INVESTOR PRESENTATION 2018 F ULL -Y EAR R ESULTS SAFE HARBOR - - PowerPoint PPT Presentation

investor
SMART_READER_LITE
LIVE PREVIEW

INVESTOR PRESENTATION 2018 F ULL -Y EAR R ESULTS SAFE HARBOR - - PowerPoint PPT Presentation

INVESTOR PRESENTATION 2018 F ULL -Y EAR R ESULTS SAFE HARBOR STATEMENT Net Element, Inc. is traded on the NASDAQ Capital Market under the >cker symbol NETE This presenta>on is for discussion purposes only. All prices and rates


slide-1
SLIDE 1

INVESTOR

PRESENTATION

2018 FULL-YEAR RESULTS

slide-2
SLIDE 2

www.netelement.com

SAFE HARBOR STATEMENT

2 www.netelement.com

Net Element, Inc. is traded on the NASDAQ Capital Market under the >cker symbol “NETE”

This presenta>on is for discussion purposes only. All prices and rates referenced herein are indica>ve and subject to market condi>ons. The material is based upon informa>on that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. The material available in this presenta>on may contain forward-looking statements, which are subject to risks, uncertain>es and assump>ons. In some cases, you can iden>fy these statements by forward-looking words such as “may”, “might”, “will”, “should”, “expect”, “plan”, “an>cipate”, “believe”, “es>mate”, “predict”, “op>mis>c”, “poten>al”, “future” or “con>nue”, the nega>ve of these terms and other comparable terminology. Such forward-looking statements are based on current plans, es>mates and expecta>ons and are made pursuant to the Private Securi>es Li>ga>on Reform Act of 1995. Forward-looking statements are based

  • n known and unknown risks, assump>ons, uncertain>es and other factors. The Company’s actual results, performance and

achievements may differ materially from any future results, performance, or achievements expressed or implied by such forward- looking statements. We do not assume responsibility for the accuracy or completeness of any forward-looking statement and you should not rely on forward-looking statements as predic>ons of future events. We are under no duty to update any of these forward- looking statements to conform them to actual results or revised expecta>ons. This presenta>on contains certain non-GAAP financial measures determined by methods other than in accordance with generally accepted accoun>ng principles. Such non-GAAP financial measures include: general and administra>ve expense before non-cash compensa>on expense. Management uses these non-GAAP financial measures to assess the performance of Net Element’s core

  • business. Net Element believes that these non-GAAP financial measures provide meaningful addi>onal informa>on about Net Element

to assist investors in evalua>ng Net Element’s opera>ng results. These non-GAAP financial measures should not be considered as a subs>tute for opera>ng results determined in accordance with GAAP and may not be comparable to other similarly >tled measures of

  • ther companies.

Any investment in Net Element will be subject to certain risks related to the nature of the Company’s business and the structure and

  • pera>ons of the Company. Any investment in the Company should be made only with an apprecia>on of the applicable risks, which are

described in the Company’s filings with the SEC.

slide-3
SLIDE 3

www.netelement.com Net Element, Inc. (NASDAQ: NETE) (“Net Element”) is a global technology and value-added payment acceptance solu>ons group

  • Net Element enables merchants to accept electronic payments (e.g.

credit, debit) at the point of sale (“POS”), online and via mobile payment technologies

  • Broad range of payment acceptance and transac>on processing

services that enable merchants of all sizes to accept and process

  • ver 100 different payment op>ons in a mul>-channel environment
  • Fully-integrated payment solu>ons incorpora>ng fraud

management and tokeniza>on technologies

  • Con>nued development of disrup>ve technologies such as

blockchain, payments enablement for Internet of Things, biometrics payment acceptance and ar>ficial intelligence

  • Diversified client base with strong recurring revenues
  • Surpassed $65.8 million in revenue in 2018
  • Surpassed $3.3 billion in total transac>on volume
  • 88 full->me employees

COMPANY OVERVIEW

3

slide-4
SLIDE 4

www.netelement.com

INVESTMENT HIGHLIGHTS

LARGE & GROWING INDUSTRY

  • Large and growing market with favorable economic trends
  • The use of non-cash forms of payments including mobile payments has

steadily increased over the past then years and con>nues to climb RECURRING REVENUE BUSINESS MODEL

