NETSOL Technologies Reports Fiscal Second Quarter 2019 Financial Results

2/13, 3:00 PM (Source: GlobeNewswire)

CALABASAS, Calif., Feb. 13, 2019 (GLOBE NEWSWIRE) -- NETSOL Technologies, Inc. (NASDAQ: NTWK), a global business services and enterprise application solutions provider, reported results for the fiscal second quarter ended December 31, 2018.

Second Quarter and Recent Operational Highlights

  • Made significant strides in the ongoing implementation process for the deployment of NFS Ascent™ Retail and Wholesale platforms with European tier-one global auto captive in China related to the $30 million contract signed in September 2018.
  • Commenced implementation of NFS Ascent Retail platform at captive auto leasing company of a major US based auto manufacturer in China.
  • Successfully began the implementation process of NFS Ascent™ Wholesale module in Japan for German auto manufacturing giant as part of the ongoing international deployment associated with the previously announced 12-country, $110 million contract.
  • Initiated process to implement NFS Ascent Solution in Singapore, Malaysia, Hong Kong and Thailand as part of the previously announced 12-country, $110 million contract.
  • Secured a mid-six-figure SaaS contract with a leading automotive leasing company covering all of Canada for a key automotive brand to provide access to the LeasePak Cloud product.
  • Appointed industry veteran Hui Liang as company’s President of China to expand footprint in the region and improve existing relationships with key customers.
  • Generated nearly $1.8 million through successfully implementing change requests from various customers across major business regions.
  • Dedicated additional resources to data science and blockchain development initiatives in both Pakistan and Thailand to create new tools and products focused on machine learning and vehicle tracking as part of the company’s broader Innovation Lab efforts.

Fiscal Second Quarter 2019 Financial Results
Total net revenues for the second quarter of fiscal 2019 were $17.0 million, compared with $14.4 million in the prior year period. The increase in total net revenues was primarily due to an increase in total license fees of $4.4 million, which was offset by a decrease in total services revenues of $1.8 million.

  • Total license fees were $4.8 million, compared with $453,000 in the prior year period.
  • Total maintenance fees were $3.7 million, compared with $3.7 million in the prior year period.
  • Total services revenues were $8.5 million, compared with $10.3 million in the prior year period.

Gross profit for the second quarter of fiscal 2019 was $8.9 million (or 52.1% of total net revenues), compared to $6.7 million (or 46.3% of total net revenues) in the second quarter of fiscal 2018. The increase in gross profit as a percentage of net revenues was primarily due to an increase in total net revenues of $2.6 million, which was offset by an increase in the cost of revenues of $386,000.

Operating expenses for the second quarter of fiscal 2019 increased 5% to $6.7 million (or 39.2% of total net revenues) from $6.4 million (or 44.1% of total net revenues) for the second quarter of fiscal 2018. The increase in operating expenses was primarily due to increases in salaries and wages, research and development expenses and professional services expenses, which were offset by decreases in selling and marketing expenses, depreciation, and general and administrative expenses.

Net income attributable to NETSOL for the second quarter of fiscal 2019 totaled $2.9 million or $0.25 per diluted share, an improvement from net income of $634,000 or $0.06 per diluted share in the second quarter of fiscal 2018.

Non-GAAP adjusted EBITDA for the second quarter of fiscal 2019 totaled $4.1 million or $0.35 per diluted share, an improvement from $2.1 million or $0.19 per diluted share in the second quarter of fiscal 2018 (see note regarding “Use of Non-GAAP Financial Measures,” below for further discussion of this non-GAAP measure).

At December 31, 2018, cash and cash equivalents were $20.3 million, an increase from $10.0 million at the end of the prior year quarter.

Management Commentary
“The second quarter was yet another period of strong, consistent performance for NETSOL, driven by various new business wins throughout our major operating regions as well as ongoing implementations for some of the larger contracts we’ve secured over the past few months," said company Co-Founder, Chairman and Chief Executive Officer Najeeb Ghauri. “Financially, this healthy combination translated to 18% revenue growth year-over-year as well as our fifth consecutive profitable quarter. Operationally, with a number of significant near-term opportunities before us, we remain highly confident in our ability to generate healthy top and bottom line results for the remainder of the year and remain in solid positioning to achieve our previously stated goal of double-digit topline growth for fiscal 2019.”

