EXHIBIT 99.1

 

 

Source: NETSOL Technologies Inc.

 

September 26, 2018 07:30 ET

 

NETSOL Technologies Reports Fiscal Fourth Quarter and Full Year 2018 Financial Results

 

Quarterly Topline Improvement Driven by Continued Strength of Core Operations; Annual Cost Reductions of $8.5 Million Underscore Increase in Net Income of $9.3 Million and Increase in EPS of $0.84; Return to Full Year Profitability Providing a Prelude to Future Long-Term Growth

 

CALABASAS, Calif., Sept. 26, 2018 (GLOBE NEWSWIRE) — NETSOL Technologies, Inc. (NASDAQ: NTWK), a global business services and enterprise application solutions provider, reported results for the fiscal fourth quarter and full year ended June 30, 2018.

 

Recent Operational Highlights

 

  ● Additional cost savings in the fiscal fourth quarter mostly tied to reductions in costs of revenues and operating costs, bringing total savings to $8.5 million through fiscal 2018.
  ● Secured a five-year contract valued at roughly $30 million with a European tier-one global auto captive to implement both NFS Ascent™ Retail and Wholesale platforms in China.
  ● Secured a multi-million-dollar contract with major American multinational automaker to implement Ascent Retail Platform in China.
  ● Received “First-Rate and Best-Selling Finance and Leasing Solution Provider” award at the China Leasing Summit 2018 for the sixth consecutive year.
  ● Secured a multi-million-dollar agreement with a leading Asian auto captive finance company to implement NFS Ascent’s Loan Origination System and Contract Management System.
  ● Appointed two new members to the Board of Directors, Malea Farsai and Henry Tolentino, to provide greater diversity and breadth of experience.
  ● NFS Ascent went live in South Africa, a new market, with German auto manufacturing giant as part of the ongoing international deployment associated with previously announced 12-country, $110 million contract.

 

   

 

 

Fiscal Fourth Quarter 2018 Financial Results

 

Total net revenues for the fourth quarter of fiscal 2018 were $16.6 million, compared with $14.5 million in the prior year period. The increase in total net revenues was primarily due to an increase in total license fees of $122,000, an increase in total maintenance fees of $206,000 and an increase in total services revenues of $1.8 million.

 

  ● Total license fees were $3.4 million, compared with $3.3 million in the prior year period.
  ● Total maintenance fees were $3.8 million, compared with $3.6 million in the prior year period.
  ● Total services revenues were $9.4 million, compared with $7.6 million in the prior year period.

 

Gross profit for the fourth quarter of fiscal 2018 was $8.5 million (or 51.2% of net revenues), compared to $4.6 million (or 31.7% of net revenues) in the fourth quarter of fiscal 2017. The increase in gross profit as a percentage of net revenues was primarily due to a decrease in costs of revenues of $1.8 million.

 

Operating expenses for the fourth quarter of fiscal 2018 decreased 6% to $7.4 million (or 44.6% of net revenues) from $7.9 million (or 54.7% of net revenues) for the fourth quarter of fiscal 2017. The decrease in operating expenses was primarily due to a decrease in provision for bad debts, which was offset by an increase in general and administrative expenses as well as research and development expenses.

 

GAAP net income attributable to NETSOL for the fourth quarter of fiscal 2018 totaled $1.2 million or $0.10 per diluted share, an improvement from net loss of $3.1 million or $(0.28) per diluted share in the fourth quarter of fiscal 2017.

 

Non-GAAP adjusted EBITDA for the fourth quarter of fiscal 2018 totaled $2.9 million or $0.26 per diluted share, an improvement from a loss of $851,000 or $(0.08) per diluted share in the fourth quarter of fiscal 2017 (see note regarding “Use of Non-GAAP Financial Measures,” below for further discussion of this non-GAAP measure).

 

At June 30, 2018, cash and cash equivalents were $22.1 million, an increase from $14.2 million at June 30, 2017.

 

Full Year Fiscal 2018 Financial Results

 

Total net revenues for fiscal 2018 were $60.9 million, compared to $65.4 million in fiscal 2017. The decrease in total net revenues was primarily due to a decrease in total license fees of $11.6 million, which was offset by an increase in total maintenance fees of $332,000 and an increase in total services revenues of $6.8 million.

 

  ● Total license fees were $6.9 million, compared with $18.5 million in the prior fiscal year.
  ● Total maintenance fees were $14.8 million, compared with $14.5 million in the prior fiscal year.
  ● Total services revenues were $39.3 million, compared with $32.4 million in the prior fiscal year.

