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NetSol Technologies Inc$5.71$.02.35%

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 NETSOL Technologies Reports Fiscal Third Quarter 2019 Financial Results
   Tuesday, May 14, 2019 8:00:00 AM ET

CALABASAS, Calif., May 14, 2019 (GLOBE NEWSWIRE) -- NETSOL Technologies, Inc. (NASDAQ: NTWK ), a global business services and enterprise application solutions provider, reported results for the fiscal third quarter ended March 31, 2019.

Third Quarter and Recent Operational Highlights

  • Updates related to previously announced 12-country, $110 million contract with German auto manufacturing giant.
    • Successfully implemented the full suite of NFS Ascent™ modules in China.
    • Successfully implemented NFS Ascent Wholesale Finance System in Japan.
    • Made continued progress with respect to additional NFS Ascent implementations in Singapore, Malaysia, Hong Kong, India and Thailand.
  • 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.
  • Continued implementation of NFS Ascent Retail platform at captive auto leasing company of a major US based auto manufacturer in China.
  • Officially launched OTOZ Mobility Innovation Lab, which has been designed to enhance reach of NETSOL Ascent platform into car-sharing opportunities with new and existing auto captive finance customers.
  • Announced strategic investment and partnership with Drivemate, the top car-sharing, peer-to-peer car rental service in Thailand, to implement new technology in exchange for future minority interest in the company, providing for a low-risk testing environment for OTOZ with a built-in customer.
  • Continued to build out capabilities in intelligent technologies such as artificial intelligence, machine learning, blockchain, IoT and cloud native architectures to help future proof core business and innovate around new opportunities, specifically car sharing and peer-to-peer sharing as well as subscription and data driven business models.


Fiscal Third Quarter 2019 Financial Results
Total net revenues for the third quarter of fiscal 2019 were $17.1 million, compared with $17.0 million in the prior year period. The increase in total net revenues was primarily due to an increase in total services revenues of $256,000, which was offset by a decrease in total license fees of $113,000 and total maintenances fees of $61,000.

  • Total license fees were $2.5 million, compared with $2.6 million in the prior year period.
  • Total maintenance fees were $3.7 million, compared with $3.8 million in the prior year period.
  • Total services revenues were $10.9 million, compared with $10.6 million in the prior year period.

Gross profit for the third quarter of fiscal 2019 was $8.6 million (or 50.0% of total net revenues), compared to $9.2 million (or 53.9% of total net revenues) in the third quarter of fiscal 2018. The decrease in gross profit as a percentage of net revenues was due to an increase in the cost of revenues of 719,000. The increase in cost of revenue was predominantly driven by increases in travel and other expenses associated with increased implementation needs for the significant new wins recorded in previous quarters, which are expected to be invoiced to clients and subsequently reimbursed. The increase in cost of revenues was offset by decreases in salaries and consultants’ costs, decreases in depreciation and amortization costs as well as an increase in total net revenues of $83,000.

Operating expenses for the third quarter of fiscal 2019 increased to $6.5 million (or 37.7% of total net revenues) from $6.4 million (or 37.8% of total net revenues) for the third quarter of fiscal 2018. The increase in operating expenses was primarily due to increases in research and development expenses and depreciation which were offset by decreases in selling and marketing expenses, salaries and wages, professional services, and general and administrative expenses.

Net income attributable to NETSOL for the third quarter of fiscal 2019 totaled $1.3 million or $0.11 per diluted share, a decrease from net income of $2.9 million or $0.26 per diluted share in the third quarter of fiscal 2018.  The decrease in net income was primarily due to a decrease in foreign currency exchange transactions to $47,000 in the third quarter of fiscal 2019 compared to $2.6 million for the third quarter of fiscal 2018.

Non-GAAP adjusted EBITDA for the third quarter of fiscal 2019 totaled $2.2 million or $0.19 per diluted share, compared to $4.3 million or $0.39 per diluted share in the third quarter of fiscal 2018 (see note regarding “Use of Non-GAAP Financial Measures,” below for further discussion of this non-GAAP measure).

At March 31, 2019, cash and cash equivalents were $17.0 million, an increase from $12.7 million at the end of the prior year quarter.

