NetSol Technologies Reports Record Fiscal Year 2008 Financial Results
Revenues Set New Annual and Quarterly Records, Rising 25% and 23% Year-Over-Year to Total $36.6 Million and $10.5 Million Respectively; GAAP Net Income Sets a Full Year Record of $7.2 Million, or $0.28 per Diluted Share, Versus a Year Ago Loss; Fourth Quarter GAAP Net Income Increased 58% to $2.1 Million, or $0.08 per Diluted Share; EBITDA Sets New Annual and Quarterly Records Rising to $11.3 Million and $3.3 Million Respectively
CALABASAS, CA -- (MARKET WIRE) -- 09/18/08 -- NetSol Technologies Inc. ("NetSol") (NASDAQ: NTWK) (DIFX: NTWK), a worldwide provider of global business services and enterprise application solutions, today announced fiscal fourth quarter and full year 2008 financial results, for the fiscal year ended June 30, 2008.
FISCAL FOURTH QUARTER 2008 CONSOLIDATED FINANCIAL HIGHLIGHTS
-- Revenues increased 23% year-over-year to $10.5 million, up 16%
sequentially from the fiscal third quarter
-- License fees increased 67% to $4.9 million
-- Maintenance fees increased 21% to $1.7 million
-- Service fees decreased 8% to $3.8 million
-- GAAP net income increased to $2.1 million, or $0.08 per fully diluted
share, versus $1.3 million, or $0.07 per fully diluted share, in the
year ago period
-- EBITDA increased to a record $3.3 million, or $0.12 per diluted share,
representing a 31% EBITDA margin, versus EBITDA of $2.0 million, or
$0.10 per diluted share, in the year ago period
-- NetSol reiterates its fiscal year 2009 financial guidance calling for
annual revenue growth between 30% to 35% over fiscal year 2008 levels
and diluted earnings per share between $0.40 to $0.45
Najeeb Ghauri, NetSol Technologies chairman and chief executive officer, commented, "NetSol delivered a truly outstanding performance in fiscal 2008, complemented by a strong fourth quarter, as we delivered record revenue, GAAP net income and EBITDA results, all meeting or exceeding our projected full year financial guidance. These exceptional financial results were supported by our ability to execute on our strategic product and growth objectives while further strengthening our global client servicing and delivery platform. The strength of our core NetSol financial suite of products helped drive double-digit annual growth in license, service and maintenance revenues. This was complemented by the rollout of our new BestShoring(TM) business model and Global Business Services platform which reflect our continued focus on meeting our international clients' needs for local expertise matched with high quality offshore delivery capabilities. Our success in executing during fiscal 2008 was highlighted by rising average deal sizes as well as the expansion or penetration of business verticals such as finance, e-government and healthcare. We continue to diversify our revenue streams geographically as well as by customer focus as we expand NetSol's presence globally, while also meeting our financial growth objectives.
"We are reiterating our fiscal year 2009 financial guidance and believe that our current business backlog, strong pipeline, expanded product and service offerings, combined with our 2009 strategic growth initiatives, will provide a solid platform to meet these ambitious goals. From a strategic perspective, we are continuing to invest in our sales and marketing resources to support our core operating divisions, particularly in North America where we recently announced the opening of our new global operating headquarters, while penetrating new growth markets such as the Middle East as well as Central and South America. Overall, we continue to focus on diversifying our customer base and client delivery centers to support our global growth initiatives. I am extremely pleased with our fiscal 2008 performance and believe NetSol has never been better positioned as we look to leverage the opportunities we are seeing in the international markets for fiscal 2009," concluded Mr. Ghauri.
NetSol reported record consolidated revenues of $10.5 million for the fourth quarter of fiscal year 2008, a 23% increase compared to the $8.6 million in revenues reported for the same period a year ago. Consolidated gross profit for the fourth quarter was approximately $5.8 million, or 55% of total revenues.
U.S. GAAP (Generally Accepted Accounting Principles) net income for the fourth quarter of fiscal year 2008 was approximately $2.1 million, or $0.08 per diluted share, which compares to GAAP net income of $1.3 million or $0.07 per diluted share, in the same period of fiscal year 2007. NetSol reported EBITDA of $3.3 million, or $0.12 per diluted share, for the fourth quarter of fiscal year 2008 compared to EBITDA of $2.0 million, or $0.10 per diluted share, in the year ago period.