 

Gross profit for fiscal 2018 increased to $29.2 million (or 47.9% of net revenues) from $28.4 million (or 43.5% of net revenues) for fiscal 2017. The increase in gross profit as a percentage of net revenues was primarily due to a decrease in costs of revenues of $5.2 million.

 

   

 

 

Operating expenses for fiscal 2018 decreased to $26.2 million (or 42.9% of net revenues) from $29.4 million (or 45.0% of net revenues) for fiscal 2017. The decrease in operating expenses was primarily due to decreases in selling and marketing expenses and provision for bad debts, which was offset by an increase in research and development expenses.

 

GAAP net income attributable to NETSOL for fiscal 2018 totaled $4.3 million or $0.38 per diluted share, an improvement from net loss of $5.0 million or $(0.46) per diluted share for fiscal 2017.

 

Non-GAAP adjusted EBITDA for fiscal 2018 totaled $10.3 million or $0.92 per diluted share, compared with $2.8 million or $0.26 per diluted share in fiscal 2017 (see note regarding “Use of Non-GAAP Financial Measures,” below for further discussion of this non-GAAP measure).

 

Management Commentary

 

“The fiscal fourth quarter was a solid end to an eventful year for NETSOL, both financially and operationally,” said NETSOL Co-Founder, Chairman and Chief Executive Officer Najeeb Ghauri. “From a financial perspective, we successfully achieved our third consecutive quarter of profitability, grew our topline 15% over the fourth quarter of the prior year as well as continued to improve our cost structure and efficiencies. In fact, our overall cost reduction initiatives have now resulted in $8.5 million of savings through fiscal 2018, which was a major driving factor in us realizing the $9.3 million increase in annual net income over last year. On top of this, in the fourth quarter alone, we were able to generate $1.8 million in savings on costs of revenues and another $500,000 from operating expenses. These initiatives have not only made NETSOL a more nimble and efficient organization, but they’ve also provided additional bandwidth, with minimal incremental cost, for us to scale our business in fiscal 2019 and beyond.”

 

“Operationally, we closed fiscal 2018 on a high note as well, demonstrated by the new and add-on sales we secured, which have continued and increased into the current year with a few notable wins,” continued Ghauri. “More recently, we won a five-year, $30 million deal with a European tier-one global auto captive and also secured a multimillion-dollar implementation with a major American multinational automaker in China. Going forward, we’re continuing to expand our strong pipeline of new projects, and we’re now able to do so in an increasingly more efficient manner. Put another way, we are proactively focusing any newly available sales time and resources on more nascent deals we have specifically identified as being capable of progressing more quickly through the buying cycle. When coupled with the more mature deals we’ve been advancing over time, this combination presents a healthy and diverse mix of new win opportunities. Looking ahead, if 2018 was about transformation for NETSOL, then the beginning of 2019 has represented the inflection point that, we believe, will propel us to double-digit topline growth for the year.”

 

Sales Outlook

 

“Fiscal 2018 has been a turnaround year for sales and NETSOL as a whole with several tier- one clients entering into new IT selection processes and Ascent making the shortlist in each occurrence,” added President and Head of Sales Naeem Ghauri. “After closing out the previous fiscal year and starting the current one with back-to-back wins in China, we are upbeat and motivated to capitalize on this building momentum. We remain confident in our ability to finish strong and secure further wins in fiscal 2019.”

 

Conference Call

 

NETSOL Technologies management will hold a conference call today (September 26, 2018) 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 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 12:00 p.m. Eastern time on the same day through October 10, 2018.

 

Toll-free replay number: 1-844-512-2921 International replay number: 1-412-317-6671 Replay ID: 13683245

 

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 the benefit of certain cost savings undertaken in the past fiscal year, 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. Beginning with the fourth quarter of fiscal 2016, NETSOL has revised its calculation of Adjusted EBITDA to exclude the portion of Adjusted EBITDA that is attributable to its subsidiaries that have a minority interest.

 

