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NETE: NETE Closes Out 2017 With 11% Growth And Declining Losses

By Lisa Thompson


Net Element (NASDAQ:NETE) reported that total revenues for 2017 increased 10.6% year over year to $60.1 million from $54.3 million a year ago. North America grew 21.4%. Mobile Payments and PayOnline have been combined to one segment called International. This segment declined 26.6% from a year ago to $8.9 million. These two entities have had their operations integrated and cost reduced and we expect sequential revenue growth and expanding margins going forward. The international segment ended the year at an $8.1 million run rate. The company has plans to reignite growth for both the US and international operations in 2018.

Total gross margin for the year declined to 14.7% from 15.8% and margins declined in both segments. The company expects margins in international to move back up to historical levels as revenues build as the business has a fixed cost structure that can handle a lot more volume without adding any costs.

Total operating expenses were flat with a year ago at $17.4. The operating loss decreased to $8.6 million from $8.8 million a year ago.

Interest expense decreased to $1.2 million from $1.5 million in 2016. Going forward this could improve slightly as with cash on the balance sheet, the company may get more favorable interest terms even though they have no plans to pay off debt.

The average primary shares outstanding for the year were 2 million, while last year there were only 1.3 million, showing an increase of 50.7%.

The net loss was $9.9 million versus $13.5 million a year ago. The adjusted non-GAAP operating loss was $7.0 million versus $7.9 million last year. On a per share basis, the adjusted non-GAAP loss per share declined to $3.57 per share versus a loss of $6.05 per share. The company continues to reduce losses and grow revenues each year and we expect the same in 2018.

During the year the company raised $14.9 million selling equity and used $5 million to support operating activities. Another $3.7 million was raised from debt. Net Element ended the year with $11.3 million in cash and $7 million in debt on the balance sheet.

We believe the company could grow revenues 8% to $65 million in revenues in 2018 through internal growth. It is trading at a market value of $35.3 million, and an enterprise value of $31.0 million or 0.5Xs enterprise value to forecasted 2018 sales.


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