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."
FISCAL YEAR 2008 BUSINESS HIGHLIGHTS
-- Introduced BestShoring(TM) and Global Business Services strategy as an
evolution of NetSol's core business offerings across NetSol's
international delivery centers.
-- Increased sales of NetSol's financial suite of products with
multi-million deals in Asia, North America and Europe, supporting
higher average deal sizes and increased diversification of NetSol's
global customer base.
-- Expanded addressable markets and business verticals with increased
penetration in finance, e-government, healthcare and defense.
-- Strengthened North American operations with key management additions
as well as additional sales and marketing resources.
-- Billable resources in the NetSol Innovation Group joint venture
increased to 130 employees.
-- Increased branding and customer reach into the Middle East including a
LeaseSoft contract win with one of the largest leasing companies in
Saudi Arabia.
-- Expanded global capital market access and Middle East market presence,
becoming the first U.S. Company to successfully dual list on the Dubai
International Financial Exchange (DIFX).
-- Awarded second pilot project for the implementation of a Land Record
Management Information System (LRMIS) for the Islamabad Capital
Territory, Pakistan, the second LRMIS project NetSol has been awarded.
-- NetSol Technologies' Development Center in Lahore achieved ISO 27001
certification.
FISCAL YEAR 2008 CONSOLIDATED FINANCIAL HIGHLIGHTS
-- Revenues for the full fiscal 2008 year increased 25% to $36.6 million
-- License fees improved 30% to $12.7 million
-- Maintenance fees increased 16% to $6.3 million
-- Service fees increased 26% to $17.7 million
-- Gross margin improved to 57% compared to 53% in the same period a
year ago
-- GAAP net income increased to a record $7.2 million, or $0.28 per
diluted share
-- EBITDA increased to a record $11.3 million, or $0.44 per diluted share,
representing a 31% EBITDA margin
NetSol reported record consolidated revenues of $36.6 million for the full fiscal 2008 year, a 25% increase compared to the $29.3 million in revenues reported for the full fiscal 2007 year. Consolidated gross profit for the full fiscal 2008 year was $20.9 million, or 57% of revenues.
GAAP net income for the 2008 full fiscal year was a record $7.2 million, or $0.28 per diluted share, compared to net loss of $4.9 million, or a loss of $0.28 per diluted share, for the full 2007 fiscal year. EBITDA increased to a record $11.3 million, or $0.44 per diluted share, as compared to EBITDA loss of $1.5 million, or a loss of $0.08 per diluted share, in the year ago period.
Conference Call & Webcast Information
NetSol will host a conference call at 11:00 a.m. ET (8:00 a.m. PT) to review the results. Najeeb Ghauri, chairman and chief executive officer, Tina Gilger, chief financial officer, and Naeem Ghauri, Europe division president, will host the call, which will be webcast live. The webcast and a supporting slide presentation will be made available online at http://www.netsoltek.com/investors/investor_relations.htm. Telephone access to the conference call is available in North America by dialing +1 (877) 407-0782 or internationally by dialing +1 (201) 689-8567.
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 # 295907. An archived replay of the conference webcast will also be available on the NetSol Technologies web site at http://www.netsoltek.com/investors/investor_relations.htm.
About NetSol Technologies
NetSol Technologies (NASDAQ: NTWK) (DIFX: NTWK) is a worldwide provider of global business services and enterprise application solutions. NetSol uses its BestShoring(TM) practices and highly experienced resources in analysis, development, quality assurance, and implementation to deliver high-quality, cost-effective solutions. Organized into specialized practices, these product and services offerings include portfolio management systems for the financial services industry, consulting, custom development, systems integration, and technical services for the global Healthcare, Insurance, Real Estate, and Technology markets. NetSol's commitment to quality is demonstrated by its achievement of the ISO 9001, ISO 279001, and SEI (Software Engineering Institute) CMMI (Capability Maturity Model) Level 5 assessments, a distinction shared by fewer than 100 companies worldwide. NetSol Technologies' clients include Fortune 500 manufacturers, global automakers, financial institutions, technology providers, and governmental agencies. Headquartered in Calabasas, California, NetSol Technologies has operations and offices in London, San Francisco, Sydney, Beijing, Bangkok, and Lahore. To join the NetSol Technologies Inc. email distribution list please visit: http://www.b2i.us/irpass.asp?BzID=897&to=ea&s=0.