  • Focused on fast growing and highly profitable market segments
  • Proven business model in the United States with recurring revenues
  • Diverse, low-risk, recession proof recurring revenue stream
  • Strong established customer & partner base

RESILIENT OPERATING LEVERAGE

  • Resilient business with strong recurring revenue and good visibility
  • Full front and back office opera>ons including risk, underwri>ng,

deployment, ac>va>on, client services, data entry and reten>on

  • Significant, untapped opportuni>es for expansion and growth in

selected ver>cals and markets with the focus on value-added offerings PROVEN MANAGEMENT TEAM

  • Track record of scaling businesses and delivering shareholder value
  • Proven achievements in new product launch
  • Proven achievements in new market development
  • Relentless focus on value crea>on and growth

4 www.netelement.com

slide-5
SLIDE 5

www.netelement.com

COMPANY EVOLUTION

EXECUTED STRATEGIC OPPORTUNITIES

  • Acquired recurring cash flows poriolios, projected to add over $9 million in

gross profits over 4 years

  • Launched subscrip>on-based payment processing, signed partnership

agreement, projected to add over $1.5 million in gross profit over 4 years POSITIONED FOR GROWTH

  • Received $7.55 million ins>tu>onal investment to support growth
  • Ensured con>nued compliance with NASDAQ lis>ng requirements
  • Launched business unit focused on blockchain technology

FOCUS ON VALUE-ADDED RELATIONSHIPS

  • Expanded direct processing rela>onships with financial ins>tu>ons
  • Expanded service offerings to over 100 payment methods interna>onally
  • Annual revenues increased 35%

ACQUISITION OF ONLINE PAYMENT PLATFORM

  • Acquisi>on of PayOnline, leading online payment plaiorm
  • Expanded PayOnline to selected emerging markets
  • Annual revenues increased 89.5%

OPERATIONAL OPTIMIZATION

  • Debt reduced from $31 million to $3 million
  • G&A reduced from $12 million to $7 million, excluding non-cash items
  • $10 million credit facility to implement strategic ini>a>ves

2018 2017 2016 2015 2014

5 www.netelement.com

slide-6
SLIDE 6

www.netelement.com

MANAGEMENT TEAM

OLEG FIRER

Chief Execu>ve Officer

STEVEN WOLBERG

Chief Legal Officer

JEFFREY GINSBERG

Chief Financial Officer

ANDREY KROTOV

Chief Technology Officer

DAYAN MARTINEZ

Investor Rela>ons

VLAD SADOVSKIY

Head of Integrated Payments

SVETLANA ESENNIKOVA

Head of Online Solu>ons

SHAWN BROWN

Head of Risk Management

GIOVANNI DI FEBO

Head of Acquiring & Compliance

CHRISTA SHOOK

Partner Growth

OLEG FIRER

Execu>ve Chairman Chief Execu>ve Officer Net Element

DREW FREEMAN

Director 30+ yrs payments Experience

HOWARD ASH

Director International Value-added specialist

JON NAJARIAN

Director CNBC cast member “Halnime Report”

JAMES CAAN

Non-Vo>ng Director Accomplished Actor & director

EXECUTIVE MANAGEMENT TEAM EXPERIENCE

6 www.netelement.com

BOARD OF DIRECTORS JONATHAN FICHMAN

Director Seasoned Fintech Execu>ve

BUSINESS LINE MANAGEMENT

slide-7
SLIDE 7

www.netelement.com

7 www.netelement.com

For the five-year period ending December 31, 2018, Net Element has executed several complex ini>a>ves and con>nued to deliver double digit percentage year-over-year organic growth

REVENUE GROWTH

158% GROWTH

Revenue growth over five-year period ending December 31, 2018

2014 2015 2016 2017 2018 $ 21.2 $ 54.3 $ 60.1 $ 65.8

31.6%

2014-18 CAGR

www.netelement.com 7

$ 40.2

slide-8
SLIDE 8

www.netelement.com

8 www.netelement.com

RECURRING REVENUE STREAMS

We have amassed a broad poriolio of value added applica>ons that leverage the growth in payments to create a diverse array of recurring revenues and differen>ate us in the marketplace. Recurring service revenue is the primary revenue component for the Company

