EX-99.1 2 ex99-1.htm

 

Exhibit 99.1

 

NETSOL Technologies Reports Fiscal Third Quarter 2023 Financial Results

 

  Net Revenue for the Quarter was $13.5 Million; $14.1 Million on a Constant Currency Basis
     
  Expansion into North America Market on Track; Establishing Client Support and ‘Center of Excellence’ Facility in Austin, TX to Grow Revenues and Customer Base
     
  Recurring Revenue (SaaS and Support) of $6.7 Million; $6.8 Million on a Constant Currency Basis; Expect Fiscal 2023 Annual Recurring Revenue (SaaS and Support) of over $25 million
     
  Strategic Business and Cost Transformation in Place; 20-25% Reduction in Headcount and Significant Total Savings Expected
     
  Integrating Generative AI and Machine Learning Capabilities into NETSOL Products through AWS Partnership
     
  $15.3 Million in Cash and $3.63 per Share in Shareholders’ Equity at March 31, 2023

 

Encino, Calif., May 11, 2023 – NETSOL Technologies, Inc. (Nasdaq: NTWK), a global business services and enterprise application solutions provider, reported results for the fiscal third quarter ended March 31, 2023.

 

Fiscal Third Quarter 2023 and Recent Operational Highlights

 

  Signed multi-million-dollar agreement with leading Japanese equipment finance company based in Australia for the deployment of premier NETSOL technology platform NFS Ascent Retail.
     
  Went live with the Company’s API-first and cloud-based calculation engine, Flex, for Haydock Finance, a business finance provider in the United Kingdom.
     
  Otoz, the Company’s fully digital, white label platform for lease, finance, and cash transactions, is live with 53 dealers across 24 U.S. states.
     
  Entered into teaming agreement with Digital Intelligence Systems (DISYS) to leverage large resource pool of over 5,000 U.S.-based engineers to augment and complement NETSOL’s growing U.S. presence and jointly undertake large enterprise-grade programs for existing and new U.S. clients.
     
  Extended partnership with Amazon Web Services (AWS) and became an API Gateway Delivery Partner, positioning NETSOL to expand capabilities and better serve clients across a variety of industries.
     
  Generated approximately $1.0 million through successful implementation of change requests from customers across multiple regions.

 

 
 

 

Fiscal Third Quarter 2023 Financial Results

 

Total net revenues for the third quarter of fiscal 2023 were $13.5 million, compared with $14.8 million in the prior year period. The decrease in total net revenues was primarily due to a decrease of $1.8 million in services revenue and offset by an increase in license fees of $362,000. On a constant currency basis, net revenues were $14.1 million. The decrease in revenues on a constant currency basis was driven by a decrease in services revenue of $1.5 million compared to the prior year period.

 

Total license fees were $2.0 million compared with $1.6 million in the prior year period. The increase is primarily due to the recognition of $1.9 million in licensing fees in the third quarter of 2023 related to a new agreement with a leading Japanese equipment finance company based in Australia. Total license fees on a constant currency basis were $2.1 million.
Total subscription (SaaS and Cloud) and support revenues were $6.7 million compared with $6.6 million in the prior year period. Total subscription and support revenues on a constant currency basis were $6.8 million.
Total services revenues were $4.9 million compared with $6.6 million in the prior year period. The decrease in services revenues is related to an overall decrease in services provided for ongoing implementations and additional change requests. Total services revenues on a constant currency basis were $5.2 million.

 

Gross profit for the third quarter of fiscal 2023 decreased to $4.7 million (or 34.8% of net revenues), compared to $5.8 million (or 39.4% of net revenues) in the third quarter of fiscal 2022. On a constant currency basis, gross profit for the third quarter of fiscal 2023 decreased to $2.4 million (or 17.1% of net revenues as measured on a constant currency basis). The decrease in gross profit on a constant currency basis was primarily due to an increase in salaries and consultant costs of $1.7 million and an increase in travel costs of $700,000, reflecting an increase in travel as countries lifted travel restrictions.

 

Operating expenses for the third quarter of fiscal 2023 were $5.6 million (or 41.7% of sales) compared to $6.4 million (or 43.0% of sales) for the third quarter of fiscal 2022. On a constant currency basis, operating expenses for the third quarter of fiscal 2023 increased to $6.9 million (or 48.7% of sales on a constant currency basis). The decrease in operating expenses was primarily due to decreases in selling and administrative expenses and offset by an increase in research and development costs.

