31 October 2006 - NETELLER Plc (LSE: NLR), the leading independent online money transfer business, today provides its 2006 third quarter update and highlights the rapid expansion it has made in global markets over the last 12 months, while it continues to review its position with respect to the US market.
Highlights
- Average daily sign ups for the quarter: 3,218; total customers at quarter end: 3,188,650
- Non-US customers represented 33 % of total sign ups of 293,465 in Q3 2006 with Europe accounting for 19 %, Canada 8 %, and Asia / ROW the balance
- Total active customers in quarter: 619,550, up 16 % from 535,853 in Q2 2006
- Average daily receipts from customers: $ 5.31m, up from $ 4.66m in Q2 2006
- Revenues $ 66.7m, up 48 % over Q3 2005; gross margin for quarter of 71.8 %
- Income before tax $ 32.5m; net income after tax: $ 30.8m; net margin 46.1 %
- EPS for quarter $ 0.257 per share vs $ 0.196 in Q3 2005
- Cash available to Company at 30 September 2006 was $ 199.2m
- October sign ups and fee generation continuing
- Increasing presence in Europe through localisation roll-out strategy
Commenting on today’s announcement, Ron Martin, President & Chief Executive Officer, said:
“NETELLER has performed well during the third quarter of 2006, continuing to grow its business both geographically and extend its reach to new customers and merchants. However, the impact of the recently passed Unlawful Internet Gambling Enforcement Act in the US is likely to change the future direction and nature of our business fundamentally. While we have continued to see strong sign ups and fees during October, NETELLER is constantly re-examining its position with regard to the US market and its provision of services to that market is currently under review. As previously stated, NETELLER, a company registered outside the US, will comply with the Act and its related regulations as if it were subject to the Act’s jurisdiction. We will keep our shareholders, merchants, customers and employees informed of any developments during this challenging period.”
* * * *
Operational and Financial Highlights
All financial figures in US$ unless otherwise noted.
Customers and Sign ups
The Company surpassed three million customers in August and closed the 3rd quarter with 3,188,650 customers. Total active customers in the quarter were 619,550, an increase of 46 % from Q3 2005 and an increase of 16 % from Q2 2006, representing a return to normalised trends. Of these 619,550 active customers, 536,146 were from North America, including 56,340 from Canada (9 % of the total). 10 % (64,893) were from Europe, and 3 % (18,511) were from Asia / ROW. 23 % of our active customers in Q3 2006 came from outside of the US. Revenue per active customer in Q3 2006 was $ 108, compared to $ 106 in Q3 2005. Daily sign ups averaged 3,218 customers for the quarter which was up 4 % from 3,085 in Q3 2005. Year-to-date sign ups are up 14 % over the previous year. North American sign ups were 75 % of total sign ups in the third quarter, with Canada accounting for 8%. European sign ups represented 19 % of total Q3 2006 sign ups, while Asia / ROW represented 6.5 %.
Average daily receipts
Average daily receipts from customers for the quarter were $ 5.31 million which was up 46 % on Q3 2005 and up 14 % on Q2 2006. Year-to-date average daily receipts are up by 53 % over the previous year.
Revenue
Revenue for the quarter was $ 66.7 million which is up 48 % from $ 44.9 million in Q3 2005. Year-to-date revenue of $ 185.6 million is up 57 % from $ 118.4 million for the same period in 2005. Revenue excluding interest was $ 172.3 million in the first nine months of 2006, while in the same period, fee income from merchants represented 64 % of revenue excluding interest, and fee income from customers was 23 %. NetBanx, the Company’s UK based payment service processor, continues to represent approximately 2 % of the Group’s total revenues.
Gross margins
Gross margin of 71.8 % has remained in line with that recorded for the first six months of 2006. Bad debts represented 12.6 % of revenue, in line with the first half of 2006, and there was a slight reduction in deposit and withdrawal fees in Q3 2006.
Income before tax
Income before tax improved 24 % to $ 32.5 million in the third quarter compared with $ 26.3 million in Q3 2005. Year-to-date income before tax is $ 90.5 million, which represents an increase of 35 % from $ 66.9 million in the prior year.
Income tax
Income tax expense for the current quarter is at approximately 5 % of pre-tax income or $ 1.7 million.
Net income
Net income for the quarter rose to $ 30.8 million (up 30 % from $ 23.6 million in Q3 2005) bringing the year-to-date net income to $ 86.6 million (up 43 % from $ 60.6 million for the same period in 2005). Net income margin was 46.1 % for the quarter compared with 52.5 % for Q3 2005.
Earnings per share
Basic EPS for the quarter was $ 0.257 per share based on the total shares outstanding of approximately 120 million. This compares to EPS of $ 0.196 for the corresponding quarter in 2005.