RECURRING REVENUE

100%

TRANSACTION PROCESSING

85%

DATA & ANALYTICS

3%

SOFTWARE LICENSE

12%

TRANSACTION PROCESSING SOFTWARE LICENSE DATA & ANALYTICS Fees charged on a per transac>on and processed volume basis for payment acceptance services provided to the merchant Sonware as a license (SaaS) model allows merchants to get point-

  • f-sale sonware without

upfront capital expenditure Business Intelligence tools are priced based on

  • usage. A percentage fee

is charged over volume processed

RECURRING REVENUE AS PERCENTAGE OF TOTAL REVENUE 2018

slide-9
SLIDE 9

www.netelement.com

www.netelement.com

Extensive network of over 100 independent sales groups and agents, including integrators, value- added resellers, affinity and referral partners boost the Company’s merchant growth

CLIENT GROWTH

2013 2014 2015 2016 2017

www.netelement.com 9

Internal Sales Force focused on ver>cals and value-added services External Partners enable rapid scalability and expansion through indirect distribu>on Value-Added Resellers and Integrators focus on technology and synergis>c sales

2018

slide-10
SLIDE 10

www.netelement.com

POWERFUL ECOSYSTEM

10 www.netelement.com

  • Maintain control of their network
  • Acquire new consumers seeking

innovaDve technology under the trusted bank brand

  • EffecDve adverDsing and loyalty

channel

FINANCIAL INSTITUTIONS

  • Enables MNOs to provide full

mobile commerce soluDons including DCB, one-click, PSMS, WAP, A2P/P2A and PIN submit

  • Significant pathway for growing

consumer engagement

  • Allows fricDonless commerce on

any device worldwide

  • Cloud-based plaXorm provides

enhanced security

  • Omni-channel giY and loyalty

program allowing consumers to earn points across all devices

CONSUMERS

  • Allows real-Dme engagement

with consumers

  • Maintain control of consumer

relaDonship

  • Merchant-branded, white label

soluDon (“Payment as a Service”)

MERCHANTS

POS Solutions Mobile Payments Value-Add Offerings Payment Acceptance Big Data/Analytics

  • |

100+

PAYMENT OPTIONS WITH 1 Integration API 1 Back Office 1 Settlement 1 Dedicated Team

  • w ○

MULTI-CHANNEL PROCESSING

MOBILE NETWORK OPERATORS

slide-11
SLIDE 11

www.netelement.com

www.netelement.com

All the features and buildings blocks to make global commerce a reality. Our vision is to set the standard for global cross-channel payments acceptance and value-added service offerings with focus on crea>on of unified global transac>on acceptance ecosystem

INTEGRATED SOLUTIONS

www.netelement.com

One of the leading providers

  • f payment acceptance

solu>ons in the United States Future-ready mul>-channel payments and merchant management plaiorm Integrated POS plaiorm for hospitality, retail, service and on the go industries Seamlessly redefine and modernize experience at the POS and behind the scenes No fees. Merchants get the full purchase price for the transac>on Enterprise-class infrastructure tools for back-office processing Our technology development team brings ideas to life Payment acceptance without

  • borders. Fully-integrated
  • nline processing plaiorm

Mobile POS applica>on makes accep>ng payments on the go easy and secure

11

slide-12
SLIDE 12

www.netelement.com

PREMIER RELATIONSHIPS

12 www.netelement.com

RECOGNIZED MERCHANTS MOBILE NETWORK OPERATORS FINANCIAL INSTITUTIONS

S

At Net Element we are commiqed to finding the most innova>ve and impaciul strategic partnership ideas, no maqer where they reside

slide-13
SLIDE 13

www.netelement.com

INTEGRATED SOLUTIONS

13 www.netelement.com

Card Processing Electronic Commerce Mobile Commerce Gift Cards Alternative Payments Marketing Security & Risk Management Customer Service Mobile Payments Advisory Bill Payments Business Analytics Reporting Tools

