11th May 2006 07:02
NETeller PLC11 May 2006 For immediate release Press release 11 May 2006 FIRST QUARTER TRADING UPDATE AND AGM STATEMENT NETELLER Plc (LSE: NLR), a leading online money transfer service provider, ispleased to provide the following update on trading for the first quarter ofoperations ending 31 March 2006 and also an update on current trading in advanceof its third Annual General Meeting which is being held later today in the Isleof Man. Highlights First Quarter to 31 March 2006 • Average daily sign ups for the quarter: 3,609; total customers at quarter end: 2,645,502• Average daily receipts from customers: $4.69m, up from $2.87m in Q1 2005• Revenues $57.9m, up 69 % over Q1 2005; gross margin for quarter of 73.5 %• Continued investment in IT and product teams resulted in higher G&A expense• Income before tax $27.7m; net income after tax: $26.5m; basic EPS $0.22 Current trading and recent events update • Current trading in line with seasonal variations and analysts' expectations for 2006• Launch of localised websites in five major European and Asian countries (France, Germany, Italy, Spain, China)• Transition of existing member application technology to a more scalable JAVA platform completed Ron Martin, President & CEO, commented "Our growth in the first quarterdemonstrates the potential of the 'deepen and extend' strategy within our corebusiness, through innovative product developments such as our Europeanlocalisation program, our Asian e-wallet launch and credit card declineinitiative. We are committed to improving NETELLER's offering to its customersand merchants, through continued investment in quality people and technology.The Board is confident that NETELLER will continue to enjoy growth in line withhistoric seasonal variations and meet analysts' expectations for the full year." Enquiries: NETELLER PlcRon Martin, President & Chief Executive Officer +44 (0) 1624 698 702Eric Hughes, Chief Financial OfficerAndrew Gilchrist, Vice President - Communications +44 (0) 1293 555 726 Citigate Dewe Rogerson +44 (0) 207 638 9571Sarah Gestetner/Seb Hoyle/George Cazenove Operational and Financial Highlights All financial figures in US$ unless otherwise noted. Average daily receipts • Average daily receipts from customers for the quarter were $4.69million which was up 64 % on Q1 2005 and up 12 % on Q4 2005. Total receiptsfrom customers during the first quarter of 2006 were $422.3 million. Sign ups • The Company surpassed two and half million customers in mid February2006 and closed the first quarter with 2,645,502 customers. Daily sign upsaveraged 3,609 customers for the quarter which was up 26 % from 2,862 in Q12005. Quarter-on-quarter sign up growth continues with an increase of 13 % fromthe 3,197 average daily sign ups recorded for Q4 2005. Revenue • Revenue for the quarter was $57.9 million which is up 69 % from $34.2million in Q1 2005, and an increase of 8% from $53.6 million in Q4 2005. Therevenue composition for Q1 2006 has shown an increase as a % of revenue from theDirect Accept product and foreign exchange fees. Interest revenue also increaseddue to increased interest rates and funds under management to 6% of totalrevenue (5% in Q4 2005). Gross margins • Gross margin of 73.5 % has improved from 72.7 % recorded for the firstquarter of 2005, and remains stable compared with the 73.5 % gross marginrecorded for the whole of 2005, largely as a result of changing costcomposition. Bad debts for the quarter at approximately 12 % were in line withthe overall bad debt level for 2005, although this represented an increase on Q42005 levels. Direct salary costs fell from 8 % in Q4 2005 to 6 % in Q1 2006primarily due to accounting allocations from direct to indirect costs ofapproximately $1.3 million. Other direct costs showed a slight increase in Q12006 from Q4 2005. Operating income • Operating income improved 62 % to $33.8 million in the first quartercompared with $20.8 million in Q1 2005. The Company has experienced an increasein general and administrative costs to $8.8 million in the first quarter 2005,up from $6.1 million in Q4 2005. The Company has continued to invest heavily innew talent and IT during Q1 2006 as part of its "extend and deepen" strategy,and expects to see the full benefits of this during the latter part of the year. Of the $2.7 million in increased general and administrative costs, $1.3million was a result of reclassifying costs from direct costs and a further $0.5million was from the introduction of a profit sharing plan for a large number ofthe Company's employees. NETELLER's primary labour market in Calgary, Canadahas recently experienced unexpectedly tight labour conditions resulting inincreased costs, and this is expected to continue for the foreseeable future. Income before tax • Income before tax improved 53 % to $27.7 million in the first quartercompared with $18.2 million in Q1 2005. The Company incurred a loss on foreignexchange of $0.5 million in Q1 