Exhibit 99.1

 

 

NETSOL Technologies Reports Fiscal Second Quarter 2021 Financial Results

 

  Despite COVID-19 Related Challenges, Topline Improved Sequentially, Driven by Notable New Contract Signings, Ongoing Implementations Globally, Increased Demand within Existing Customer Base
  Steady, Double-Digit, Subscription and Support Revenue Growth from $5.1 Million to $5.7 Million Leading to $23+ Million Run Rate Over Coming Twelve Months with Opportunities for Upside
  Recurring Revenue Growth Accelerated by Further Cloud Adoption and Major Go Live Events as Customers Continue to Automate And Transform Business Processes In Response to Pandemic
  Long-Term Growth Outlook Aided by Ongoing Financial and Operational Improvement Through the Balance of Fiscal 2021, Partnership Pilots Through Otoz Innovation Lab, Record Cash Position of $32 Million to Fund Rebooted Global Sales and Marketing Activities

 

CALABASAS, Calif., February 16, 2021 – NETSOL Technologies, Inc. (Nasdaq: NTWK), a global business services and enterprise application solutions provider, reported results for the fiscal second quarter ended December 31, 2020.

 

Fiscal Second Quarter 2021 and Recent Operational Highlights

 

  Appointed Co-Founder, President of Global Sales and CEO of Otoz, Naeem Ghauri to serve as President of NETSOL Technologies, Inc., a newly created role that is responsible for P&L for all subsidiaries as well as developing a cohesive strategy to grow the company’s SaaS revenues and cloud offerings through digital product development and new complementary solutions to existing core offerings.
  Secured an agreement with an existing tier one finance customer in China to upgrade to the NFS Ascent® Retail and Wholesale platforms as part of a contract expected to generate $9.0 million over the multi-year life of the agreement.
  Successfully implemented the NFS Ascent® Retail Platform, including the Company’s proprietary Loan Origination System (LOS) and Contract Management System (CMS) for a tier-one German auto captive finance company in China in the second phase of a previously announced $30 million contract.
  Announced the successful implementation of the NFS Ascent® Retail Platform with Allica, a rapidly growing U.K. bank serving small and medium-sized enterprises, marking the first “Go Live” of a cloud-based NFS Ascent® Retail client in the region.
  Regarding previously announced 12-country, $110 million contract with German auto manufacturing giant, the Company made continued progress with respect to additional NFS Ascent® implementations. The Company had a successful October 2020 Go Live event in Thailand for its Retail Platform and is currently underway on implementation for the same offering in New Zealand.
  Signed an agreement with a renowned financial services company in the U.S. to implement the Company’s North American LeasePak Cloud offering, which is expected to generate approximately $1.0 million over the multi-year life of the contract.
  Subscription (SaaS and Cloud) and support revenues reached $5.7 million, a 12% increase over the prior year and a $23+ million run rate projected over the coming twelve months with opportunities for upside.

 

   
 

 

  Generated nearly $1.5 million by successfully implementing change requests from various customers across multiple regions during the fiscal second quarter.
  Introduced WRLD3D’s NXT: a COVID-aware smart workplace platform to support companies’ return to work safely.
  Otoz nearing completion of a pilot launch for a U.S. tier one automotive company with expected Go Live in the next few months. Backlog of potential new customers continues to grow.

 

Fiscal Second Quarter 2021 Financial Results

 

Total net revenues for the second quarter of fiscal 2021 were $13.1 million, compared with $15.7 million in the prior year period. The decrease in total net revenues was primarily due to a decrease in total services revenues of $5.6 million, which was offset by an increase in total license fees of $2.4 million and an increase in total subscription and support revenues of $620,000.

 

  Total license fees were $2.6 million, compared with $177,000 in the prior year period.
  Total subscription (SaaS and Cloud) and support revenues were $5.7 million, compared with $5.1 million in the prior year period.
  Total services revenues were $4.8 million, compared with $10.4 million in the prior year period.

