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Item 2.02 Results of Operations and Financial Condition.
On November 7, 2023, NetSol Technologies, Inc. issued a press release announcing results of operations and financial conditions for the quarter ended September 30, 2023. The press release is furnished as Exhibit 99.1 to this Form 8-K.
The information in this report shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document field under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Exhibits
| 99.1 | News Release dated November 7, 2023 | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document |
| Page 2 |
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| NETSOL TECHNOLOGIES, INC. | ||
| Date: | November 7, 2023 | /s/ Najeeb Ghauri |
| NAJEEB GHAURI | ||
| Chief Executive Officer |
| Date: | November 7, 2023 | /s/ Roger Almond |
| ROGER ALMOND | ||
| Chief Financial Officer |
| Page 3 |
Exhibit 99.1
NETSOL Technologies Reports Fiscal First Quarter 2024 Results
| ● | Net Revenue for the Quarter Grew 12% to $14.2 Million | |
| ● | SaaS and Annual recurring Revenues Continue to Grow Year Over Year | |
| ● | Gross Margins Increased to 43% and Company Reports Net Profit |
Encino, Calif., November 7, 2023 – NETSOL Technologies, Inc. (Nasdaq: NTWK), a global business services and enterprise application solutions provider, reported results for the fiscal first quarter ended September 30, 2023.
Fiscal First Quarter 2024 Financial Results
Total net revenues for the first quarter of fiscal 2024 increased 12% to $14.2 million, compared with $12.7 million in the prior year period. On a constant currency basis, total net revenues were $14.3 million.
| ● | License fees were $1.3 million compared with $250,000 in the prior year period. License fees on a constant currency basis were $1.3 million. | |
| ● | Total subscription (SaaS and Cloud) and support revenues were $6.5 million compared with $6.0 million in the prior year period. Total subscription and support revenues on a constant currency basis were $6.5 million. | |
| ● | Total services revenues were $6.4 million, consistent with $6.4 million in the prior year period. Total services revenues on a constant currency basis were $6.5 million. |
Gross profit for the first quarter of fiscal 2024 was $6.2 million (or 43% of net revenues), compared to $4.3 million (or 33% of net revenues) in the first quarter of fiscal 2023. On a constant currency basis, gross profit for the first quarter of fiscal 2024 was $4.7 million (or 33% of net revenues as measured on a constant currency basis).
Operating expenses for the first quarter of fiscal 2024 were $5.8 million (or 41% of sales) compared to $6.1 million (or 48% of sales) for the first quarter of fiscal 2023. On a constant currency basis, operating expenses for the first quarter of fiscal 2023 increased to $6.4 million (or 45% of sales on a constant currency basis).
GAAP net income attributable to NETSOL for the first quarter of fiscal 2024 totaled $31,000 or $0.003 per diluted share, compared with GAAP net loss of $(621,000) or a loss of $(0.06) per diluted share in the first quarter of fiscal 2023. Included in GAAP net income attributable to NETSOL was a loss of $(134,000) on foreign exchange currency in the first quarter of fiscal 2024, compared to a gain of approximately $1.3 million in the prior year period. On a constant currency basis, NETSOL realized a loss of $(174,000) on foreign currency transactions.
Non-GAAP adjusted EBITDA for the first quarter of fiscal 2024 was $466,000 or $0.04 per diluted share, compared with non-GAAP adjusted EBITDA loss of $28,000 or $(0.002) per diluted share in the first quarter of fiscal 2023 (see note regarding “Use of Non-GAAP Financial Measures,” below for further discussion of this non-GAAP measure).
Management Commentary
NETSOL Co-Founder, Chairman and Chief Executive Officer Najeeb Ghauri stated, “Our first quarter of 2024 was highlighted by increases in total net revenue, improved gross margins, and profitability. This quarter highlights the strength of our business model particularly when we recognize licensing fees, subscription and support revenues, and services revenues. One goal is to drive more consistent license revenue alongside our more predictable subscription and support and services revenues.
“We also continue to drive our cost containment initiative so we can reallocate capital to growing our SaaS business and expansion into the United States market. On that front, our focus continues to be staffing our new office in Austin, Texas with the best talent available to address this largely untapped market. Moreover, our white label SaaS-based solution Otoz is now live in 60 MiniAnywhere dealerships across 37 U.S. states, demonstrating the growing demand for SaaS-based solutions in this market. Finally, we continue to evaluate strategic acquisition opportunities throughout North America.
“We’re very pleased with our results this quarter, and we believe that our performance reflects the long-term earnings potential for NETSOL as we continue to scale our revenue. We are working diligently to build our pipeline of licensing deals, and along with our expanding SaaS offerings, we believe this will drive improved results and more consistent profitability and cash generation.”
Conference Call
NETSOL Technologies management will hold a conference call today (November 7, 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: 877-407-0789
International dial-in: 201-689-8562
Please call the conference telephone number 5-10 minutes prior to the start time or use this link for telephone access to the call via your web browser. 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 also be broadcast live and available for replay here, along with additional replay access being provided through the company information section of NETSOL’s website.