Other 3rd Quarter Highlights
The Company has continued to develop its product to customers and merchants during the third quarter of 2006, with the launch of localised sites in Sweden and Denmark. These new offerings add to the specific country versions of the NETELLER e-wallet service for the US, UK, Canada, France, Germany, Italy and Spain, Japan, and China. Further launches into Poland, Turkey, Australia and Brazil are planned for the fourth quarter. Furthermore, the Company has announced a new “Refer a Friend” program which should help to drive additional volumes through incentivised referrals within its peer-to-peer offering.
As previously announced, Steve Lawrence, the founder and former Chairman of NETELLER, resigned as a non-executive director with effect from 13 October 2006. Paul Templeman, President & CEO of the Company’s European Operations, will be leaving NETELLER on 31 October 2006 to pursue personal business interests. David Gagie, who is developing our financial services business, will assume Paul’s role on an interim basis. David will also take responsibility for our UK-based credit card processing division, NetBanx, with effect from 1 November 2006. We would like to thank both Steve and Paul for their significant contributions to the business.
Current Trading
Since the end of September trading has continued to show positive growth trends in both sign ups and average daily receipts, in line with typical seasonal variations. While October has shown strong sign ups, revenue and cash generation, it is difficult to predict trends or outcome for the remainder of the 2006 year given the current uncertainty regarding the Company’s principal market. The Company will seek to give more clarity once its position regarding the US is resolved. In the meantime, management are taking appropriate actions to ensure that the Company’s operations and cost base are appropriate for its strategy and direction in the future.
| |
Q3 - 2006 |
9 months 2006 |
Q3 - 2005 |
9 months 2005 |
Q2 - 2006 |
2006 to 2005 |
|
2006 |
| |
US$ |
US$ |
US$ |
US$ |
US$ |
Q3 |
YTD |
Q3 to Q2 |
| Revenue |
66,671,914 |
185,566,463 |
44,942,816 |
118,427,490 |
61,003,026 |
48% |
57% |
9% |
| Direct costs |
18,784,956 |
52,322,452 |
11,722,016 |
31,429,535 |
18,215,995 |
60% |
66% |
3% |
| |
|
|
|
|
|
|
|
|
| Gross profit |
47,886,958 |
133,244,011 |
33,220,800 |
86,997,955 |
42,787,031 |
44% |
53% |
12% |
| General & Admin |
10,367,105 |
28,562,310 |
4,400,649 |
12,468,939 |
9,386,773 |
135% |
129% |
10% |
| Operating income |
37,519,853 |
104,681,700 |
28,809,151 |
74,529,016 |
33,400,258 |
30% |
40% |
12% |
| |
|
|
|
|
|
|
|
|
| Other income |
|
|
|
|
|
|
|
|
| Foreign exchange gain |
(213,456) |
71,995 |
(216,532) |
(53,048) |
768,950 |
|
|
|
| Management bonus |
- |
(1,949,710) |
- |
(1,795,6220) |
- |
|
|
|
Deprecation and
Amortisation |
(304,040,454) |
(7,977,411) |
(1,335,674) |
(3,612,782) |
(2,527,670) |
|
|
|
| Stock option expense |
(1,774,135) |
(4,348,951) |
(981,249) |
(2,149,294) |
(1,379,661) |
|
|
|
| Income before tax |
32,473,807 |
90,477,623 |
26,275,696 |
66,918,270 |
30,261,877 |
24% |
35% |
7% |
| Income taxes |
1,713,599 |
3,840,006 |
2,663,921 |
6,339,129 |
929,316 |
|
|
|
|
Net income after tax |
30,760,207 |
86,637,617 |
23,611,775 |
60,579,171 |
29,332,561 |
30% |
43% |
5% |
| |
|
|
|
|
|
|
|
|
|
Daily sign ups |
3,218 |
3,239 |
3,085 |
2,840 |
2,898 |
4% |
14% |
11% |
Total customers
(at period end) |
3,188,650 |
3,188,650 |
2,026,413 |
2,026,413 |
2,909,190 |
57% |
57% |
10% |
Revenue per
active customer |
$ 108 |
nm |
$ 106 |
nm |
$ 113 |
2% |
nm |
-4% |
Average daily receipts
from customers |
5,314,631 |
4,892,434 |
3,640,823 |
3,222,446 |
4,663,174 |
46% |
52% |
14% |
Total customer
receipts |
488,946,070 |
1,335,634,373 |
331,314,942 |
872,851,944 |
424,348,841 |
48% |
53% |
15% |
(1) An active customers are defined as a customer whose e-wallet account balance has changed during the quarter.
nm not meaningful
|