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 June 30,   As of June 30, 
   2018   2017 
ASSETS          
Current assets:          
Cash and cash equivalents  $22,088,853   $14,172,954 
Accounts receivable, net of allowance of $610,061 and $571,511   12,775,461    6,583,199 
Accounts receivable, net - related party   3,374,272    1,644,942 
Revenues in excess of billings   14,285,778    19,126,389 
Revenues in excess of billings - related party   -    80,705 
Convertible note receivable - related party   2,123,500    200,000 
Other current assets   2,703,032    2,463,886 
Total current assets   57,350,896    44,272,075 
Revenues in excess of billings, net - long term   1,206,669    5,173,538 
Property and equipment, net   16,165,491    20,370,703 
Long term investment   3,217,162    3,057,020 
Other assets   70,299    244,275 
Intangible assets, net   12,247,196    17,043,151 
Goodwill   9,516,568    9,516,568 
Total assets  $99,774,281   $99,677,330 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current liabilities:          
Accounts payable and accrued expenses  $7,873,809   $6,880,194 
Current portion of loans and obligations under capitalized leases   8,595,919    10,222,795 
Unearned revenues   5,949,581    3,925,702 
Common stock to be issued   88,324    88,324 
Total current liabilities   22,507,633    21,117,015 
Loans and obligations under capitalized leases; less current maturities   330,596    366,762 
Total liabilities   22,838,229    21,483,777 
Commitments and contingencies Stockholders’ equity:          
Preferred stock, $.01 par value; 500,000 shares
authorized;		   -    - 
Common stock, $.01 par value; 14,500,000 shares authorized; 11,708,469 shares issued and 11,502,616 outstanding as of June 30, 2018 and 11,225,385 shares issued and 11,190,606 outstanding as of June 30, 2017   117,085    112,254 
           
Additional paid-in-capital   126,479,147    124,409,998 
Treasury stock (At cost, 205,853 shares and 34,779 shares as of June 30, 2018 and June 30, 2017, respectively)   (1,205,024)   (454,310)
Accumulated deficit   (37,994,502)   (42,301,390)
Stock subscription receivable   (221,000)   (297,511)
Other comprehensive loss   (24,386,071)   (18,074,570)
Total NETSOL stockholders’ equity   62,789,635    63,394,471 
Non-controlling interest   14,146,417    14,799,082 
Total stockholders’ equity   76,936,052    78,193,553 
Total liabilities and stockholders’ equity  $99,774,281   $99,677,330 

 

   

 

 

NETSOL Technologies, Inc. and Subsidiaries

Schedule 2: Consolidated Statement of Operations

 

   For the Three Months   For the Year 
   Ended June 30,   Ended June 30, 
   2018   2017   2018   2017 
Net Revenues:                    
                     
License fees  $3,387,386   $3,265,338   $6,598,254   $18,218,912 
                     
Maintenance fees   3,680,138    3,505,675    14,382,309    14,157,367 
                     
Services   8,161,844    5,954,297    33,611,982    24,798,899 
License fees - related party   -    -    261,513    246,957 
Maintenance fees - related party   108,905    77,685    418,444    311,359 
Services - related party   1,282,954    1,678,698    5,657,756    7,632,774 
                     
Total net revenues   16,621,227    14,481,693    60,930,258    65,366,268 
                     
Cost of revenues:                    
                     
Salaries and consultants   5,611,843    6,610,960    21,856,162    24,645,223 
Travel   549,254    824,669    1,775,327    3,137,671 
Depreciation and amortization   1,142,444    1,458,235    4,610,737    5,448,059 
Other   803,650    1,002,364    3,481,115    3,727,379 
                     
Total cost of revenues   8,107,191    9,896,228    31,723,341    36,958,332 
                     
Gross profit
   8,514,036    4,585,465    29,206,917    28,407,936 
                       
Operating expenses:                    
Selling and marketing   2,014,638    2,248,765    7,620,476    9,746,229 
Depreciation and amortization   262,771    289,051    962,737    1,114,275 
Provision for bad debts   460,730    1,407,019    460,730    1,407,751 
                     
General and administrative   4,391,531    3,865,875    16,254,067    16,747,550 
Research and development cost   281,377    107,613    853,996    393,345 
                     
Total operating expenses   7,411,047    7,918,323    26,152,006    29,409,150 
                    
Income (loss) from operations   1,102,989    (3,332,858)   3,054,911    (1,001,214)
                     
Other income and (expenses)                    
Gain (loss) on sale of assets   (16,874)   2,948    7,594    (30,147)
Interest expense   (92,059)   (133,085)   (422,327)   (310,044)
Interest income   197,316    98,638    592,153    179,723 
Gain (loss) on foreign currency exchange transactions   (294,340)   952,705    5,010,383    306,819 
Share of net loss from equity investment   272,020    -    (262,556)   - 
Other income (expense)   26,923    22,214    42,847    50,378 
Total other income (expenses)   92,986    943,420    4,968,094    196,729 
                    
Net income (loss) before income taxes   1,195,975    (2,389,438)   8,023,005    (804,485)
Income tax provision   (386,047)   (491,588)   (873,027)   (931,951)
                     
Net income (loss)   809,928    (2,881,026)   7,149,978    (1,736,436)
                     