Sales Outlook
“NETSOL’s total global pipeline remains robust, especially in our APAC region, where we are seeing demand grow for both our products and services,” added President and Head of Sales Naeem Ghauri. “Additionally, we are continuing to benefit from our local business knowledge and strong relationships as many of our competitors struggle to establish a presence in the region. Going forward, we are cognizant of the various, emerging macro-economic challenges in China and will continue to monitor these issues closely.  However, we are still seeing healthy interest from our existing customers who are investing in our systems to derive additional efficiencies that should aid them in addressing potential corrections in their respective markets. Looking ahead to the remainder of the year, we are currently in good positioning on a number of customer ‘shortlists’ for large-scale programs where we believe we have a good chance of success and remain bullish on our forecasts for fiscal 2019.”

Conference Call
NETSOL Technologies management will hold a conference call today (February 13, 2019) at 11:00 a.m. Eastern time (8:00 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 Liolios 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 2:00 p.m. Eastern time on the same day through February 27, 2019.

Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 13687282

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 approximately 1,350 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 leasing and finance lifecycle.

Forward-Looking Statements
Certain statements in this press release are forward-looking in nature, including, but not limited to, expected net revenue and the demand for and sales lifecycle of NFS Ascent, and accordingly, 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. 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
Liolios
949-574-3860
investors@netsoltech.com


NETSOL Technologies, Inc. and Subsidiaries
Schedule 1: Consolidated Balance Sheets

    As of December 31,   As of June 30, 
 ASSETS  2018    2018 
Current assets:   
 Cash and cash equivalents$  20,320,804  $  22,088,853 
 Accounts receivable, net of allowance of $376,178  and $610,061    7,852,296     12,775,461 
 Accounts receivable, net - related party   2,944,290     3,374,272 
 Revenues in excess of billings   13,832,654     14,285,778 
 Revenues in excess of billings - related party   62,323     - 
 Convertible note receivable - related party   3,156,500     2,123,500 
 Other current assets   4,092,921     2,703,032 
  Total current assets   52,261,788     57,350,896 
Revenues in excess of billings, net - long term   -     1,206,669 
Property and equipment, net   14,005,541     16,165,491 
Long term investment   2,689,005     3,217,162 
Other assets   35,470     70,299 
Intangible assets, net   9,637,010     12,247,196 
Goodwill   9,516,568     9,516,568 
  Total assets$  88,145,382  $  99,774,281 
      
 LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:   
 Accounts payable and accrued expenses$  7,468,984  $  7,873,809 
 Current portion of loans and obligations under capitalized leases   7,627,426     8,595,919 
 Unearned revenues   4,705,302     5,949,581 
 Common stock to be issued   88,324     88,324 
  Total current liabilities   19,890,036     22,507,633 
Loans and obligations under capitalized leases; less current maturities   345,473     330,596 
  Total liabilities   20,235,509     22,838,229 
Commitments and contingencies   
Stockholders' equity:   
 Preferred stock, $.01 par value; 500,000 shares authorized;    -     - 
 Common stock, $.01 par value; 14,500,000 shares authorized;   
  11,860,310  shares issued and 11,654,457  outstanding as of December 31, 2018  and   
  11,708,469  shares issued and 11,502,616  outstanding as of June 30, 2018   118,603     117,085 
 Additional paid-in-capital   127,398,738     126,479,147 
 Treasury stock (At cost, 205,853 shares and 205,853 shares   
  as of December 31, 2018 and June 30, 2018, respectively)   (1,205,024)    (1,205,024)
 Accumulated deficit   (39,972,079)    (37,994,502)
 Stock subscription receivable   (221,000)    (221,000)
 Other comprehensive loss   (28,446,811)    (24,386,071)
  Total NetSol stockholders' equity   57,672,427     62,789,635 
 Non-controlling interest   10,237,446     14,146,417 
  Total stockholders' equity   67,909,873     76,936,052 
  Total liabilities and stockholders' equity$  88,145,382  $  99,774,281 
      