A telephone replay of the conference call will be available approximately three hours after the call concludes through Tuesday, November 21, 2023.
Toll-free replay number: 844-512-2921
International replay number: 412-317-6671
Replay ID: 13742018
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 | |||||||
| September 30, 2023 | June 30, 2023 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 16,551,677 | $ | 15,533,254 | ||||
| Accounts receivable, net of allowance of $416,435 and $420,354 | 6,870,956 | 11,714,422 | ||||||
| Revenues in excess of billings, net of allowance of $116,425 and $1,380,141 | 13,008,285 | 12,377,677 | ||||||
| Other current assets | 2,244,490 | 1,978,514 | ||||||
| Total current assets | 38,675,408 | 41,603,867 | ||||||
| Revenues in excess of billings, net - long term | 724,875 | - | ||||||
| Property and equipment, net | 5,770,794 | 6,161,186 | ||||||
| Right of use assets - operating leases | 1,359,106 | 1,151,575 | ||||||
| Other assets | 32,326 | 32,327 | ||||||
| Intangible assets, net | - | 127,931 | ||||||
| Goodwill | 9,302,524 | 9,302,524 | ||||||
| Total assets | $ | 55,865,033 | $ | 58,379,410 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 6,802,879 | $ | 6,552,181 | ||||
| Current portion of loans and obligations under finance leases | 5,756,553 | 5,779,510 | ||||||
| Current portion of operating lease obligations | 538,363 | 505,237 | ||||||
| Unearned revenue | 5,170,335 | 7,932,306 | ||||||
| Total current liabilities | 18,268,130 | 20,769,234 | ||||||
| Loans and obligations under finance leases; less current maturities | 137,847 | 176,229 | ||||||
| Operating lease obligations; less current maturities | 795,935 | 652,194 | ||||||
| Total liabilities | 19,201,912 | 21,597,657 | ||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, $.01 par value; 500,000 shares authorized; | - | - | ||||||
| Common stock, $.01 par value; 14,500,000 shares authorized; 12,311,850 shares issued and 11,372,819 outstanding as of September 30, 2023 12,284,887 shares issued and 11,345,856 outstanding as of June 30, 2023 | 123,120 | 122,850 | ||||||
| Additional paid-in-capital | 128,536,132 | 128,476,048 | ||||||
| Treasury stock (at cost, 939,031 shares as of September 30, 2023 and June 30, 2023) | (3,920,856 | ) | (3,920,856 | ) | ||||
| Accumulated deficit | (44,865,296 | ) | (44,896,186 | ) | ||||
| Other comprehensive loss | (46,411,702 | ) | (45,975,156 | ) | ||||
| Total NetSol stockholders’ equity | 33,461,398 | 33,806,700 | ||||||
| Non-controlling interest | 3,201,723 | 2,975,053 | ||||||
| Total stockholders’ equity | 36,663,121 | 36,781,753 | ||||||
| Total liabilities and stockholders’ equity | $ | 55,865,033 | $ | 58,379,410 | ||||
NETSOL Technologies, Inc. and Subsidiaries
Schedule 2: Consolidated Statement of Operations
| For the Three Months | ||||||||
| Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Net Revenues: | ||||||||
| License fees | $ | 1,280,449 | $ | 249,960 | ||||
| Subscription and support | 6,512,243 | 6,016,834 | ||||||
| Services | 6,449,489 | 6,439,325 | ||||||
| Total net revenues | 14,242,181 | 12,706,119 | ||||||
| Cost of revenues | 8,080,164 | 8,454,122 | ||||||
| Gross profit | 6,162,017 | 4,251,997 | ||||||
| Operating expenses: | ||||||||
| Selling, general and administrative | 5,432,969 | 5,678,561 | ||||||
| Research and development cost | 378,419 | 469,627 | ||||||
| Total operating expenses | 5,811,388 | 6,148,188 | ||||||
| Income (loss) from operations | 350,629 | (1,896,191 | ) | |||||
| Other income and (expenses) | ||||||||
| Interest expense | (276,017 | ) | (121,610 | ) | ||||
| Interest income | 414,718 | 431,857 | ||||||
| Gain (loss) on foreign currency exchange transactions | (134,253 | ) | 1,315,705 | |||||
| Other income (expense) | 57,881 | 25,616 | ||||||
| Total other income (expenses) | 62,329 | 1,651,568 | ||||||
| Net income (loss) before income taxes | 412,958 | (244,623 | ) | |||||
| Income tax provision | (121,895 | ) | (193,348 | ) | ||||
| Net income (loss) | 291,063 | (437,971 | ) | |||||
| Non-controlling interest | (260,173 | ) | (182,758 | ) | ||||
| Net income (loss) attributable to NetSol | $ | 30,890 | $ | (620,729 | ) | |||
| Net income (loss) per share: | ||||||||
| Net income (loss) per common share | ||||||||
| Basic | $ | 0.003 | $ | (0.06 | ) | |||
| Diluted | $ | 0.003 | $ | (0.06 | ) | |||
