NetSol Technologies Reports Record Fiscal Fourth Quarter 2007 Financial Results
Quarterly GAAP EPS Increases to $0.07 as Net Income Grows to a Record $1.3 Million
Quarterly Revenue Grows 84% Year-Over-Year to a Record $8.6 Million
CALABASAS, CA -- (MARKET WIRE) -- 09/19/07 -- NetSol Technologies Inc. ("NetSol") (NASDAQ: NTWK), a multinational provider of enterprise software and IT services to the financial services industry, today announced financial results for the fiscal year 2007, ended June 30, 2007.
Fiscal Fourth Quarter 2007 Financial Highlights
-- Revenues increased 84% year-over-year to $8.6 million
-- License fees increased 137% year-over-year to $2.9 million
-- Maintenance fees increased 97% year-over-year to $1.5 million
-- Services increased 57% year-over-year to $4.2 million
-- Gross margin increased to 62% compared to 34% in the prior year period
-- Operating income improved to $1.9 million compared to an operating
loss of $1.5 million in the year ago period
-- GAAP net income increased to $1.3 million, or $0.07 per share,
versus a loss of ($0.11) in the year ago period
-- EBITDA increased to $2.0 million, or $0.10 per basic and diluted share
-- Business outlook and revenue generation for fiscal year 2008 remains
strong as NetSol scales up to deliver another solid year of growth.
NetSol Technologies, Inc. reported consolidated revenues of $8.6 million for the fourth quarter of fiscal year 2007, an 84% increase compared to the $4.7 million in revenues reported for the same period in fiscal year 2006. Consolidated gross profit for the fourth quarter was approximately $5.3 million, an increase of 234% as compared to the prior year. Gross margin for the fourth quarter of fiscal year 2007 was 62% compared to 34% in the prior year period.
GAAP (Generally Accepted Accounting Principles) net income for the fourth quarter of fiscal year 2007 was $1.3 million, or $0.07 per basic and diluted share, compared to a GAAP net loss of $1.7 million, or ($0.11) per basic and diluted share, reported in the fourth quarter of fiscal year 2006. EBITDA for the fourth quarter was $2.0 million, or $0.10 per basic and diluted share, compared to negative EBITDA of $672 thousand in the fourth quarter of fiscal year 2006.
Najeeb Ghauri, chairman and CEO stated, "Our fiscal fourth quarter 2007 financial performance was exceptional, highlighted by record quarterly revenue and GAAP net income. This represents a remarkable turnaround from a GAAP net loss in the year ago fourth quarter compared to a $1.3 million GAAP profit in the current fiscal fourth quarter, within a 12 month period. Our record top line revenue growth was fuelled by strong demand for our LeaseSoft and LeasePak solutions which experienced a 137% jump in license revenue year-over-year.
"Our services business also posted strong double digit year-over-year growth as NetSol's IT consulting services group extended its reach into new verticals. We successfully combined the strong demand for our enterprise software and IT consulting services with a clear focus on managing internal operating efficiencies and were able to achieve our goal of returning NetSol to GAAP profitability on a quarterly basis," concluded Mr. Ghauri.
NetSol Technologies recently announced its new offering for IT outsourcing and customized development services to the North American equipment and finance market, as well as the recent deployment of LeasePak 6.0. The Company continues to invest in an array of new products for the financial services vertical as well as other complementary businesses and aims to introduce additional new incremental growth engines to its business in the foreseeable future. These areas align directly with the Company's strategic vision of being a leading provider of innovative software applications and high-value IT consulting services.