 

Total other income for the third quarter of fiscal 2023 increased to $5.4 million compared to $679,000 in the prior year period. On a constant currency basis, total other income for the third quarter of fiscal 2023 increased to $7.9 million. The increase in total other income is primarily due to foreign currency exchange transactions. As most contracts with NETSOL Pakistan are either in U.S. dollars or Euros, currency fluctuations will yield foreign currency exchange gains or losses depending on the value of the Pakistan Rupee compared to the U.S. dollar and the Euro. During the three months ended March 31, 2023, the value of the U.S. dollar increased 25.3% and the value of the Euro increased 27.3%, respectively.

 

GAAP net income attributable to NETSOL for the third quarter of fiscal 2023 totaled $2.5 million or $0.23 per diluted share, compared with GAAP net loss of $(278,000) or $(0.02) per diluted share in the third quarter of fiscal 2022. On a constant currency basis, GAAP net income attributable to NETSOL for the third quarter of fiscal 2023 totaled $1.2 million or $0.11 per diluted share.

 

 
 

 

Non-GAAP adjusted EBITDA for the third quarter of fiscal 2023 was $3.3 million or $0.29 per diluted share, compared with non-GAAP adjusted EBITDA of $359,000 or $0.03 per diluted share in the third quarter of fiscal 2022 (see note regarding “Use of Non-GAAP Financial Measures,” below for further discussion of this non-GAAP measure).

 

At March 31, 2023, cash and cash equivalents were $15.3 million, a decrease from $24.0 million at June 30, 2022. Total NETSOL stockholders’ equity at March 31, 2023 was $41.0 million, or $3.63 per share.

 

Management Commentary

 

NETSOL Co-Founder, Chairman and Chief Executive Officer Najeeb Ghauri stated, “Our third quarter results demonstrated customer growth and our continued execution of strategic initiatives and projects. During the quarter, we signed and began recognizing revenue from a multi-million-dollar agreement with Kubota, a leading Japanese equipment company in Australia, for our NFS Ascent product. Additionally, we went live with Flex – our cloud-based calculation engine – for Haydock Finance, a business finance provider based in the United Kingdom. We also recognized considerable gain on foreign currency exchange transactions, which can have a meaningful impact on our results, depending on how the U.S. dollar and Euro fluctuate in a given quarter.”

 

“While we’re thrilled to see demand for NETSOL products in our established markets, perhaps what we’re most excited about is our opportunity in North America,” Mr. Ghauri continued. “Last quarter, we announced our plans to significantly expand our presence in this largely untapped region, beginning with the establishment of a sales and support facility in Austin, Texas. This facility will support our growing customer base in the United States as our Otoz offering has now gone live with 53 MiniAnywhere dealers across the United States, and our products like NFS Ascent gain traction in this market. We believe North America represents a tremendous opportunity for us, especially as it pertains to our SaaS and cloud-based offerings that generate valuable recurring revenue for our business.

 

Mr. Ghauri concluded, “We are focused on driving enhanced profitability across our entire business. The reality is that as the Company evolves toward a SaaS model, we can provide the superior customer service we are known for with far fewer people. Last quarter, we announced cost reduction initiatives which we estimated would generate significant savings for our business. Our goal is to reduce our total headcount by 25% which we believe will have a materially positive impact on revenue per employee, net profit and EBITDA, and will enable us to allocate resources to new product development and our growing market share in North America. We look forward to sharing the results with you as we continue to make progress.”

 

Conference Call

 

NETSOL Technologies management will hold a conference call today (May 11, 2023) 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: 877-300-8521

International dial-in: 412-317-6026

 

 
 

 

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 Investor Relations at 818-222-9195.

 

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

 

A telephone replay of the conference call will be available approximately three hours after the call concludes through Thursday, May 25, 2023.

 

Toll-free replay number: 844-512-2921

International replay number: 412-317-6671

Replay ID: 10178599

 

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 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.

 

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 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:

 

IMS Investor Relations

netsol@imsinvestorrelations.com

+1 203-972-9200

 

 
 

 

NETSOL Technologies, Inc. and Subsidiaries

Schedule 1: Consolidated Balance Sheets

 