| Weighted average number of shares outstanding | ||||||||
| Basic | 11,345,856 | 11,257,539 | ||||||
| Diluted | 11,345,856 | 11,257,539 | ||||||
NETSOL Technologies, Inc. and Subsidiaries
Schedule 3: Consolidated Statement of Cash Flows
| Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income (loss) | $ | 291,063 | $ | (437,971 | ) | |||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 530,786 | 845,003 | ||||||
| Amortization of right of use of assets | - | - | ||||||
| Provision for bad debts | 7,880 | (47,479 | ) | |||||
| Gain on sale of assets | (98 | ) | (23,296 | ) | ||||
| Stock based compensation | 60,354 | 81,834 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 4,608,881 | 815,132 | ||||||
| Revenues in excess of billing | (1,478,386 | ) | 337,996 | |||||
| Other current assets | 92,686 | (340,390 | ) | |||||
| Accounts payable and accrued expenses | 341,722 | 687,453 | ||||||
| Unearned revenue | (2,791,269 | ) | (619,425 | ) | ||||
| Net cash provided by operating activities | 1,663,619 | 1,298,857 | ||||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | (371,630 | ) | (1,347,601 | ) | ||||
| Sales of property and equipment | 1,230 | 453,607 | ||||||
| Net cash used in investing activities | (370,400 | ) | (893,994 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Payments on finance lease obligations and loans - net | (44,474 | ) | (445,737 | ) | ||||
| Net cash used in financing activities | (44,474 | ) | (445,737 | ) | ||||
| Effect of exchange rate changes | (230,322 | ) | (2,999,975 | ) | ||||
| Net decrease in cash and cash equivalents | 1,018,423 | (3,040,849 | ) | |||||
| Cash and cash equivalents at beginning of the period | 15,533,254 | 23,963,797 | ||||||
| Cash and cash equivalents at end of period | $ | 16,551,677 | $ | 20,922,948 | ||||
NETSOL Technologies, Inc. and Subsidiaries
Schedule 4: Reconciliation to GAAP
| For the Three Months | ||||||||
| Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Net Income (loss) attributable to NetSol | $ | 30,890 | $ | (620,729 | ) | |||
| Non-controlling interest | 260,173 | 182,758 | ||||||
| Income taxes | 121,895 | 193,348 | ||||||
| Depreciation and amortization | 530,786 | 845,003 | ||||||
| Interest expense | 276,017 | 121,610 | ||||||
| Interest (income) | (414,718 | ) | (431,857 | ) | ||||
| EBITDA | $ | 805,043 | $ | 290,133 | ||||
| Add back: | ||||||||
| Non-cash stock-based compensation | 60,354 | 81,834 | ||||||
| Adjusted EBITDA, gross | $ | 865,397 | $ | 371,967 | ||||
| Less non-controlling interest (a) | (399,423 | ) | (399,535 | ) | ||||
| Adjusted EBITDA, net | $ | 465,974 | $ | (27,568 | ) | |||
| Weighted Average number of shares outstanding | ||||||||
| Basic | 11,345,856 | 11,257,539 | ||||||
| Diluted | 11,345,856 | 11,257,539 | ||||||
| Basic adjusted EBITDA | $ | 0.04 | $ | (0.002 | ) | |||
| Diluted adjusted EBITDA | $ | 0.04 | $ | (0.002 | ) | |||
| (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 | $ | 260,173 | $ | 182,758 | ||||
| Income Taxes | 36,377 | 59,910 | ||||||
| Depreciation and amortization | 141,334 | 238,333 | ||||||
| Interest expense | 85,889 | 37,396 | ||||||
| Interest (income) | (128,091 | ) | (132,489 | ) | ||||
| EBITDA | $ | 395,682 | $ | 385,908 | ||||
| Add back: | ||||||||
| Non-cash stock-based compensation | 3,741 | 13,627 | ||||||
| Adjusted EBITDA of non-controlling interest | $ | 399,423 | $ | 399,535 | ||||
Cover |
Nov. 07, 2023 |
|---|---|
| Cover [Abstract] | |
| Document Type | 8-K |
| Amendment Flag | false |
| Document Period End Date | Nov. 07, 2023 |
| Entity File Number | 0-22773 |
| Entity Registrant Name | NETSOL TECHNOLOGIES, INC. |
| Entity Central Index Key | 0001039280 |
| Entity Tax Identification Number | 95-4627685 |
| Entity Incorporation, State or Country Code | NV |
| Entity Address, Address Line One | 16000 Ventura Blvd |
| Entity Address, Address Line Two | Suite 770 |
| Entity Address, City or Town | Encino |
| Entity Address, State or Province | CA |
| Entity Address, Postal Zip Code | 91436 |
| City Area Code | 818 |
| Local Phone Number | 222-9195 |
| Written Communications | false |
| Soliciting Material | false |
| Pre-commencement Tender Offer | false |
| Pre-commencement Issuer Tender Offer | false |
| Title of 12(b) Security | Common Stock, $.01 par value per share |
| Trading Symbol | NTWK |
| Security Exchange Name | NASDAQ |
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