NETSOL Technologies Reports Fiscal First Quarter 2021 Financial Results

• Net Income of $718,000, $0.06 EPS and $4.7 Million Cash from Operations
  
• Gross Subscription (SaaS) and Annual Recurring And Contracted Support Revenues Exceeded $5 Million for the First Time
• Major Go-Live Event, Double-Digit Recurring Revenue Growth, and Continued Cost Management Efforts Yield Fourth Straight Quarter of Profitability
• OTOZ Partnering to Launch a Digital Automotive Retail Platform for a U.S. Based Subsidiary of a Renowned German Auto Manufacturer for One of its Key Brands with an Initial Launch in California in Early Calendar 2021
• Moderate Return to Business Conditions, Coupled with High-Value, Near-Term Pipeline of Opportunities Underscore Cautiously Optimistic Growth Outlook for Fiscal 2021

CALABASAS, Calif., Nov. 16, 2020 (GLOBE NEWSWIRE) — NETSOL Technologies, Inc. (Nasdaq: NTWK), a global business services and enterprise application solutions provider, reported results for the fiscal first quarter ended September 30, 2020.

Fiscal First Quarter 2021 and Recent Operational Highlights

• Successfully implemented the NFS Ascent® Retail Platform, including the Company’s proprietary Loan Origination System (LOS) and Contract Management System (CMS) for a tier-one German auto captive finance company in China in the second phase of a previously announced $30 million contract.
• Regarding previously announced 12-country, $110 million contract with German auto manufacturing giant, the Company made continued progress with respect to additional NFS Ascent® implementations. The Company has successful Go Live events in Singapore and Thailand in September and October, respectively. The implementation process has also now begun in New Zealand and Australia.
• Announced the successful implementation of the Company’s first North American cloud-based NFS Ascent Contract Management System (CMS) for SCI Lease Corp, a Canadian-based national automotive leasing company.
• Appointed Peter Minshall as Executive Vice President (EVP) of NTA. The EVP role will report directly to the Company CEO and is responsible for the entire NTA portion of NETSOL’s business operations.
• Generated $315,000 in additional SaaS subscription and support revenues, which are recurring in nature and anticipated to gradually increase as the Company implements NFS legacy products and NFS Ascent®.
• NETSOL effectively generated approximately $1.3 million by successfully implementing change requests from various customers across multiple regions.
• NETSOL’s new mobility startup subsidiary, Otoz, is partnering to launch its digital automotive retail platform for a U.S. based subsidiary of a renowned German auto manufacturer for one of its key brands.

Fiscal First Quarter 2021 Financial Results

Total net revenues for the first quarter of fiscal 2021 were $12.6 million, compared with $13.6 million in the prior year period. The decrease in total net revenues was primarily due to a decrease in total license fees of $2.5 million, which was offset by an increase in subscription and support revenues of $565,000 and an increase in total service revenues of $970,000.

• Total license fees were $3,500, compared with $2.5 million in the prior year period.
• Total subscription (SaaS and Cloud) and support revenues were $5.2 million, compared with $4.6 million in the prior year period.
• Total services revenues were $7.5 million, compared with $6.5 million in the prior year period.

Gross profit for the first quarter of fiscal 2021 was $6.4 million (or 50.5% of net revenues), compared to $6.1 million (or 45.0% of net revenues) in the first quarter of fiscal 2020. The increases in gross profit and gross profit as a percentage of revenue were primarily due to decreases in cost of revenues, which were predominantly driven by a decrease in travel expenses resulting from the COVID-19 pandemic.

Operating expenses for the first quarter of fiscal 2021 decreased 18.2% to $5.3 million (or 42.3% of net revenues) from $6.5 million (or 48.2% of net revenues) for the first quarter of fiscal 2020. The decrease in operating expenses was primarily due to decreases in selling and marketing, professional services, research and development and general and administrative expenses, which were offset by a minor increase in depreciation and amortization.

GAAP net income attributable to NETSOL for the first quarter of fiscal 2021 totaled $718,000 or $0.06 per diluted share, compared with GAAP net loss of $(1.8) million or $(0.16) per diluted share in the first quarter of fiscal 2020. GAAP net income attributable to NETSOL included a $296,000 gain on foreign currency exchange transactions in the first quarter of fiscal 2020, which was a significant increase compared with a loss of $1.8 million in the prior year period.

Non-GAAP adjusted EBITDA for the first quarter of fiscal 2021 totaled $1.6 million or $0.14 per diluted share, compared with non-GAAP adjusted EBITDA loss of $(1.1) million or $(0.09) per diluted share in the first quarter of fiscal 2020 (see note regarding “Use of Non-GAAP Financial Measures,” below for further discussion of this non-GAAP measure).