 

Gross profit for the second quarter of fiscal 2021 was $6.0 million (or 46.0% of net revenues), compared to $7.8 million (or 49.7% of net revenues) in the second quarter of fiscal 2020. The decreases in gross profit and gross profit as a percentage of revenue were primarily due to a decrease in net revenue, offset by a decrease in cost of sales. The decrease in cost of sales was primarily due to a decrease in travel expense of $1.4 million, which was offset by an increase in salaries and consultant fees of $669,000.

 

Operating expenses for the second quarter of fiscal 2021 decreased 16.1% to $6.0 million (or 45.4% of net revenues) from $7.1 million (or 45.2% of net revenues) for the second quarter of fiscal 2020. The decrease in operating expenses was primarily due to decreases in selling and marketing expenses, professional services, research and development and general and administrative expenses.

 

GAAP net loss attributable to NETSOL for the second quarter of fiscal 2021 totaled $(242,000) or $(0.02) per diluted share, compared with GAAP net income of $586,000 or $0.05 per diluted share in the second quarter of fiscal 2020. GAAP net loss attributable to NETSOL included a $14,000 gain on foreign currency exchange transactions in the second quarter of fiscal 2021, which was a decrease from a gain of $61,000 in the prior year period.

 

Non-GAAP adjusted EBITDA for the second quarter of fiscal 2021 totaled $617,000 or $0.05 per diluted share, compared with non-GAAP adjusted EBITDA of $1.6 million or $0.13 per diluted share in the second quarter of fiscal 2020 (see note regarding “Use of Non-GAAP Financial Measures,” below for further discussion of this non-GAAP measure).

 

At December 31, 2020, cash and cash equivalents were $32.0 million, an increase from $20.2 million at June 30, 2020.

 

   
 

 

Stock Repurchase Program

 

On July 30, 2020, NETSOL’s Board of Directors approved a stock repurchase program that authorized potential repurchases of up to $2 million of its common stock over a six-month period. After the expiry of the original program, the Company’s Board of Directors approved the extension of the repurchase program through June 28, 2021. Under the program, the Company may repurchase its common stock in the open market from time-to-time, in amounts, at prices, and at such times as the Company deems appropriate, subject to market conditions and federal and state laws governing such transactions. NETSOL expects to fund the repurchase with its existing cash balance and cash generated from operations.

 

As of December 31, 2020, the Company had repurchased 446,996 shares of its common stock at an aggregate value of $1,392,671.

 

Management Commentary

 

“Fiscal Q2 yielded incrementally improved results for our global business as we saw the early stages of return to work thanks to the initial rollout of COVID-19 vaccine treatments at the end of 2020,” said NETSOL Co-Founder, Chairman and Chief Executive Officer Najeeb Ghauri. “We have continued to lean into our technology strengths and are still operating remotely for the most part without missing a step. During the period we expanded our SaaS-based footprint through a multi-million-dollar upgrade as well as several large-scale implementations, driving our recurring revenue base close to $6 million for the quarter nearly $11 million year to date. We also recorded nearly $1.5 million in change requests from current customers, another encouraging data point for the improving health of the industries we serve and the economy as a whole.

 

“Operationally, our recent appointment of Naeem Ghauri to President of NTI should allow us to accelerate progress within our core initiatives, namely driving more consistent topline growth through an increased focused on high-margin, SaaS opportunities which should also lead to sustained profitability. While the broader market cautiously begins to pick up in waves, we are continuing to execute against our near-term pipeline and current implementation schedule. We are being conservative in our cost structures, managing the business as owners, and will opportunistically look to deploy additional resources to high-value areas such as our Otoz Innovation Lab. We remain optimistic for the remainder of the year and even more bullish on the years ahead.”