Fiscal Fourth Quarter 2007 Business Highlights
-- Launch of NetSol's outsourcing and customized development services to
North American equipment and finance market
-- Strategic partnership formed with Field Solutions to deliver
comprehensive, robust solution for the broking market
-- NetSol's North American Division hosts its annual user conference
-- Key customer wins included:
-- First fleet management system contract signed with a major
automotive finance company
-- Major automotive finance company in China signed a follow-on
contract valued at more than $1.0 million
-- NetSol won its fifth major contract in China with the signing of
a multi-million dollar LeaseSoft contract
-- Terex Corporation selected NetSol's LeasePak 6.0 Enterprise Edition
-- A Fortune 100 information technology company selected NetSol's
LeasePak 6.0 Enterprise Edition
-- Kaupthing Singer & Friedlander Premium Finance selected NetSol to
develop web based credit facilities
-- NetSol was awarded a software development contract for a new
e-Government initiative at the Pakistan Ministry of Population
Welfare
-- Pakistan Ministry of Health awarded NetSol a software development
contract for a new e-Government initiative
Full Year Fiscal 2007 Consolidated Financial Highlights
-- Revenues for the year increased 57% to $29.3 million
-- License fees increased 89% year-over-year to $9.8 million
-- Maintenance fees increased 123% year-over-year to $5.4 million
-- Services increased 27% year-over-year to $14.1 million
-- Gross margin increased to 53% compared to 52% in the prior year period
-- Operating income improved to $2.6 million compared to an operating
loss of $259,347 in the year ago period
-- GAAP net loss was $4.9 million, or ($0.27) per basic and diluted
share, including non-cash charges totaling $5.0 million relating to
the financing for the acquisition of McCue Systems
-- EBITDA loss for the year totaled $1.5 million, or ($0.08) per basic
and diluted share, including one-time non-cash charges of $5.0 million
NetSol Technologies, Inc. reported consolidated revenues of $29.3 million for fiscal year 2007, a 57% increase compared to the $18.7 million in revenues reported for fiscal year 2006. Consolidated gross profit for the fiscal year 2007 was $15.6 million, an increase of 62% as compared to the prior year. Gross margin for the fiscal year 2007 was 53% compared to 52% in the prior year period.
GAAP net loss for fiscal year 2007 was approximately $4.9 million, or ($0.27) per basic and diluted share, which compares to a GAAP net loss of $1.4 million, or ($0.09) per basic and diluted share for fiscal year 2006. EBITDA loss for fiscal year 2007 was approximately $1.5 million, or ($0.08) per basic and diluted share, which compares to EBITDA of $2.2 million, or $0.15 per basic and diluted share, for fiscal year 2006.
During the first half of fiscal year 2007, NetSol recorded non-cash charges totaling $5.0 million related to the financing for the acquisition of McCue Systems in June 2006. Excluding these non-cash charges, NetSol would have reported proforma EBITDA for fiscal 2007 of approximately $3.6 million, or $0.20 per basic and diluted share, compared to EBITDA of approximately $2.2 million, or $0.15 per basic and diluted share, for the fiscal year 2006.
EBITDA is defined as earnings before interest, taxes, depreciation and amortization. The Company uses EBITDA as a measure of the Company's operating trends. Investors are cautioned that EBITDA is not a measure of liquidity or of financial performance under Generally Accepted Accounting Principles (GAAP). The EBITDA numbers presented may not be comparable to similarly titled measures reported by other companies. EBITDA, while providing useful information, should not be considered in isolation or as an alternative to net income or cash flows as determined under GAAP. Consistent with the SEC Regulation G, the non-GAAP measures in this press release have been reconciled to the nearest GAAP measure, and this reconciliation is located under the financial table heading "Reconciliation to GAAP."
NetSol ended fiscal year 2007 with approximately $4.0 million dollars in cash and cash equivalents.
The Company's subsidiary, NetSol Technologies, Ltd, a Pakistani company listed on the Karachi Stock Exchange (KARACHI: NETSOL), released its June 30 fiscal year end results on September 17, 2007. These results may be found on the Karachi Stock Exchange website www.kse.com.pk. The subsidiary's results represent only a portion of the Company-wide results. Consolidated results of NetSol Technologies, Inc. may be found in the Company's annual report filed on form 10-KSB.