To learn more about NetSol Technologies Inc., visit www.netsoltech.com.
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.
Financial Tables Follow
NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
For the Three Months For the Year
Ended June 30, Ended June 30,
2008 2007 2008 2007
------------ ------------ ------------ ------------
Net Revenues: (UNAUDITED) (AUDITED)
License fees $ 4,915,813 $ 2,936,770 $ 12,685,039 $ 9,788,266
Maintenance fees 1,749,871 1,451,243 6,306,321 5,441,339
Services 3,849,971 4,188,426 17,650,815 14,052,481
------------ ------------ ------------ ------------
Total revenues 10,515,655 8,576,439 36,642,175 29,282,086
Cost of revenues
Salaries and
consultants 2,728,921 2,204,328 10,071,664 8,812,934
Travel 746,745 334,481 1,719,743 1,529,796
Repairs and
maintenance 72,692 117,448 405,140 430,962
Insurance 85,283 58,302 239,043 211,897
Depreciation and
amortization 551,166 100,779 1,398,454 794,482
Other 548,587 434,962 1,890,100 1,914,440
------------ ------------ ------------ ------------
Total cost of
sales 4,733,394 3,250,300 15,724,144 13,694,511
------------ ------------ ------------ ------------
Gross profit 5,782,261 5,326,139 20,918,031 15,587,575
Operating expenses:
Selling and
marketing 904,562 1,056,004 3,722,470 3,161,924
Depreciation and
amortization 517,321 457,086 1,939,502 1,846,790
Bad debt expense 55,016 72,606 58,293 189,873
Salaries and
wages 945,402 781,794 3,703,836 3,696,501
Professional
services,
including
non-cash
compensation 413,490 293,499 837,598 1,067,702
General and
adminstrative 1,170,091 775,735 3,447,113 2,977,917
------------ ------------ ------------ ------------
Total operating
expenses 4,005,882 3,436,724 13,708,812 12,940,707
------------ ------------ ------------ ------------
Income from
operations 1,776,379 1,889,415 7,209,219 2,646,868
Other income and
(expenses):
Gain (Loss) on
sale of assets (2,440) 16,090 (35,484) (2,977)
Beneficial
conversion
feature - - - (2,208,334)
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)
Interest expense (82,043) (74,476) (626,708) (617,818)
Interest income 35,234 38,092 195,103 201,015
Gain on sale of
subsidiary
shares - - 1,240,808 -
Gain on foreign
currency
exchange rates 1,430,669 42,434 2,020,839 178,522
Other income and
(expenses) 29,600 18,210 148,544 74,050
------------ ------------ ------------ ------------
Total other
income
(expenses) 1,411,020 5,926 2,943,102 (5,428,534)
------------ ------------ ------------ ------------
Net income (loss)
before minority
interest in
subsidiary 3,187,399 1,895,341 10,152,321 (2,781,666)
Minority interest
in subsidiary (1,051,781) (561,508) (2,808,291) (1,935,589)
Income taxes (75,710) (33,686) (121,982) (160,306)
------------ ------------ ------------ ------------
Net income (loss) 2,059,908 1,300,147 7,222,048 (4,877,561)
Dividend required
for preferred
stockholders (33,508) (77,640) (178,541) (237,326)
Subsidiary dividend
(minority holders
portion) - - (817,173) -
Bonus stock
distribution
(minority holders
portion) (615,635) (345,415) (1,160,994) (345,415)
------------ ------------ ------------ ------------
Net income (loss)
applicable to
common
shareholders 1,410,765 877,092 5,065,340 (5,460,302)
Other comprehensive
loss:
Translation
adjustment (2,390,317) (259,113) (3,792,148) (55,770)
------------ ------------ ------------ ------------
Comprehensive
income (loss) $ (979,552) $ 617,979 $ 1,273,192 $ (5,516,072)
============ ============ ============ ============
Net income (loss)
per share:
Basic $ 0.08 $ 0.06 $ 0.29 $ (0.28)
============ ============ ============ ============
Diluted $ 0.08 $ 0.07 $ 0.28 $ (0.28)
============ ============ ============ ============
Weighted average
number of shares
outstanding