 

Otoz Update

 

“Otoz is nearing completion of a pilot launch to fully digitize a U.S. tier one automotive company,” said Naeem Ghauri, President of NETSOL Technologies, Inc. and Otoz CEO. “This project has allowed us to create an amazing digital auto buying experience through a state-of-the-art app. Overall, this pilot is a door opener for Otoz to penetrate the rapidly growing digital mobility platform movement. Based on the sizeable prospect pipeline we have today, we are well on track to continue grow the Otoz client list by at least another few tier one mobility customers over the next twelve months.”

 

Conference Call

 

NETSOL Technologies management will hold a conference call today (February 16, 2021) 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 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 12:00 p.m. Eastern time on the same day through March 2, 2021.

 

Toll-free replay number: 1-844-512-2921

International replay number: 1-412-317-6671

Replay ID: 13715527

 

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 more than 1300 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 finance and leasing lifecycle.

 

About Otoz

 

Otoz provides business-to-business, white-label technology solutions for new mobility. Our suite of agile and customizable mobility solutions ranges from car sharing and subscription products to AI-enabled chatbots, allowing businesses to engage consumers and facilitate the complete transaction lifecycle intelligently and digitally. Otoz technologies empower automotive companies and start-ups to launch new mobility models quickly and efficiently. The technology Otoz has developed is cloud-native and supported by artificial intelligence (AI), machine learning (ML), internet of things (IoT) and blockchain. Our technology drives utilization, while supporting robust and efficient operations.

 

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 such as the effect of stay at home orders and social distancing imposed by COVID-19 and its resultant impact on our financials and the world economy 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:

 

Matt Glover and Tom Colton

 

Gateway Investor Relations

1-949-574-3860

investors@netsoltech.com

 

   
 

 

NETSOL Technologies, Inc. and Subsidiaries

Schedule 1: Consolidated Balance Sheets

 

   As of   As of 
   December 31, 2020   June 30, 2020 
ASSETS          
Current assets:          
Cash and cash equivalents  $32,003,647   $20,166,830 
Accounts receivable, net of allowance of $308,236 and $435,611   5,213,604    10,131,752 
Accounts receivable - related party, net of allowance of $1,373,099 and $90,594   -    1,282,505 
Revenues in excess of billings, net of allowance of $153,650 and $188,914   13,290,010    17,198,281 
Revenues in excess of billings - related party, net of allowance of $8,163 and $0   -    8,163 
Other current assets, net of allowance of $1,243,633 and $0   2,395,985    3,108,180 
Total current assets   52,903,246    51,895,711 
Revenues in excess of billings, net - long term   356,059    1,300,289 
Convertible note receivable - related party, net of allowance of $4,250,000 and $0   -    4,250,000 
Property and equipment, net   12,209,500    11,329,631 
Right of use of assets - operating leases   1,937,907    2,360,129 
Long term investment   3,734,907    2,387,692 
Other assets   47,190    41,992 
Intangible assets, net   4,753,543    5,391,077 
Goodwill   9,516,568    9,516,568 
Total assets  $85,458,920   $88,473,089 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current liabilities:          
Accounts payable and accrued expenses  $6,327,192   $5,680,837 
Current portion of loans and obligations under finance leases   10,383,572    9,139,561 
Current portion of operating lease obligations   1,169,960    1,111,912 
Unearned revenues   3,753,781    4,095,472 
Common stock to be issued   88,324    88,324 
Total current liabilities   21,722,829    20,116,106 
Loans and obligations under finance leases; less current maturities   1,554,317    1,539,975 
Operating lease obligations; less current maturities   962,724    1,339,965 
Total liabilities   24,239,870    22,996,046 
Commitments and contingencies          
Stockholders’ equity:          
Preferred stock, $.01 par value; 500,000 shares authorized;   -    - 
Common stock, $.01 par value; 14,500,000 shares authorized; 12,147,458 shares issued and 11,452,959 outstanding as of December 31, 2020 and 12,122,149 shares issued and 11,874,646 outstanding as of June 30, 2020   121,476    121,222 
Additional paid-in-capital   128,823,181    128,677,754 
Treasury stock (at cost, 694,499 shares and 247,503 shares as of December 31, 2020 and June 30, 2020, respectively)   (2,848,640)   (1,455,969)
Accumulated deficit   (40,104,089)   (34,269,817)
Other comprehensive loss   (32,060,151)   (34,085,047)
Total NetSol stockholders’ equity   53,931,777    58,988,143 
Non-controlling interest   7,287,273    6,488,900 
Total stockholders’ equity   61,219,050    65,477,043 
Total liabilities and stockholders’ equity  $85,458,920   $88,473,089 