 

NETSOL Technologies, Inc. and Subsidiaries
Schedule 2: Consolidated Statement of Operations

    For the Three Months   For the Six Months 
    Ended December 31,   Ended December 31, 
    2018   2017   2018   2017 
Net Revenues:       
 License fees$  4,817,569  $  235,932  $  10,773,682  $  561,998 
 Maintenance fees   3,534,693     3,568,448     7,173,020     7,042,173 
 Services   8,237,334     9,087,191     14,655,968     16,104,928 
 License fees - related party   -     217,105     -     261,513 
 Maintenance fees - related party   127,030     101,251     228,379     204,214 
 Services - related party   286,001     1,236,508     568,123     3,090,385 
   Total net revenues    17,002,627     14,446,435     33,399,172     27,265,211 
          
Cost of revenues:       
  Salaries and consultants    4,497,054     5,362,092     9,517,616     10,826,252 
  Travel    1,706,182     287,901     2,858,179     801,013 
  Depreciation and amortization    880,048     1,168,103     1,817,652     2,341,216 
  Other    1,060,772     939,986     2,109,096     1,796,568 
  Total cost of revenues   8,144,056     7,758,082     16,302,543     15,765,049 
          
Gross profit   8,858,571     6,688,353     17,096,629     11,500,162 
          
Operating expenses:       
 Selling and marketing   2,048,303     1,932,140     3,749,629     3,643,436 
 Depreciation and amortization   193,779     222,785     406,011     468,658 
 General and administrative   4,002,059     4,026,706     8,408,779     7,814,264 
 Research and development cost   424,652     189,891     742,807     374,976 
  Total operating expenses   6,668,793     6,371,522     13,307,226     12,301,334 
          
Income (loss) from operations   2,189,778     316,831     3,789,403     (801,172)
          
Other income and (expenses)       
 Gain (loss) on sale of assets   (3,504)    (8,939)    48,790     (16,069)
 Interest expense   (63,804)    (109,675)    (163,238)    (227,746)
 Interest income   230,421     115,570     479,385     252,481 
 Gain on foreign currency exchange transactions   2,536,755     1,737,967     2,547,667     2,754,329 
 Share of net loss from equity investment   (298,293)    (203,336)    (597,984)    (270,898)
 Other income    4,503     14,511     9,882     15,610 
  Total other income (expenses)   2,406,078     1,546,098     2,324,502     2,507,707 
          
Net income before  income taxes   4,595,856     1,862,929     6,113,905     1,706,535 
Income tax provision   (264,872)    (200,927)    (501,786)    (225,798)
Net income    4,330,984     1,662,002     5,612,119     1,480,737 
 Non-controlling interest   (1,475,355)    (1,027,581)    (1,793,901)    (1,215,814)
Net income attributable to NetSol$  2,855,629  $  634,421  $  3,818,218  $  264,923 
          
Net income (loss) per share:       
 Net income (loss) per common share       
  Basic$  0.25  $  0.06  $  0.33  $  0.02 
  Diluted$  0.25  $  0.06  $  0.33  $  0.02 
          
Weighted average number of shares outstanding       
 Basic   11,586,507     11,159,075     11,542,877     11,115,346 
 Diluted   11,592,193     11,171,543     11,548,563     11,127,814 
          


NETSOL Technologies, Inc. and Subsidiaries
Schedule 3: Consolidated Statement of Cash Flows

      
    For the Six Months 
    Ended December 31, 
    2018   2017 
Cash flows from operating activities:    
 Net income $  5,612,119  $  1,480,737 
 Adjustments to reconcile net income    
  to net cash provided by (used in) operating activities:    
 Depreciation and amortization    2,223,663     2,809,874 
 Share of net loss from investment under equity method    597,984     270,898 
 (Gain) loss on sale of assets    (48,790)    16,069 
 Stock based compensation    869,743     833,530 
 Changes in operating assets and liabilities:    
  Accounts receivable    4,208,751     (13,231,059)
  Accounts receivable - related party    (219,538)    (1,637,829)
  Revenues in excess of billing    (7,633,216)    602,676 
  Revenues in excess of billing - related party    (91,279)    (32,308)
  Other current assets    (1,409,746)    (524,547)
  Accounts payable and accrued expenses    139,331     887,824 
  Unearned revenue    (1,094,375)    6,469,146 
 Net cash provided by (used in) operating activities    3,154,647     (2,054,989)
      