Non-controlling interest   367,593    (242,467)   (2,843,090)   (3,241,594)
Net income (loss) attributable to NETSOL  $1,177,521   $(3,123,493)  $4,306,888   $(4,978,030)
                     
Net income (loss) per share:                    
Net income (loss) per common share                    
Basic  $0.10   $(0.28)  $0.38   $(0.46)
Diluted  $0.10   $(0.28)  $0.38   $(0.46)
Weighted average number of shares outstanding                    
Basic   11,274,196    11,098,202    11,197,319    10,912,284 
Diluted   11,274,196    11,098,202    11,197,319    10,912,284 

 

   

 

 

NETSOL Technologies, Inc. and Subsidiaries

Schedule 3: Consolidated Statement of Cash Flows

 

   For the Year
Ended June 30,		 
   2018   2017 
Cash flows from operating activities:          
Net income (loss)  $7,149,978   $(1,736,436)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:          
Depreciation and amortization   5,573,474    6,562,334 
Provision for bad debts   460,730    1,407,751 
Impairment of assets   172,505    - 
Share of net loss from investment under equity method   262,556    - 
(Gain) loss on sale of assets   (7,594)   30,147 
Stock based compensation   1,861,445    2,522,158 
Fair market value of warrants and stock options granted   -    241,165 
Changes in operating assets and liabilities:          
Accounts receivable   (7,735,582)   2,292,980 
Accounts receivable - related party   (2,735,846)   2,803,520 
Revenues in excess of billing   6,788,580    (13,966,522)
Revenues in excess of billing - related party   77,128    211,615 
Other current assets   (195,529)   72,522 
Accounts payable and accrued expenses   1,653,778    751,835 
Unearned revenue   2,388,699    (738,704)
Net cash provided by operating activities   15,714,322    454,365 
           
Cash flows from investing activities:          
Purchases of property and equipment   (2,449,449)   (2,203,203)
Sales of property and equipment   943,252    781,018 
Convertible note receivable - related party   (1,923,500)   (200,000)
Investment in WRLD3D   (230,000)   (1,105,555)
Purchase of subsidiary shares from open market   (33,987)   - 
Net cash used in investing activities   (3,693,684)   (2,727,740)
           
Cash flows from financing activities:          
Proceeds from the exercise of stock options and warrants   

312,311 

    

866,438

 
Proceeds from exercise of subsidiary options   10,349    75,382 
Restricted cash   90,000    - 
Purchase of treasury stock   (750,714)   (38,885)
Dividend paid by subsidiary to non-controlling interest   (417,853)   (2,156,273)
Proceeds from bank loans   1,365,250    6,184,635 
Payments on capital lease obligations and loans - net   (1,626,109)   (554,048)
Net cash provided by (used in) financing activities   (1,016,766)   4,377,249 
Effect of exchange rate changes   (3,087,973)   511,553 
Net increase in cash and cash equivalents   7,915,899    2,615,427 
Cash and cash equivalents at beginning of the period   14,172,954    11,557,527 
           
Cash and cash equivalents at end of period  $22,088,853   $14,172,954 

 

 
 

 

NETSOL Technologies, Inc. and Subsidiaries

Schedule 4: Reconciliation to GAAP

 

   Year Ended   Year Ended 
   June 30, 2018   June 30, 2017 
Net Income (loss) before preferred dividend, per GAAP  $4,306,888   $(4,978,030)
Non-controlling interest   2,843,090    3,241,594 
Income taxes   873,027    931,951 
Depreciation and amortization   5,573,474    6,562,334 
Interest expense   422,327    310,044 
Interest (income)   (592,153)   (179,723)
           
EBITDA  $13,426,653   $5,888,170 
Add back:          
Non-cash stock-based compensation   1,861,445    2,763,323 
           
Adjusted EBITDA, gross  $15,288,098   $8,651,493 
Less non-controlling interest (a)   (4,947,498)   (5,841,143)
Adjusted EBITDA, net  $10,340,600   $2,810,350 
           
Weighted Average number of shares outstanding          
Basic   11,197,319    10,912,284 
Diluted   11,197,319    10,919,169 
Basic adjusted EBITDA  $0.92   $0.26 
Diluted adjusted EBITDA  $0.92   $0.26 
           
(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  $2,843,090   $3,241,594 
Income Taxes   162,419    140,499 
Depreciation and amortization   1,817,367    2,168,249 
Interest expense   136,445    98,331 
Interest (income)   (180,061)   (60,042)
EBITDA  $4,779,260   $5,588,631 
Add back:          
Non-cash stock-based compensation   168,238    252,512 
Adjusted EBITDA of non-controlling interest  $4,947,498   $5,841,143