 

   
 

 

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, 
   2020   2019   2020   2019 
Net Revenues:                    
License fees  $2,586,504   $176,706   $2,589,979   $2,640,922 
Subscription and support   5,724,802    5,104,736    10,896,665    9,711,112 
Services   4,810,154    10,351,153    12,282,194    16,770,044 
Services - related party   -    57,424    -    140,357 
Total net revenues   13,121,460    15,690,019    25,768,838    29,262,435 
                     
Cost of revenues:                    
Salaries and consultants   5,294,662    4,625,872    9,821,311    9,080,836 
Travel   159,174    1,572,923    262,926    2,915,558 
Depreciation and amortization   713,749    734,352    1,420,998    1,454,017 
Other   911,566    954,912    1,839,719    1,899,436 
Total cost of revenues   7,079,151    7,888,059    13,344,954    15,349,847 
                     
Gross profit   6,042,309    7,801,960    12,423,884    13,912,588 
                     
Operating expenses:                    
Selling and marketing   1,558,027    1,858,096    3,167,631    3,601,964 
Depreciation and amortization   221,572    215,479    443,362    417,866 
General and administrative   4,065,788    4,568,790    7,493,424    8,487,403 
Research and development cost   110,419    454,605    196,408    1,127,575 
Total operating expenses   5,955,806    7,096,970    11,300,825    13,634,808 
                     
Income from operations   86,503    704,990    1,123,059    277,780 
                     
Other income and (expenses)                    
Gain (loss) on sale of assets   (52,531)   528    (74,273)   239 
Interest expense   (94,241)   (88,006)   (197,568)   (151,669)
Interest income   210,854    435,682    411,675    834,911 
Gain (loss) on foreign currency exchange transactions   13,981    61,061    310,022    (1,699,129)
Share of net loss from equity investment   (43,685)   (164,796)   (151,535)   (354,020)
Other income   45,365    207,987    132,637    226,313 
Total other income (expenses)   79,743    452,456    430,958    (1,143,355)
                     
Net income (loss) before income taxes   166,246    1,157,446    1,554,017    (865,575)
Income tax provision   (245,434)   (610,510)   (509,728)   (848,748)
Net income (loss)   (79,188)   546,936    1,044,289    (1,714,323)
Non-controlling interest   (162,916)   39,039    (568,839)   472,351 
Net income (loss) attributable to NetSol  $(242,104)  $585,975   $475,450   $(1,241,972)
                     
Net income (loss) per share:                    
Net income (loss) per common share                    
Basic  $(0.02)  $0.05   $0.04   $(0.11)
Diluted  $(0.02)  $0.05   $0.04   $(0.11)
                     
Weighted average number of shares outstanding                    
Basic   11,580,030    11,724,606    11,683,631    11,694,423 
Diluted   11,580,030    11,724,606    11,683,631    11,694,423 

 

   
 

 

NETSOL Technologies, Inc. and Subsidiaries

Schedule 3: Consolidated Statement of Cash Flows

 