Cash flows from investing activities:    
 Purchases of property and equipment    (1,441,237)    (543,123)
 Sales of property and equipment    519,645     193,241 
 Convertible note receivable - related party    (1,033,000)    (500,000)
 Investment in WRLD3D    -     (50,000)
 Net cash used in investing activities    (1,954,592)    (899,882)
      
Cash flows from financing activities:    
 Proceeds from the exercise of stock options and warrants    65,000     215,311 
 Proceeds from exercise of subsidiary options    2,650     7,755 
 Purchase of treasury stock    -     (601,020)
 Dividend paid by subsidiary to non-controlling interest    (566,465)    (417,853)
 Proceeds from bank loans    382,240     708,457 
 Payments on capital lease obligations and loans - net    (289,027)    (361,814)
 Net cash used in financing activities    (405,602)    (449,164)
Effect of exchange rate changes    (2,562,502)    (764,269)
Net decrease in cash and cash equivalents    (1,768,049)    (4,168,304)
Cash and cash equivalents at beginning of the period    22,088,853     14,172,954 
Cash and cash equivalents at end of period $  20,320,804  $  10,004,650 
      

 

NETSOL Technologies, Inc. and Subsidiaries
Schedule 4: Reconciliation to GAAP

 Three Months Three Months Six Months Six Months
 Ended Ended Ended Ended
 December 31, 2018 December 31, 2017 December 31, 2018 December 31, 2017
        
        
Net Income (loss) before preferred dividend, per GAAP$  2,855,629  $  634,421  $  3,818,218  $  264,923 
Non-controlling interest   1,475,355     1,027,581     1,793,901     1,215,814 
Income taxes   264,872     200,927     501,786     225,798 
Depreciation and amortization   1,073,827     1,390,888     2,223,663     2,809,874 
Interest expense   63,804     109,675     163,238     227,746 
Interest (income)   (230,421)    (115,570)    (479,385)    (252,481)
EBITDA$  5,503,066  $  3,247,922  $  8,021,421  $  4,491,674 
Add back:       
Non-cash stock-based compensation   437,695     405,721     869,743     833,530 
Adjusted EBITDA, gross$  5,940,761  $  3,653,643  $  8,891,164  $  5,325,204 
Less non-controlling interest (a)   (1,887,861)    (1,562,303)    (2,640,530)    (2,264,167)
Adjusted EBITDA, net$  4,052,900  $  2,091,340  $  6,250,634  $  3,061,037 
        
        
Weighted Average number of shares outstanding       
Basic   11,586,507     11,159,075     11,542,877     11,115,346 
Diluted   11,592,193     11,171,543     11,548,563     11,127,814 
        
Basic adjusted EBITDA$  0.35  $  0.19  $  0.54  $  0.28 
Diluted adjusted EBITDA$  0.35  $  0.19  $  0.54  $  0.28 
        
        
(a)The reconciliation of adjusted EBITDA of non-controlling interest       
to net income attributable to non-controlling interest is as follows       
        
Net Income attributable to non-controlling interest$  1,475,355  $  1,027,581  $  1,793,901  $  1,215,814 
Income Taxes   70,821     29,945     141,364     40,423 
Depreciation and amortization   338,278     465,138     704,132     932,320 
Interest expense   20,219     34,463     52,909     73,535 
Interest (income)   (54,247)    (36,918)    (121,115)    (82,075)
EBITDA$  1,850,426  $  1,520,209  $  2,571,191  $  2,180,017 
Add back:       
Non-cash stock-based compensation   37,435     42,094     69,339     84,150 
Adjusted EBITDA of non-controlling interest$  1,887,861  $  1,562,303  $  2,640,530  $  2,264,167 
        


LOGO.jpg

Copyright GlobeNewswire, Inc. 2016. All rights reserved.
You can register yourself on the website to receive press releases directly via e-mail to your own e-mail account.