Management Commentary
“In the fiscal third quarter, we continued to execute in all areas of our core business, enabling us to achieve certain major operational milestones that positively impacted our financial and operational performance,” said company Co-Founder, Chairman and Chief Executive Officer Najeeb Ghauri. “More specifically, our successful ‘Go Live’ in China this past March represented the greatest single deployment of our Ascent platform in the largest leasing market in the Asia Pacific region. We’ve now generated profitable results from operations for six consecutive quarters and have continued to sequentially improve our topline throughout the course of the fiscal 2019. In the near term, we remain on track to achieve our previously stated goal of double-digit revenue growth for the year. Going forward, we’re continuing to position ourselves effectively for the long term through new initiatives like our recently launched OTOZ Mobility Innovation Lab, which will allow us to expand reach of our existing platform into new growth opportunities.”

Sales Outlook
“We are continuing to generate a healthy mix of business opportunities, through both implementation execution and up-selling to our current client base as well as by expanding on our already-robust international pipeline,” added President and Head of Sales Naeem Ghauri. “NFS Ascent continues to be the main growth driver for our core operations, and we’re seeing great interest in upgrades from existing clients as well as RFPs from potential new clients.

“With the recent launch of our OTOZ Innovation Lab, there has been an incredibly strong response from the market, particularly around the platform’s capabilities in blockchain and artificial intelligence. As mobility becomes redefined, our industry is entering a period of significant evolution and also disruption. New, emerging models for car and ride sharing, where these technologies of the future should play a central role, will help define the leading solutions going forward. With Ascent and OTOZ together, NETSOL has established two major platforms that have the ability to address and leverage these new models for many years to come.”

Conference Call
NETSOL Technologies management will hold a conference call today (May 14, 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 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 2:00 p.m. Eastern time on the same day through May 28, 2019.

Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 13689882

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
Gateway Investor Relations
949-574-3860
investors@netsoltech.com

  NETSOL Technologies, Inc. and Subsidiaries
  Schedule 1: Consolidated Balance Sheets
      
    As of March 31,  As of June 30,
 ASSETS  2019     2018  
Current assets:   
 Cash and cash equivalents$  17,014,590  $  22,088,853 
 Accounts receivable, net of allowance of $373,329  and $610,061    15,971,676     12,775,461 
 Accounts receivable, net - related party   3,012,133     3,374,272 
 Revenues in excess of billings   13,381,205     14,285,778 
 Revenues in excess of billings - related party   61,822     - 
 Convertible note receivable - related party   3,250,000     2,123,500 
 Other current assets   3,593,057     2,703,032 
  Total current assets   56,284,483     57,350,896 
Revenues in excess of billings, net - long term   -     1,206,669 
Property and equipment, net   14,374,262     16,165,491 
Long term investment   2,501,299     3,217,162 
Other assets   23,994     70,299 
Intangible assets, net   9,042,726     12,247,196 
Goodwill   9,516,568     9,516,568 
  Total assets$  91,743,332  $  99,774,281 
      
 LIABILITIES AND STOCKHOLDERS' EQUITY   
Current liabilities:   
 Accounts payable and accrued expenses$  6,881,435  $  7,873,809 
 Current portion of loans and obligations under capitalized leases   8,111,332     8,595,919 
 Unearned revenues   6,241,741     5,949,581 
 Common stock to be issued   88,324     88,324 
  Total current liabilities   21,322,832     22,507,633 
Loans and obligations under capitalized leases; less current maturities   716,563     330,596 
  Total liabilities   22,039,395     22,838,229 
Commitments and contingencies   
Stockholders' equity:   
 Preferred stock, $.01 par value; 500,000 shares authorized;    -     - 
 Common stock, $.01 par value; 14,500,000 shares authorized;   
  11,879,056 shares issued and 11,673,203 outstanding as of March 31, 2019 and   
  11,708,469 shares issued and 11,502,616 outstanding as of June 30, 2018   118,791     117,085 
 Additional paid-in-capital   127,551,606     126,479,147 
 Treasury stock (At cost, 205,853 shares and 205,853 shares   
  as of March 31, 2019 and June 30, 2018, respectively)   (1,205,024)    (1,205,024)
 Accumulated deficit   (38,704,519)    (37,994,502)
 Stock subscription receivable   (221,000)    (221,000)
 Other comprehensive loss   (28,474,832)    (24,386,071)
  Total NetSol stockholders' equity   59,065,022     62,789,635 
 Non-controlling interest   10,638,915     14,146,417 
  Total stockholders' equity   69,703,937     76,936,052 
  Total liabilities and stockholders' equity$  91,743,332  $  99,774,281 
      