At September 30, 2020, cash and cash equivalents were $24.9 million, an increase from $20.2 million at June 30, 2020.

Management Commentary
“The beginning of the fiscal year was an extension of the same business conditions we’ve witnessed since the pandemic took hold, but we are continuing to operate efficiently, control costs and execute on our long-term strategic growth plan,” said NETSOL Co-Founder, Chairman and Chief Executive Officer Najeeb Ghauri. “Financially, we generated roughly $1.3 million from change requests and reduced expenses by nearly 20% leading to sustained profitability on a trailing-twelve-month basis. We also grew our recurring revenue base by double digits to $5.2 million. As we layer on maintenance fees through larger, traditional, enterprise contracts and increase our SaaS-based footprint, we expect to build this base over time, which provides for more predictable revenues with a more attractive margin profile.

“During fiscal Q1, we were very active on the implementation front and had multiple successful ‘Go Live’ events within our APAC region for a pair of major international auto manufacturers. We are also gaining traction with mid-size auto captives in our North American and European markets with the latter comprising a greater portion of overall revenues compared to last year. Our Otoz Innovation Lab remains a bright spot, making great progress on current partnerships, including work with a renowned German OEM on a digital automotive retail platform for one of its key brands. With several catalysts on the horizon, we are optimistic about our prospects for the new fiscal year.”

Sales Outlook

Ghauri added: “Sales discussions with a number of potential customers remain active, and we are confident that the market is beginning to pick up in all global regions. We have a number of high-value, near-term opportunities in our pipeline and are cautiously optimistic about our growth outlook.”

Otoz Update
“We recently began a partnership to launch a fully-digital mobile app for a major German auto captive in the U.S. that will enable a touchless customer journey, all built on the Otoz platform,” said Naeem Ghauri, CEO of Otoz. “The end product will be rolled out to hundreds of auto dealers across the U.S. and is expected to generate significant SaaS revenues for our business. Separately, we are in the final contract negotiation stages with a number of other major players in the automotive space and look forward to announcing those agreements in the near future.”

Conference Call

NETSOL Technologies management will hold a conference call today (November 16, 2020) at 9:00 a.m. Eastern time (6:00 a.m. Pacific time) to discuss these financial results. A question and answer session will follow management’s presentation.

U.S. dial-in: 1-877-407-0789
International dial-in: 1-201-689-8562

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Gateway Investor Relations at 1-949-574-3860.

The conference call will be broadcasted live and available for replay here and via the Investor Relations section of NETSOL’s website.

A replay of the conference call will be available after 12:00 p.m. Eastern time on the same day through November 30, 2020.

Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 13712135

About NETSOL Technologies
NETSOL Technologies, Inc. (Nasdaq: NTWK) is a worldwide provider of IT and enterprise software solutions primarily serving the global leasing and finance industry. The Company’s suite of applications is backed by 40 years of domain expertise and supported by a committed team of more than 1300 professionals placed in eight strategically located support and delivery centers throughout the world. NFS, LeasePak, LeaseSoft or NFS Ascent® – help companies transform their Finance and Leasing operations, providing a fully automated asset-based finance solution covering the complete finance and leasing lifecycle.

About Otoz

Otoz provides business-to-business, white-label technology solutions for new mobility. Our suite of agile and customizable mobility solutions ranges from car sharing and subscription products to AI-enabled chatbots, allowing businesses to engage consumers and facilitate the complete transaction lifecycle intelligently and digitally. Otoz technologies empower automotive companies and start-ups to launch new mobility models quickly and efficiently. The technology Otoz has developed is cloud-native and supported by artificial intelligence (AI), machine learning (ML), internet of things (IoT) and blockchain. Our technology drives utilization, while supporting robust and efficient operations.

Forward-Looking Statements


This press release may contain forward-looking statements relating to the development of the Company’s products and services and future operating results, including statements regarding the Company that are subject to certain risks and uncertainties such as the effect of stay at home orders and social distancing imposed by COVID-19 and its resultant impact on our financials and the world economy that could cause actual results to differ materially from those projected. The words “expects,” “anticipates,” variations of such words, and similar expressions, identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, but their absence does not mean that the statement is not forward-looking. These statements are not guarantees of future performance and are subject to certain risks, uncertainties, and assumptions that are difficult to predict. Factors that could affect the Company’s actual results include the progress and costs of the development of products and services and the timing of the market acceptance, as well as the delay in recovery or a prolonged economic downturn that effects our Company, our customers and the world economy. The subject Companies expressly disclaim any obligation or undertaking to update or revise any forward looking statement contained herein to reflect any change in the company’s expectations with regard thereto or any change in events, conditions or circumstances upon which any statement is based.

