In our last review of Net Element International Inc (NASDAQ:NETE) which can be accessed here, the company had just come from a share price spike.
At the time, the company’s share price was trading at highs of over $9 and this was a great time for their management.
However, shortly afterwards, their share price went on a free fall to lower than $4, a move which could by then have easily been mistaken for a correction or reversal until now.
They are currently basking in the glory of another 30% rise in prices as the company’s price shot from below $4 to $5.14 on 24th November. This coupled with the over 1 million shares traded on the same day. The spike is further elaborated by the chart below:
Such a price increase has sparked our interest in the company and necessitated research into NETE. As such, over the course of this piece, we will review the reasons behind such an increment and how sustainable it is.
A Brief Look At NETE
Net Element Inc, formed in 2004 and with headquarters in Miami, Florida, is a global financial technology and value-added solutions group specializing in mobile payments and other transactional services in emerging countries and in the United States.
The company focuses on the small and medium sized businesses (SMB) market and currently operates in three segments: North America Transaction Solutions, Mobile Solutions, and Online Solutions. They currently have over 96 employees.
NETE: Operations and Growth
NETE has, since our last review, undergone significant developments.
First was the growth in their e-commerce and integrated services operations. Here, the company saw growth in their key revenue generating activities (described above) with the growth being as follows: the e-merchants, e-commerce volumes and electronic transactions from the e-commerce segment grew by 37%, 33% and 34% respectively.
Furthermore, their integrated services segment which boasts of forums such as Aptito and Unified m-POS went further to grow by 134%, 84% and 43% on their volumes, transactions and merchants respectively.
Such growth was celebrated by their management with their CEO, Oleg Firer making the following remarks:
“We are confident in our ability to continue executing our growth strategy and are excited about the Company’s future. Unified Payments continues gaining market-share by delivering competitive e-commerce, mobile point of sale and integrated value-added services through easy-to-use technology such as Apple iOS and Android apps while providing exceptional customer service, technical support and fast merchant on-boarding.”
Second, in a move to ensure the efficiency, flexibility and convenience of their electronic transactions, NETE has incorporated new technology.
The company launched its own same day Automated Clearing House service which will enable customers to use their e-payment services more efficiently as well as ensure customers can accept eCheck payments. This will see NETE venture into a space whose volumes, according to NACHA -The Electronic Payments Association® in North America-, accounted for over 25 billion payments and $43 trillion in transfers in 2016.
With such numbers in play, a bright future seems to be set for NETE.
Finally, the company was ranked among Deloitte’s 2017 Technology Fast 500.
The ranking which incorporated companies which achieved revenue growth ranging from 135 percent to 59,093 percent from 2013 to 2016 saw them ranked 418th. During this period, the company grew by over 190%, quite a significant leap for them.
Their CEO praised the company for such growth which he credited to organic growth in its North America Transactions Segment, specifically the success of its Unified Payments brand. The management believes that such growth will continue for them into the future as they work towards bettering it.
Results from the third quarter of business have sent mixed signals to the market courtesy of the varying performance as will be seen below.
Despite their revenues going by 14% up from $12.8 million to $14.9 million based on a year-on-year analysis, the current revenue position was a drop of nearly 8% from $16.1 million in the second quarter. Management attributed this to the hurricane which disrupted their operations during the period of its occurrence. Moreover, the reduction in sales and administrative expenses by over $200,000 did little to ensure their loss position wasn’t further aggravated as they went further to make a loss of $1.7 million, up from $1.6 million in the previous quarter.
However, its not all doom for NETE as the company finally turned a positive operating cash flow.
During the current period, they made about $94,000 in operating cash flows. Moreover, they spent nearly $1.4 million in acquisitions, a move which speaks to their futuristic outlook as well as the management’s belief in consolidation of their industry as well as alluding to their need to diversify.
Although the above doesn’t all tell of success, it is important to appreciate that NETE is working towards growth and has made significant strides on this path. Despite the fact that a lot needs to be done especially in cementing their revenue base, the company seems to be working diligently in doing so. This will pay off quite soon.
In conclusion, NETE is a company on the growth path. It has made significant strides to ensure they are the go-to company on electronic payments and this seems to be working well for them. Going forward, we see NETE creating value for their shareholders and eventually see this translating to a higher share price.
We will be updating our subscribers as soon as we know more. For the latest updates on NETE, sign up below!
Disclosure: We have no position in NETE and have not been compensated for this article.