Conference Call Information
NetSol Technologies will host a conference call at 11:00 a.m. ET (8:00 a.m. PT) today to review these results. The conference call will be web cast live and will be accompanied by a PowerPoint presentation, both may be accessed online at: http://www.netsoltek.com/investors/investor_relations.htm. To access the live teleconference investors and analysts in North America may dial +1 (877) 407-8033 or when calling internationally dial +1 (201) 689-8033.
An audio replay of the conference call will be available approximately one hour following the conclusion of the call and will be available for 30 days. To access the replay in North America dial +1 (877) 660-6853 or when calling internationally dial +1 (201) 612-7415, using replay account code # 286 and conference ID # 253380. An archived replay of the conference webcast also will be available on the NetSol Technologies web site at: http://www.netsoltek.com/investors/investor_relations.htm
About NetSol Technologies
NetSol Technologies is a multinational provider of enterprise software and IT services to the financial services industry. NetSol helps clients to identify, evaluate and implement technology solutions to meet their strategic business challenges and maximize their bottom line. By utilizing its worldwide resources, NetSol delivers high-quality, cost-effective equipment and vehicle finance portfolio management solutions. The Company also delivers managed IT services ranging from consulting and application development to systems integration and development outsourcing. NetSol's commitment to quality is demonstrated by its achievement of both ISO 9001 and SEI (Software Engineering Institute) CMMi (Capability Maturity Model) Level 5 assessment, a distinction shared by only 94 companies worldwide. The Company's clients include global automakers, financial institutions, technology companies and governmental agencies. Headquartered in Calabasas, CA, NetSol Technologies also has operations and/or offices in London, San Francisco, Adelaide, Beijing, Lahore and Karachi, Pakistan. To learn more about NetSol Technologies, visit the Company's web site at www.netsoltek.com. Click here to join the NetSol Technologies, Inc. email distribution list: http://www.b2i.us/irpass.asp?BzID=897&to=ea&s=0.
Forward-Looking Statements
This press release may contain forward-looking statements relating to the development of the Company's products and services and future operation 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 "believe," "expect," "anticipate," "intend," variations of such words, and similar expressions, identify forward-looking statements, 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.
NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS -- JUNE 30, 2007
For the Three Months Ended For the Years Ended
June 30, June 30, June 30, June 30,
2007 2006 2007 2006
------------ ------------ ------------ ------------
Revenues: (unaudited) (unaudited) (audited) (audited)
Licence fees $ 2,936,770 $ 1,239,984 $ 9,788,266 $ 5,192,371
Maintenance fees 1,451,243 735,537 5,441,339 2,444,075
Services 4,188,426 2,674,706 14,052,481 11,053,966
------------ ------------ ------------ ------------
Total revenues 8,576,439 4,650,227 29,282,086 18,690,412
Cost of revenues:
Salaries and
consultants 2,204,328 2,020,271 8,812,934 6,117,886
Travel and
entertainment 334,481 283,851 1,529,796 756,880
Communication 47,292 46,372 161,128 129,741
Depreciation and
amortization 60,404 239,356 652,669 733,370
Other 603,795 467,755 2,502,452 1,282,641
------------ ------------ ------------ ------------
Total cost of
sales 3,250,300 3,057,605 13,658,979 9,020,518
------------ ------------ ------------ ------------
Gross profit 5,326,139 1,592,622 15,623,107 9,669,894
Operating expenses:
Selling and
marketing 811,328 598,443 2,356,831 1,789,349
Depreciation and
amortization 497,461 574,907 1,988,603 2,286,678
Salaries and wages 895,610 870,922 4,294,368 2,557,648
Professional
services,