Use of Non-GAAP Financial Measures

The reconciliation of Adjusted EBITDA to net income, the most comparable financial measure based upon GAAP, as well as a further explanation of adjusted EBITDA, is included in the financial tables in Schedule 4 of this press release. 

Investor Relations Contact:

Matt Glover and Tom Colton

Gateway Investor Relations
1-949-574-3860
[email protected]

NETSOL Technologies, Inc. and Subsidiaries

Schedule 1: Consolidated Balance Sheets

			As of				As of
	ASSETS		September 30, 2020				June 30, 2020
Current assets:
	Cash and cash equivalents		$	24,885,365			$	20,166,830
	Accounts receivable, net of allowance of $279,903 and $435,611			6,732,575				10,131,752
	Accounts receivable – related party, net of allowance of $1,373,099 and $90,594			–				1,282,505
	Revenues in excess of billings, net of allowance of $91,250 and $188,914			18,430,766				17,198,281
	Revenues in excess of billings – related party, net of allowance of $8,163 and $0			–				8,163
	Other current assets, net of allowance of $1,243,633 and $0			2,616,769				3,108,180
		Total current assets		52,665,475				51,895,711
Revenues in excess of billings, net – long term				–				1,300,289
Convertible note receivable – related party, net of allowance of $4,250,000  and $0				–				4,250,000
Property and equipment, net				11,256,306				11,329,631
Right of use of assets – operating leases				2,133,902				2,360,129
Long term investment				2,417,291				2,387,692
Other assets				41,175				41,992
Intangible assets, net				5,032,630				5,391,077
Goodwill				9,516,568				9,516,568
		Total assets	$	83,063,347			$	88,473,089
	LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Accounts payable and accrued expenses		$	6,005,999			$	5,680,837
	Current portion of loans and obligations under finance leases			9,677,277				9,139,561
	Current portion of operating lease obligations			1,165,957				1,111,912
	Unearned revenues			2,775,600				4,095,472
	Common stock to be issued			88,324				88,324
		Total current liabilities		19,713,157				20,116,106
Loans and obligations under finance leases; less current maturities				1,705,699				1,539,975
Operating lease obligations; less current maturities				1,110,832				1,339,965
		Total liabilities		22,529,688				22,996,046
Commitments and contingencies
Stockholders’ equity:
	Preferred stock, $.01 par value; 500,000 shares authorized;			–				–
	Common stock, $.01 par value; 14,500,000 shares authorized;
		12,137,045  shares issued and 11,742,490  outstanding as of September 30, 2020  and
		12,122,149  shares issued and 11,874,646  outstanding as of June 30, 2020		121,371				121,222
	Additional paid-in-capital			128,764,618				128,677,754
	Treasury stock (at cost, 394,555 shares and 247,503 shares
	as of September 30, 2020 and June 30, 2020, respectively)			(1,920,645	)			(1,455,969	)
	Accumulated deficit			(39,861,985	)			(34,269,817	)
	Other comprehensive loss			(33,210,231	)			(34,085,047	)
		Total NetSol stockholders’ equity		53,893,128				58,988,143
	Non-controlling interest			6,640,531				6,488,900
		Total stockholders’ equity		60,533,659				65,477,043
		Total liabilities and stockholders’ equity	$	83,063,347			$	88,473,089

 

NETSOL Technologies, Inc. and Subsidiaries

Schedule 2: Consolidated Statement of Operations

			For the Three Months
			Ended September 30,
				2020				2019
Net Revenues:
	License fees		$	3,475			$	2,464,216
	Subscription and support			5,171,863				4,606,376
	Services			7,472,040				6,418,891
	Services – related party			–				82,933
		Total net revenues		12,647,378				13,572,416
Cost of revenues:
	Salaries and consultants			4,526,649				4,454,964
	Travel			103,752				1,342,635
	Depreciation and amortization			707,249				719,665
	Other			928,153				944,524
		Total cost of revenues		6,265,803				7,461,788
Gross profit				6,381,575				6,110,628
Operating expenses:
	Selling and marketing			1,609,604				1,743,868
	Depreciation and amortization			221,790				202,387
	General and administrative			3,427,636				3,918,613
	Research and development cost			85,989				672,970
		Total operating expenses		5,345,019				6,537,838
Income (loss) from operations				1,036,556				(427,210	)
Other income and (expenses)
	Loss on sale of assets			(21,742	)			(289	)
	Interest expense			(103,327	)			(63,663	)
	Interest income			200,821				399,229
	Gain (loss) on foreign currency exchange transactions			296,041				(1,760,190	)
	Share of net loss from equity investment			(107,850	)			(189,224	)
	Other income			87,272				18,326
		Total other income (expenses)		351,215				(1,595,811	)
Net income (loss) before   income taxes				1,387,771				(2,023,021	)
Income tax provision				(264,294	)			(238,238	)
Net income (loss)				1,123,477				(2,261,259	)
	Non-controlling interest			(405,923	)			433,312
Net income (loss) attributable to NetSol			$	717,554			$	(1,827,947	)
Net income per share:
	Net income per common share
		Basic	$	0.06			$	(0.16	)
		Diluted	$	0.06			$	(0.16	)
Weighted average number of shares outstanding
	Basic			11,787,233				11,664,239
	Diluted			11,787,233				11,664,239