 

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
    2019   2018   2019   2018 
Net Revenues:       
 License fees$  2,536,320  $  2,648,870  $  13,310,002  $  3,210,868 
 Maintenance fees   3,562,412     3,659,998     10,735,432     10,702,171 
 Services   10,519,219     9,345,210     25,175,187     25,450,138 
 License fees - related party   -     -     -     261,513 
 Maintenance fees - related party   142,344     105,325     370,723     309,539 
 Services - related party   366,760     1,284,417     934,883     4,374,802 
   Total net revenues    17,127,055     17,043,820     50,526,227     44,309,031 
          
Cost of revenues:       
  Salaries and consultants    4,833,611     5,418,067     14,351,227     16,244,319 
  Travel    1,793,964     425,060     4,652,143     1,226,073 
  Depreciation and amortization    874,654     1,127,077     2,692,306     3,468,293 
  Other    1,067,506     880,897     3,176,602     2,677,465 
  Total cost of revenues   8,569,735     7,851,101     24,872,278     23,616,150 
          
Gross profit   8,557,320     9,192,719     25,653,949     20,692,881 
          
Operating expenses:       
 Selling and marketing   1,864,990     1,962,402     5,614,619     5,605,838 
 Depreciation and amortization   252,442     231,308     658,453     699,966 
 General and administrative   3,833,209     4,048,271     12,241,988     11,862,535 
 Research and development cost   513,770     197,643     1,256,577     572,619 
  Total operating expenses   6,464,411     6,439,624     19,771,637     18,740,958 
          
Income (loss) from operations   2,092,909     2,753,095     5,882,312     1,951,923 
          
Other income and (expenses)       
 Gain (loss) on sale of assets   16,380     40,537     65,170     24,468 
 Interest expense   (70,447)    (102,522)    (233,685)    (330,268)
 Interest income   201,084     142,356     680,469     394,837 
 Gain on foreign currency exchange transactions   47,218     2,550,394     2,594,885     5,304,723 
 Share of net loss from equity investment   (245,389)    (263,678)    (843,373)    (534,576)
 Other income    3,116     314     12,998     15,924 
  Total other income (expenses)   (48,038)    2,367,401     2,276,464     4,875,108 
          
Net income before  income taxes   2,044,871     5,120,496     8,158,776     6,827,031 
Income tax provision   (275,476)    (261,182)    (777,262)    (486,980)
Net income    1,769,395     4,859,314     7,381,514     6,340,051 
 Non-controlling interest   (501,835)    (1,994,869)    (2,295,736)    (3,210,683)
Net income attributable to NetSol$  1,267,560  $  2,864,445  $  5,085,778  $  3,129,368 
          
          
          
Net income (loss) per share:       
 Net income (loss) per common share       
  Basic$  0.11  $  0.26  $  0.44  $  0.28 
  Diluted$  0.11  $  0.25  $  0.44  $  0.28 
          
Weighted average number of shares outstanding       
 Basic   11,656,098     11,190,048     11,580,066     11,118,529 
 Diluted   11,691,342     11,268,842     11,615,310     11,152,365 
          

 

NETSOL Technologies, Inc. and Subsidiaries
Schedule 3: Consolidated Statement of Cash Flows
        
     For the Nine Months  
     Ended March 31 
     2019   2018  
 Cash flows from operating activities:     
  Net income $  7,381,514  $  6,340,051  
  Adjustments to reconcile net income     
    to net cash provided by (used in) operating activities:     
  Depreciation and amortization    3,350,759     4,168,259  
  Share of net loss from investment under equity method    843,373     534,576  
  Gain on sale of assets    (65,170)    (24,468) 
  Stock based compensation    980,682     1,281,763  
  Fair market value of stock options    43,612     -  
  Changes in operating assets and liabilities:     
      Accounts receivable    (4,249,540)    (17,848,921) 
      Accounts receivable - related party    (461,435)    (2,634,063) 
      Revenues in excess of billing    (6,862,451)    5,904,161  
      Revenues in excess of billing - related party    (97,359)    (85,743) 
      Other current assets    (1,189,909)    (796,126) 
      Accounts payable and accrued expenses    (540,615)    1,139,509  
      Unearned revenue    611,157     4,273,007  
  Net cash provided by (used in) operating activities    (255,382)    2,252,005  
        