including
non-cash
compensation 293,499 242,554 1,067,702 607,706
Bad debt expense 72,606 2,929 189,873 30,218
General and
adminstrative 866,220 790,804 3,078,862 2,657,642
------------ ------------ ------------ ------------
Total operating
expenses 3,436,724 3,080,559 12,976,239 9,929,241
------------ ------------ ------------ ------------
Income (loss) from
operations 1,889,415 (1,487,937) 2,646,868 (259,347)
Other income and
(expenses)
Loss on sale of
assets 16,090 (1,076) (2,977) (35,090)
Beneficial
conversion
feature - - (2,208,334) (14,389)
Amortization of
debt discount and
capitalized cost
of debt - - (2,803,691) -
Liquidation
damages - - (180,890) -
Fair market value
of warrants
issued (34,424) - (68,411) (21,505)
Gain on
forgiveness of
debt - - - 8,294
Interest expense (74,476) (201,987) (617,818) (442,887)
Interest income 73,248 10,391 339,164 280,276
Other income and
(expenses) 25,488 246,333 114,423 191,736
------------ ------------ ------------ ------------
Total other
expenses 5,926 53,661 (5,428,534) (33,565)
------------ ------------ ------------ ------------
Net income (loss)
before taxes and
minority interest
in subsidiary 1,895,341 (1,434,276) (2,781,666) (292,912)
------------ ------------ ------------ ------------
Minority interest
in earnings of
subsidiary (561,508) (254,248) (1,935,589) (954,120)
Income taxes (33,686) (15,130) (160,306) (106,021)
------------ ------------ ------------ ------------
Net income (loss) 1,300,147 (1,703,654) (4,877,561) (1,353,053)
Dividend required
for preferred
stockholders (77,640) - (237,326) -
Bonus stock
dividend (minority
holders portion) (345,415) - (345,415) -
------------ ------------ ------------ ------------
Net income (loss)
applicable to
common
shareholders 877,092 (1,703,654) (5,460,302) (1,353,053)
Other comprehensive
(loss) gain:
Translation
adjustment (259,113) (100,069) (55,770) 101,031
------------ ------------ ------------ ------------
Comprehensive loss $ 617,979 $ (1,803,723) $ (5,516,072) $ (1,252,022)
============ ============ ============ ============
Net income (loss)
per share:
Basic $ 0.07 $ (0.11) $ (0.27) $ (0.09)
============ ============ ============ ============
Diluted $ 0.07 $ (0.11) $ (0.27) $ (0.09)
============ ============ ============ ============
Weighted average
number of shares
outstanding
Basic 19,706,920 15,468,248 18,189,590 14,567,007
Diluted 19,835,177 15,468,248 18,189,590 14,567,007
NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(AUDITED)
As of
June 30, 2007
-------------
ASSETS
Current assets:
Cash and cash equivalents $ 4,010,164
Accounts receivable, net of allowance for doubtful
accounts of $168,718 7,937,686
Revenues in excess of billings 8,501,769
Other current assets 2,278,749
-------------
Total current assets 22,728,368
Property and equipment, net of accumulated depreciation 7,583,752
Other assets, long-term 1,308,267
Intangibles:
Product licenses, renewals, enhancements, copyrights,
trademarks, and tradenames, net 7,772,848
Customer lists, net 2,427,405
Goodwill 7,708,501
-------------
Total intangibles 17,908,754
-------------
Total assets $ 49,529,141
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 3,590,652
Current portion of notes and obligations under capitalized
leases 887,098
Other payables - acquisitions 962,406
Unearned revenues 2,815,660
Due to officers 356,422
Dividend to preferred stockholders payable 77,640
Loans payable, bank 3,097,928
-------------
Total current liabilities 11,787,806
Obligations under capitalized leases, less current
maturities 339,759
-------------
Total liabilities 12,127,565
Minority interest 3,552,635
Commitments and contingencies -
Stockholders' equity:
Preferred stock, 5,000,000 shares authorized; 4,130 issued
and outstanding 4,130,000
Common stock, $.001 par value; 45,000,000 shares
authorized; 20,556,553 issued and outstanding 20,556
Additional paid-in-capital 66,988,147
Treasury stock (10,194)
Accumulated deficit (37,132,343)
Stock subscription receivable (1,001,407)