   As of   As of 
   March 31, 2023   June 30, 2022 
ASSETS          
Current assets:          
Cash and cash equivalents  $15,259,497   $23,963,797 
Accounts receivable, net of allowance of $232,004 and $166,231   9,223,484    8,669,202 
Revenues in excess of billings, net of allowance of $43,334 and $136,976   13,741,884    14,571,776 
Other current assets   2,599,532    2,223,361 
Total current assets   40,824,397    49,428,136 
Revenues in excess of billings, net - long term   -    853,601 
Property and equipment, net   6,871,036    9,382,624 
Right of use of assets - operating leases   1,102,729    969,163 
Long term investment   1,066,878    1,059,368 
Other assets   425    25,546 
Intangible assets, net   381,878    1,587,670 
Goodwill   9,302,524    9,302,524 
Total assets  $59,549,867   $72,608,632 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current liabilities:          
Accounts payable and accrued expenses  $7,098,206   $6,813,541 
Current portion of loans and obligations under finance leases   5,969,044    8,567,145 
Current portion of operating lease obligations   421,223    548,678 
Unearned revenue   4,167,655    4,901,562 
Total current liabilities   17,656,128    20,830,926 
Loans and obligations under finance leases; less current maturities   215,243    476,223 
Operating lease obligations; less current maturities   651,443    447,260 
Total liabilities   18,522,814    21,754,409 
Commitments and contingencies          
Stockholders’ equity:          
Preferred stock, $.01 par value; 500,000 shares authorized;   -    - 
Common stock, $.01 par value; 14,500,000 shares authorized; 12,238,042 shares issued and 11,299,011 outstanding as of March 31, 2023 12,196,570 shares issued and 11,257,539 outstanding as of June 30, 2022   122,382    121,966 
Additional paid-in-capital   128,536,955    128,218,247 
Treasury stock (at cost, 939,031 shares as of March 31, 2023 and June 30, 2022)   (3,920,856)   (3,920,856)
Accumulated deficit   (39,821,470)   (39,652,438)
Other comprehensive loss   (47,192,994)   (39,363,085)
Total NetSol stockholders’ equity   37,724,017    45,403,834 
Non-controlling interest   3,303,036    5,450,389 
Total stockholders’ equity   41,027,053    50,854,223 
Total liabilities and stockholders’ equity  $59,549,867   $72,608,632 

 

 
 

 

NETSOL Technologies, Inc. and Subsidiaries

Schedule 2: Consolidated Statement of Operations

 

   For the Three Months   For the Nine Months 
   Ended March 31,   Ended March 31, 
   2023   2022   2023   2022 
Net Revenues:                    
License fees  $1,982,985   $1,620,827   $2,248,829   $3,586,874 
Subscription and support   6,656,082    6,554,540    19,175,585    22,159,798 
Services   4,867,322    6,634,459    17,178,452    17,956,877 
Total net revenues   13,506,389    14,809,826    38,602,866    43,703,549 
                     
Cost of revenues:                    
Salaries and consultants   6,453,814    6,756,898    19,482,720    18,081,225 
Travel   724,431    256,730    1,752,074    753,698 
Depreciation and amortization   602,829    741,587    1,950,156    2,236,190 
Other   1,020,286    1,220,041    3,318,427    3,712,256 
Total cost of revenues   8,801,360    8,975,256    26,503,377    24,783,369 
                     
Gross profit   4,705,029    5,834,570    12,099,489    18,920,180 
                     
Operating expenses:                    
Selling and marketing   1,643,853    2,074,873    5,413,492    5,502,028 
Depreciation and amortization   180,137    206,346    569,313    633,481 
General and administrative   3,509,212    3,841,655    10,745,031    11,548,097 
Research and development cost   302,262    251,001    1,244,793    761,621 
Total operating expenses   5,635,464    6,373,875    17,972,629    18,445,227 
                     
Income (loss) from operations   (930,435)   (539,305)   (5,873,140)   474,953 
                     
Other income and (expenses)                    
Gain (loss) on sale of assets   (84,838)   8,770    (56,494)   (181,955)
Interest expense   (188,137)   (85,916)   (512,110)   (277,737)
Interest income   263,794    364,161    1,005,557    1,123,547 
Gain on foreign currency exchange transactions   5,385,591    499,516    7,358,519    2,684,680 
Share of net loss from equity investment   2,377    (76,798)   7,510    (317,581)
Other income (expense)   21,897    (30,296)   113,877    (7,599)
Total other income (expenses)   5,400,684    679,437    7,916,859    3,023,355 
                     
Net income before  income taxes   4,470,249    140,132    2,043,719    3,498,308 
Income tax provision   (227,718)   (157,604)   (641,122)   (526,737)
Net income (loss)   4,242,531    (17,472)   1,402,597    2,971,571 
Non-controlling interest   (1,697,908)   (260,998)   (1,571,629)   (1,655,287)
Net income (loss) attributable to NetSol  $2,544,623   $(278,470)  $(169,032)  $1,316,284 
                     
