on companies with less than $1 billion in market capitalization. The research is not paid for and is unbiased. The company does not conduct any investment banking or commission based business. SeeThruEquity is approved to contribute its research to Thomson One Analytics (First Call), Capital IQ, FactSet, Zacks, and distribute its research to its database of opt-in investors. The company also contributes its estimates to Thomson Estimates, the leading estimates platform on Wall Street.

For more information visit www.seethruequity.com.


Ajay Tandon

SOURCE: SeeThruEquity