   For the Six Months 
   Ended December 31, 
   2020   2019 
Cash flows from operating activities:          
Net income (loss)  $1,044,289   $(1,714,323)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:          
Depreciation and amortization   1,864,360    1,871,883 
Provision for bad debts   (175,575)   (20,699)
Share of net loss from investment under equity method   151,535    354,020 
Loss on sale of assets   74,273    (239)
Stock based compensation   165,164    328,585 
Changes in operating assets and liabilities:          
Accounts receivable   5,479,516    4,554,558 
Accounts receivable - related party   -    2,229,695 
Revenues in excess of billing   4,540,271    (1,088,693)
Revenues in excess of billing - related party   -    14,823 
Other current assets   (252,781)   (208,065)
Accounts payable and accrued expenses   313,869    490,875 
Unearned revenue   (554,077)   (3,019,493)
Net cash provided by operating activities   12,650,844    3,792,927 
           
Cash flows from investing activities:          
Purchases of property and equipment   (1,249,895)   (785,999)
Sales of property and equipment   123,194    32,524 
Convertible note receivable - related party   -    (535,000)
Investment in associates   (93,000)   - 
Net cash used in investing activities   (1,219,701)   (1,288,475)
           
Cash flows from financing activities:          
Proceeds from exercise of subsidiary options   -    11,621 
Purchase of treasury stock   (1,392,671)   - 
Dividend paid by subsidiary to non-controlling interest   -    (1,920,618)
Proceeds from bank loans   705,338    2,074,341 
Payments on finance lease obligations and loans - net   (175,352)   (102,499)
Net cash provided by (used in) financing activities   (862,685)   62,845 
Effect of exchange rate changes   1,268,359    2,149,923 
Net increase in cash and cash equivalents   11,836,817    4,717,220 
Cash and cash equivalents at beginning of the period   20,166,830    17,366,364 
Cash and cash equivalents at end of period  $32,003,647   $22,083,584 

 

   
 

 

NETSOL Technologies, Inc. and Subsidiaries

Schedule 4: Reconciliation to GAAP

 

   For the Three Months Ended   For the Three Months Ended    For the Six Months Ended   For the Six Months Ended 
   December 31, 2020   December 31, 2019    December 31, 2020   December 31, 2019 
                  
Net Income (loss) attributable to NetSol  $(242,104)  $585,975    $475,450   $(1,241,972)
Non-controlling interest   162,916    (39,039)    568,839    (472,351)
Income taxes   245,434    610,510     509,728    848,748 
Depreciation and amortization   935,321    949,831     1,864,360    1,871,883 
Interest expense   94,241    88,006     197,568    151,669 
Interest (income)   (210,854)   (435,682)    (411,675)   (834,911)
EBITDA  $984,954   $1,759,601    $3,204,270   $323,066 
Add back:                     
Non-cash stock-based compensation   74,169    164,292     165,164    328,585 
Adjusted EBITDA, gross  $1,059,123   $1,923,893    $3,369,434   $651,651 
Less non-controlling interest (a)   (441,853)   (346,644)    (1,140,697)   (155,409)
Adjusted EBITDA, net  $617,270   $1,577,249    $2,228,737   $496,242 
                      
                      
Weighted Average number of shares outstanding                     
Basic   11,580,030    11,724,606     11,683,631    11,694,423 
Diluted   11,580,030    11,724,606     11,683,631    11,694,423 
                      
Basic adjusted EBITDA  $0.05   $0.13    $0.19   $0.04 
Diluted adjusted EBITDA  $0.05   $0.13    $0.19   $0.04 
                      
(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  $162,916   $(39,039)   $568,839   $(472,351)
Income Taxes   44,233    190,292     92,882    243,627 
Depreciation and amortization   264,535    270,003     529,100    529,638 
Interest expense   28,824    25,491     60,344    44,532 
Interest (income)   (67,207)   (115,670)    (133,164)   (221,171)
EBITDA  $433,301   $331,077    $1,118,001   $124,275 
Add back:                     
Non-cash stock-based compensation   8,552    15,567     22,696    31,134 
Adjusted EBITDA of non-controlling interest  $441,853   $346,644    $1,140,697   $155,409