Net income (loss) per share:                    
Net income (loss) per common share                    
Basic  $0.23   $(0.02)  $(0.01)  $0.12 
Diluted  $0.23   $(0.02)  $(0.01)  $0.12 
                     
Weighted average number of shares outstanding                    
Basic   11,283,954    11,249,606#   11,270,466    11,249,449 
Diluted   11,283,954    11,249,606#   11,270,466    11,249,449 

 

 
 

 

NETSOL Technologies, Inc. and Subsidiaries

Schedule 3: Consolidated Statement of Cash Flows

 

   For the Nine Months 
   Ended March 31, 
   2023   2022 
Cash flows from operating activities:          
Net income  $1,402,597   $2,971,571 
Adjustments to reconcile net income to net cash          
provided by operating activities:          
Depreciation and amortization   2,519,469    2,869,671 
Provision for bad debts   7,648    6,897 
Share of net (gain) loss from investment under equity method   (7,510)   317,581 
(Gain) loss on sale of assets   56,494    181,955 
Stock based compensation   198,559    78,225 
Changes in operating assets and liabilities:          
Accounts receivable   (1,855,899)   (3,404,247)
Revenues in excess of billing   240,324    (385,971)
Other current assets   (621,731)   53,173 
Accounts payable and accrued expenses   1,321,289    14,918 
Unearned revenue   (696,621)   2,822,178 
Net cash provided by operating activities   2,564,619    5,525,951 
           
Cash flows from investing activities:          
Purchases of property and equipment   (1,575,059)   (1,680,856)
Sales of property and equipment   153,402    321,251 
Net cash used in investing activities   (1,421,657)   (1,359,605)
           
Cash flows from financing activities:          
Purchase of treasury stock   -    (100,106)
Proceeds from bank loans   270,292    312,467 
Payments on finance lease obligations and loans - net   (787,641)   (1,045,464)
Net cash used in financing activities   (517,349)   (833,103)
Effect of exchange rate changes   (9,329,913)   (6,465,085)
Net decrease in cash and cash equivalents   (8,704,300)   (3,131,842)
Cash and cash equivalents at beginning of the period   23,963,797    33,705,154 
Cash and cash equivalents at end of period  $15,259,497   $30,573,312 

 

 
 

 

NETSOL Technologies, Inc. and Subsidiaries

Schedule 4: Reconciliation to GAAP

 

   For the Three Months   For the Nine Months 
   Ended March 31,   Ended March 31, 
   2023   2022   2023   2022 
                 
Net Income (loss) attributable to NetSol  $2,544,623   $(278,470)  $(169,032)  $1,316,284 
Non-controlling interest   1,697,908    260,998    1,571,629    1,655,287 
Income taxes   227,718    157,604    641,122    526,737 
Depreciation and amortization   782,966    947,933    2,519,469    2,869,671 
Interest expense   188,137    85,916    512,110    277,737 
Interest (income)   (263,794)   (364,161)   (1,005,557)   (1,123,547)
EBITDA  $5,177,558   $809,820   $4,069,741   $5,522,169 
Add back:                    
Non-cash stock-based compensation   52,392    49,933    198,559    78,225 
Adjusted EBITDA, gross  $5,229,950   $859,753   $4,268,300   $5,600,394 
Less non-controlling interest (a)   (1,971,516)   (500,805)   (2,363,688)   (2,382,721)
Adjusted EBITDA, net  $3,258,434   $358,948   $1,904,612   $3,217,673 
                     
Weighted Average number of shares outstanding                    
Basic   11,283,954    11,249,606    11,270,466    11,249,449 
Diluted   11,283,954    11,249,606    11,270,466    11,249,449 
                     
Basic adjusted EBITDA  $0.29   $0.03   $0.17   $0.29 
Diluted adjusted EBITDA  $0.29   $0.03   $0.17   $0.29 
                     
(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  $1,697,908   $260,998   $1,571,629   $1,655,287 
Income Taxes   69,947    45,427    198,263    159,854 
Depreciation and amortization   219,759    279,055    713,676    840,508 
Interest expense   57,797    25,764    157,929    81,846 
Interest (income)   (77,988)   (117,417)   (303,489)   (362,146)
EBITDA  $1,967,423   $493,827   $2,338,008   $2,375,349 
Add back:                    
Non-cash stock-based compensation   4,093    6,978    25,680    7,372 
Adjusted EBITDA of non-controlling interest  $1,971,516   $500,805   $2,363,688   $2,382,721