  • Turn-key

Integration Loyalty / Rewards Point of Sale

COMPREHENSIVE SOLUTION SET DISTRIBUTION

INTERNAL SALES FORCE EXTERNAL PARTNERS 1 2

  • Established sales force and market expertise
  • Motivated team leaders
  • Access to proprietary commission platform
  • Contracts to elected partners & distributors

in North America, Europe, CIS and Asia

INTEGRATED TECHNOLOGY PLATFORM

slide-14
SLIDE 14

www.netelement.com

www.netelement.com

Momentum in the transi>on of consumer payments away from paper and towards card and electronic alterna>ves is expected to result in total cash and

  • ther paper declining by $1.9 trillion and $453

billion, respec>vely, over the forecast period. Factors accelera>ng the transi>on to digital payments include increased access to financial services and government policies. Despite substan>al growth in card payment value,

  • n a year-over-year growth basis, electronic direct

payment value is expected to increase fastest between 2017 and 2022

DIGITAL PAYMENTS

A LARGE, GLOBAL AND FAST-GROWING MARKET

www.netelement.com

Fintech transacaon value

+18%

Mobile commerce

+23%

Blockchain market

+61.5%

Sources: Sta,sta Digital Market Outlook; Euromonitor; Blockchain News

14

Forecast compound annual growth rates 2016-2021

slide-15
SLIDE 15

www.netelement.com

INDUSTRY OVERVIEW

15 www.netelement.com

The global payments industry con>nues to deliver healthy growth, with underlying fundamentals such as transac>on volumes and account balances demonstra>ng even greater strength. This scenario also lays the groundwork for significant disrup>on likely to alter the dynamics between financial ins>tu>ons and fintechs.

Asia-Pacific EMEA LATAM North America 2014 2015 2016 2017 2022E 0.4 0.4 0.4 0.5 0.6 0.1 0.1 0.2 0.2 0.3 0.3 0.3 0.3 0.3 0.4 0.7 0.7 0.8 0.9 1.6 2019E 2020E 2023E

30% 32% 34% 35% 36%

Share of total banking, %

CAGR % 2017-22

+11% +6% +8% +7% Payments revenue in trillions US$ 1.5 1.6 1.7 1.9 2.9 Source: McKinsey Global Payments Map Source: Staasta 2018 2017 359 2,804 530 3,068 748 3,397 1,015 3,757 2,118 4,569 Mobile POS Payments Digital Commerce Transacaon volume in billions US$ 3,164 3,598 4,145 4,772 6,867

slide-16
SLIDE 16

www.netelement.com

16 www.netelement.com

Demand for SaaS-based solu>ons provides an opportunity for technology-enabled POS (“iPOS”). We believe that we are well posi>oned to benefit from merchants’ demand for integrated payments solu>ons at the early stage of an upgrade cycle.

2013 31% 79% 2020 2013 31% 79% 2020 2017

  • $3.8

>$4.4 2020

SMB Spending on SaaS Expected to Increase

11% CAGR

SaaS Spending Among SMB(1)

Driving Adopaon of Technology-Enabled iPOS

Offering Value Added Services Creates New Revenue Streams & Sackier Merchants

✓ Visual POS ✓ Product organiza>on tools ✓ Omni-channel payment acceptance ✓ Ability to manage supplier rela>onships ✓ Invoicing and reconcilia>on ✓ Analy>cs and addi>onal repor>ng

As Merchants Seek to Upgrade their Soluaons Creaang a Significant Revenue Opportunity

+48%

iPOS Usage (% of Total Retailers)(2) iPOS & mPOS Addressable Market ($BN)(2)

+5% CAGR

(1) BCG “Merchant Acquiring: How to Win in a Digital World” (2) Ingenico’s 2020 Strategic Plan Presenta>on

INDUSTRY OVERVIEW

slide-17
SLIDE 17

www.netelement.com

2018 HIGHLIGHTS

POSITIONED FOR GROWTH

17 www.netelement.com

Revenue

$65.8 million

2018 2017 $65.8 million $60.1 million

  • 10%

Transacaons Processed

149 million

2018 2017 149 million 154 million

  • (3%)

Gross Margin

$10.2 million

2018 2017 $10.2 million $8.8 million

  • 15%

Gross Margin - U.S.