 

NETSOL Technologies, Inc. and Subsidiaries

Schedule 3: Consolidated Statement of Cash Flows

				For the Three Months
				Ended September 30,
					2020				2019
Cash flows from operating activities:
	Net income (loss)			$	1,123,477			$	(2,261,259	)
	Adjustments to reconcile net income (loss)
		to net cash provided by operating activities:
	Depreciation and amortization				929,039				922,052
	Provision for bad debts				(258,160	)			(38,621	)
	Share of net loss from investment under equity method				107,850				189,224
	Loss on sale of assets				21,742				289
	Stock based compensation				90,995				164,293
	Changes in operating assets and liabilities:
		Accounts receivable			3,823,299				4,836,183
		Accounts receivable – related party			–				46,016
		Revenues in excess of billing			394,995				(1,870,517	)
		Revenues in excess of billing – related party			–				66,330
		Other current assets			(393,253	)			(278,677	)
		Accounts payable and accrued expenses			255,239				122,012
		Unearned revenue			(1,383,619	)			(1,631,245	)
	Net cash provided by operating activities				4,711,604				266,080
Cash flows from investing activities:
	Purchases of property and equipment				(489,289	)			(321,125	)
	Sales of property and equipment				32,673				958
	Convertible note receivable – related party				–				(435,000	)
	Investment in associates				(60,500	)			–
	Net cash used in investing activities				(517,116	)			(755,167	)
Cash flows from financing activities:
	Proceeds from exercise of subsidiary options				–				11,621
	Purchase of treasury stock				(464,676	)			–
	Proceeds from bank loans				697,295				–
	Payments on finance lease obligations and loans – net				(143,506	)			(147,376	)
	Net cash provided by (used in) financing activities				89,113				(135,755	)
Effect of exchange rate changes					434,934				879,857
Net increase in cash and cash equivalents					4,718,535				255,015
Cash and cash equivalents at beginning of the period					20,166,830				17,366,364
Cash and cash equivalents at end of period				$	24,885,365			$	17,621,379

NETSOL Technologies, Inc. and Subsidiaries

Schedule 4: Reconciliation to GAAP

	For the Three Months Ended				For the Three Months Ended
	September 30, 2020				September 30, 2019
Net Income (loss) attributable to NetSol	$	717,554			$	(1,827,947	)
Non-controlling interest		405,923				(433,312	)
Income taxes		264,294				238,238
Depreciation and amortization		929,039				922,052
Interest expense		103,327				63,663
Interest (income)		(200,821	)			(399,229	)
EBITDA	$	2,219,316			$	(1,436,535	)
Add back:
Non-cash stock-based compensation		90,995				164,293
Adjusted EBITDA, gross	$	2,310,311			$	(1,272,242	)
Less non-controlling interest (a)		(698,844	)			191,235
Adjusted EBITDA, net	$	1,611,467			$	(1,081,007	)
Weighted Average number of shares outstanding
Basic		11,787,233				11,664,239
Diluted		11,787,233				11,664,239
Basic adjusted EBITDA	$	0.14			$	(0.09	)
Diluted adjusted EBITDA	$	0.14			$	(0.09	)
(a)The reconciliation of adjusted EBITDA of non-controlling interest
to net income attributable to non-controlling interest is as follows
Net Income (loss) attributable to non-controlling interest	$	405,923			$	(433,312	)
Income Taxes		48,649				53,335
Depreciation and amortization		264,565				259,635
Interest expense		31,520				19,041
Interest (income)		(65,957	)			(105,501	)
EBITDA	$	684,700			$	(206,802	)
Add back:
Non-cash stock-based compensation		14,144				15,567
Adjusted EBITDA of non-controlling interest	$	698,844			$	(191,235	)