2006 which compared with a gain of $0.5 millionin Q4 2005. The Company continues to manage this exposure through an activehedging strategy. Net income • Net income for the quarter rose to $26.5 million (up 62 % from $16.4million in Q1 2005). Net income margin was 45.9 % for the quarter. The firstquarter traditionally has the lowest net margin due to the annual managementbonus. Earnings per share • The earnings per share for Q1 2006 was US $0.22 per share for thequarter based on the number of shares outstanding for the period of 120,353,025. Other First Quarter Highlights • The Company officially launched an updated version of its Japaneselanguage service following successful beta-testing. This new version is alreadystarting to drive increased sign-ups as merchants expand their offerings in thisregion. The Company expects to add additional payment options for Japan duringthe second half of 2006. • Additionally, having completed the formal testing of a new Asiane-wallet during the first quarter, the Company announced the official launch ofthis service, based on the Quick Access 1-Pay platform, in April 2006. • The Company continues to improve executive bench strength. During thefirst quarter, Rohit Joshi was promoted to Executive Vice President of Products,and the Company recently appointed Chris Carlson as Vice President ofTechnology. These appointments continue to drive NETELLER's transition from atechnology-driven to a product-focused organisation. • The acceleration of investment in the business and expansion into newmarkets are key elements of the Company's "deepen and extend" strategy for 2006. The Company believes the full benefits of these initiatives will be achievedin the latter part of this year and beyond. Current Trading & AGM Statement Since the end of March, trading has continued to show positive growth trends inboth sign ups and average daily receipts, in line with typical seasonalvariations. The Company looks forward to a promising second quarter and isconfident that it will meet analysts' expectations for the full year ending 31December 2006. The Company launched localised websites in four European countries (France,Germany, Italy and Spain) towards the end of April 2006 which should generateadditional revenue opportunities for the Group, particularly with the FIFA 2006World Cup. Since the release to customers on 25th April, early indications arealready showing a significant growth in sign-up rates from new customers,particularly in Germany and France. Furthermore, the launch of the Asiane-wallet should provide merchants and customers with localised paymentcapability supported by NETELLER's traditionally strong support offering. As previously announced, the Board is due to confirm the appointment of GordHerman as Executive Chairman of NETELLER Plc at the Company's board meetinglater this morning. The next update on trading is expected to be in early September 2006 whenNETELLER will announce its Interim Results for the half year to 30 June 2006. First Quarter 2006 Unaudited Financial Information Unaudited Unaudited Unaudited Q1 - 2006 Q4 - 2005 Q1 - 2005 Q1 2006 vs Q1 2006 vs Q4 2005 Q1 2005 US$ US$ US$ % change % change Revenue 57,891,523 53,627,972 34,193,554 8% 69% Direct costs 15,321,501 14,173,895 9,331,053 8% 64% Gross profit 42,570,022 39,454,077 24,862,501 8% 71% General and admin 8,808,433 6,133,578 4,058,738 43% 117%Operating income 33,761,590 33,320,499 20,803,763 1% 62% Other income (expense) Foreign exchange gain (465,498) 522,693 67,431 Management bonus (1,949,710) - (1,778,009) Depreciation and Amortisation (2,409,288) (1,935,535) (913,198) Stock option expense (1,195,155) (1,046,835) -Income before tax 27,741,939 30,860,822 18,179,987 -10% 53% Income taxes 1,197,090 (71,854) 1,815,526 Net income after tax 26,544,849 30,932,676 16,364,461 -14% 62% Average daily sign ups 3,609 3,197 2,862 13% 26%Total customers (at period 2,645,502 2,320,670 1,508,659 14% 75%end)Average daily receipts from 4,692,661 4,175,418 2,865,878 12% 64% Customers Notes to Editors The NETELLER Group With over 2.6 million customers in 160 countries and more than $7 billion inannual transactions, the NETELLER Group operates the largest independent onlinemoney transfer business in the world. The Group specializes in providinginnovative and instant payment services where money transfer is difficult orrisky due to identity, trust, currency exchange, or distance. Being independenthas allowed the Group to support over 3,400 retailers and merchants in manygeographies and across multiple industries. The Group is one of the largest companies quoted on the London Stock Exchange'sAIM market, with a ticker symbol of NLR. NETELLER UK Limited is authorised bythe Financial Services Authority (FSA) to operate as a regulated e-money issuer. For more information about the Group visit www.netellerplc.com. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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