Common stock to be issued 1,329,612
Other comprehensive loss (475,430)
-------------
Total stockholders' equity 33,848,941
-------------
Total liabilities and stockholders' equity $ 49,529,141
=============
NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(AUDITED)
For the Years
Ended June 30,
2007 2006
------------ ------------
Cash flows from operating activities:
Net loss from continuing operations $ (5,460,302) $ (1,353,053)
Adjustments to reconcile net loss to net
cash (used in)/provided by operating
activities:
Depreciation and amortization 2,641,272 3,020,048
Provision for uncollectible accounts 189,873 30,218
Gain on forgiveness of debt - (8,294)
Loss on sale of assets 2,977 35,090
Minority interest in subsidiary 1,935,589 954,120
Stock issued for services 88,099 200,194
Stock issued for convertible note payable
interest 311,868 -
Stock issued for dividends payable to
preferred stockholders 159,686 -
Bonus stock dividend issued by subsidiary 345,415 -
Fair market value of warrants and stock
options granted 136,571 25,618
Beneficial conversion feature 2,208,334 14,389
Amortization of capitalized cost of debt 2,815,358 100,172
Changes in operating assets and
liabilities:
Increase in accounts receivable (2,858,608) (1,351,660)
Increase in other current assets (3,199,796) (3,789,179)
Increase in accounts payable and accrued
expenses 560,136 430,419
------------ ------------
Net cash (used in)/provided by operating
activities (123,528) (1,691,918)
Cash flows from investing activities:
Purchases of property and equipment (2,420,470) (2,709,569)
Sales of property and equipment 366,088 301,684
Purchases of certificates of deposit - (1,534,371)
Proceeds from sale of certificates of
deposit 1,737,481 -
(Payments)/accruals of acquisition payable (4,027,753) 4,086,204
Increase in intangible assets (3,295,262) (5,027,968)
Cash brought in at acquisition - 473,890
------------ ------------
Net cash used in investing activities (7,639,916) (4,410,130)
Cash flows from financing activities:
Proceeds from sale of common stock 1,030,093 1,400,000
Proceeds from the exercise of stock options
and warrants 1,008,250 669,382
Capital contributed from sale of subsidiary
stock - 4,031,001
Dividend to preferred shareholders payable 77,640 -
Reduction of restricted cash 4,533,555 (4,533,555)
Proceeds from convertible notes payable - 5,500,000
Proceeds from loans from officers 165,000 -
Payments on capital lease obligations &
loans - net 2,359,017 82,650
------------ ------------
Net cash provided by financing activities 9,173,555 7,149,478
Effect of exchange rate changes in cash 106,285 74,611
------------ ------------
Net increase in cash and cash equivalents 1,516,396 1,122,041
Cash and cash equivalents, beginning of year 2,493,768 1,371,727
------------ ------------
Cash and cash equivalents, end of year $ 4,010,164 $ 2,493,768
============ ============
NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
RECONCILIATION TO GAAP
(UNAUDTIED)
For the Year
Ended
June 30, 2007
-------------
Net loss per GAAP $ (4,877,561)
One-time, non-cash expenses:
Beneficial conversion feature 2,208,334
Amortization of debt discount and capitalized cost of
debt 2,803,691
-------------
5,012,025
-------------
Pro-forma income $ 134,464
=============
Weighted average number of shares outstanding
Basic and diluted 18,189,590
-------------
Pro-forma EPS $ 0.01
=============
EBITDA - GAAP (1,458,165)
One-time, non-cash expenses:
Beneficial conversion feature 2,208,334
Amortization of debt discount and capitalized cost of
debt 2,803,691
-------------
5,012,025
-------------
Pro-forma EBITDA $ 3,553,860
=============
Weighted average number of shares outstanding
Basic and diluted 18,189,590
-------------
Pro-forma EBITDA EPS $ 0.20
=============
Contacts: NetSol Technologies, Inc. Tina Gilger Chief Financial Officer Tel: +1 818-222-9195, x112 Investor Relations Christopher Chu The Global Consulting Group Tel: +1-646-284-9426 Email: [email protected]
Released September 19, 2007