 Cash flows from investing activities:     
  Purchases of property and equipment    (2,590,302)    (1,107,732) 
  Sales of property and equipment    1,005,214     348,762  
  Convertible note receivable - related party    (1,126,500)    (550,000) 
  Investment in WRLD3D    -     (50,000) 
  Purchase of subsidiary shares from open market    -     (33,987) 
  Net cash used in investing activities    (2,711,588)    (1,392,957) 
        
 Cash flows from financing activities:     
  Proceeds from the exercise of stock options and warrants    85,000     215,311  
  Proceeds from exercise of subsidiary options      2,650     10,349  
  Restricted cash    -     90,000  
  Purchase of treasury stock    -     (750,714) 
  Dividend paid by subsidiary to non-controlling interest    (566,465)    (417,853) 
  Proceeds from bank loans    1,337,092     696,936  
  Payments on capital lease obligations and loans - net    (298,610)    (961,901) 
  Net cash provided by (used in) financing activities    559,667     (1,117,872) 
 Effect of exchange rate changes    (2,666,960)    (1,202,147) 
 Net decrease in cash and cash equivalents    (5,074,263)    (1,460,971) 
 Cash and cash equivalents at beginning of the period    22,088,853     14,172,954  
 Cash and cash equivalents at end of period $  17,014,590  $  12,711,983  
        


NETSOL Technologies, Inc. and Subsidiaries
Schedule 4: Reconciliation to GAAP
         
 Three Months Three Months Nine Months Nine Months 
 Ended Ended Ended Ended 
 March 31, 2019 March 31, 2018 March 31, 2019 March 31, 2018 
         
         
 Net Income (loss) before preferred dividend, per GAAP $  1,267,560  $  2,864,445  $  5,085,778  $  3,129,368  
 Non-controlling interest    501,835     1,994,869     2,295,736     3,210,683  
 Income taxes    275,476     261,182     777,262     486,980  
 Depreciation and amortization    1,127,096     1,358,385     3,350,759     4,168,259  
 Interest expense    70,447     102,522     233,685     330,268  
 Interest (income)    (201,084)    (142,356)    (680,469)    (394,837) 
 EBITDA $  3,041,330  $  6,439,047  $  11,062,751  $  10,930,721  
 Add back:         
 Non-cash stock-based compensation    154,551     448,233   -   1,024,294     1,281,763  
 Adjusted EBITDA, gross $  3,195,881  $  6,887,280  $  12,087,045  $  12,212,484  
 Less non-controlling interest (a)    (959,955)    (2,540,702)    (3,600,485)    (4,804,869) 
 Adjusted EBITDA, net $  2,235,926  $  4,346,578  $  8,486,560  $  7,407,615  
         
         
 Weighted Average number of shares outstanding         
 Basic    11,656,098     11,190,048     11,580,066     11,118,529  
 Diluted    11,691,342     11,268,842     11,615,310     11,152,365  
         
 Basic adjusted EBITDA $  0.19  $  0.39  $  0.73  $  0.67  
 Diluted adjusted EBITDA $  0.19  $  0.39  $  0.73  $  0.66  
         
         
(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$  501,835  $  1,994,869  $  2,295,736  $  3,210,683  
 Income Taxes    109,957     65,798     251,321     106,221  
 Depreciation and amortization    360,071     449,828     1,064,203     1,382,148  
 Interest expense    22,173     31,865     75,082     105,400  
 Interest (income)    (43,905)    (43,702)    (165,020)    (125,777) 
 EBITDA $  950,131  $  2,498,658  $  3,521,322  $  4,678,675  
 Add back:         
 Non-cash stock-based compensation    9,824     42,044     79,163     126,194  
 Adjusted EBITDA of non-controlling interest $  959,955  $  2,540,702  $  3,600,485  $  4,804,869  
         

Netsol logo.png

Source: NETSOL Technologies Inc.


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