14.5%

2018 2017

EBITDA

($1.7) million

2018 2017 ($1.7) million ($6.3) million

  • 73%

Gross Margin - Internaaonal

23.7%

2018 2017 23.7% 21.9%

  • 8%

Total Transacaon Value

$3.3 billion

2018 2017 $3.3 billion $2.8 billion

  • 18%

Transacaons Value - U.S.

$2.9 billion

2018 2017 $2.9 billion $2.3 billion

  • 27%

Transacaons Value - Internaaonal

$520 million

2018 2017 $354 million $520 million

  • (33%)

* excludes disconDnued business line

14.5% 13.4%

  • 8%
slide-18
SLIDE 18

www.netelement.com

FINANCIAL OVERVIEW

18 www.netelement.com

Impressive Organic Net Revenue Growth Rapidly-Growing Payment Volume Rapid EBITDA Development 2018 Gross Margin Analysis

$0 $20 $40 $60 $80 2014A 2015A 2016A 2017A 2018A 2019E 2020E

North American Transac>on Solu>ons Interna>onal Transac>on Solu>ons

19.4 27.4 42.1 51.1 59.4 64.1 70.0 1.8 12.8 12.2 9.2 $21.2 $40.2 $54.3 $60.1 $65.8 $69.5 $75.4 1 3 . 8 % C A G R

% Growth 35% 11% 10% 6% 8% ($ in millions)

$0 $1,250 $2,500 $3,750 $5,000 2014A 2015A 2016A 2017A 2018A 2019E 2020E 21.7% CAGR

% Growth 28% 22% 18% 21% 20% ($ in millions)

$667 $1,800 $2,300 $2,800 $3,300 $4,000 $4,800 8.9 6.6 8.5 $ in Millions Revenue Gross Margin % of Revenue North America $59.1 $8.6 14.5% International $6.6 $1.6 23.7% Total $32.5 $10.2 15.5%

  • $9
  • $7
  • $5
  • $2

$0 $2 2014A 2015A 2016A 2017A 2018A 2019E 2020E 1.5

  • 1.9
  • 1.7
  • 6.1
  • 8.7
  • 2.9

0.1 0.1

($ in millions)

$ in Millions Revenue Gross Margin % of Revenue North America $51.1 $6.9 13.4% International $8.9 $1.9 21.9% Total $60.0 $8.8 14.7%

2017 Gross Margin Analysis

slide-19
SLIDE 19

www.netelement.com

19 www.netelement.com

SINGLE-SOURCE APPROACH

BACK OFFICE Fulfillment/ Maintenance

  • Fully automated
  • Rapid turnaround
  • Inventory Management

SALES Customer Acquisition/ Boarding SALES Agent Support SALES Retention Support BACK END Merchant Acquiring RISK MANAGEMENT MANAGEMENT INFORMATION BACK OFFICE Exceptions Processing BACK OFFICE Merchant Support

  • Level 1 outsource
  • 24/7/365 availability
  • Proprietary centralized

customer relationship management platform

  • Retrieval automation
  • Chargeback dispute

resolution

  • Extensive web-based

management information systems

  • Custom reporting options
  • Comprehensive statement
  • Management dashboard
  • Integrated real-time monitoring
  • Underwriting, credit scoring,

fraud control, collection

  • Merchant boarding; online,

mobile, XML on the go, fax, email

  • Support of nationwide

sales network

  • Product know-how
  • Sales partner training
  • Escalations
  • Reactive merchant

retention

  • Proactive merchant

retention

  • Product up-sell and

cross-sell opportunities

  • Comprehensive merchant

statement

  • Monthly or daily transaction

billing

  • Residual accounting
  • Integrated VAS offerings
slide-20
SLIDE 20

www.netelement.com

Global technology and value-added solutions group that supports electronic payments acceptance in a multi-channel environment

investors@netelement.com https://www.linkedin.com/company/net-element/ https://www.facebook.com/netelement https://twitter.com/neteinc +1 (305) 507-8808 www.netelement.com