Basic 25,425,042 19,706,920 24,118,538 18,189,590
Diluted 27,303,554 19,835,177 25,997,049 18,189,590
NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET - AS OF JUNE 30, 2008
ASSETS
Current assets:
Cash and cash equivalents $ 6,275,238
Accounts receivable, net of allowance for
doubtful accounts of $108,538 10,988,888
Revenues in excess of billings 11,053,042
Other current assets 2,406,407
-----------
Total current assets 30,723,575
Property and equipment, net of accumulated
depreciation 9,176,780
Other assets, long-term 1,866,437
Intangibles:
Product licenses, renewals, enhancements,
copyrights, trademarks, and tradenames, net 10,837,856
Customer lists, net 1,732,761
Goodwill 9,439,285
-----------
Total intangibles 22,009,902
------------
Total assets $ 63,776,694
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 4,116,659
Current portion of loans and obligations under
capitalized leases 2,280,110
Other payables - acquisitions 846,215
Unearned revenues 3,293,728
Due to officers 184,173
Dividend to preferred stockholders payable 33,508
Loans payable, bank 2,932,551
-----------
Total current liabilities 13,686,944
Obligations under capitalized leases, less
current maturities 332,307
Long term loans; less current maturities 411,608
------------
Total liabilities 14,430,859
Minority interest 6,866,514
Commitments and contingencies -
Stockholders' equity:
Preferred stock, 5,000,000 shares authorized;
1,920 issued and outstanding 1,920,000
Common stock, $.001 par value; 95,000,000
shares authorized; 25,545,482 issued and
outstanding 25,545
Additional paid-in-capital 76,456,697
Treasury stock (35,681)
Accumulated deficit (32,067,003)
Stock subscription receivable (600,907)
Common stock to be issued 1,048,249
Other comprehensive loss (4,267,579)
-----------
Total stockholders' equity 42,479,321
------------
Total liabilities and stockholders' equity $ 63,776,694
============
NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
For the Years
Ended June 30,
2008 2007
------------ ------------
Cash flows from operating activities:
Net income (loss) from continuing
operations $ 7,222,048 $ (4,877,561)
Adjustments to reconcile net income (loss)
applicable to common shareholders to
net cash provided by (used in) operating
activities:
Depreciation and amortization 3,337,956 2,641,272
Bad debt expense 58,293 189,873
Loss on sale of assets 35,484 2,977
Gain on sale of subsidiary shares in Pakistan (1,240,808) -
Minority interest in subsidiary 2,808,291 1,935,589
Stock issued for services 167,926 88,099
Stock issued for convertible note payable
interest - 311,868
Fair market value of warrants and stock
options granted 24,320 136,571
Beneficial conversion feature - 2,208,334
Amortization of capitalized cost of debt - 2,815,358
Changes in operating assets and liabilities:
Increase in accounts receivable (4,123,995) (2,858,608)
Increase in other current assets (4,980,504) (3,359,736)
Decrease in long-term assets 229,622 159,940
Increase in accounts payable and accrued
expenses 233,408 560,136
------------ ------------
Net cash provided by/(used in) operating
activities 3,772,041 (45,888)
Cash flows from investing activities:
Purchases of property and equipment (4,435,755) (2,420,470)
Sales of property and equipment 15,838 366,088
Net proceeds of certificates of deposit - 1,737,481
Bank overdraft 85,335 -
Payments of acquisition payable (879,007) (4,027,753)
Increase in intangible assets (4,829,369) (3,295,262)
------------ ------------
Net cash used in investing activities (10,042,958) (7,639,916)
Cash flows from financing activities:
Proceeds from sale of common stock 1,500,000 1,030,093
Proceeds from the exercise of stock options
and warrants 3,282,827 1,008,250
Proceeds from sale of subsidiary stock 1,765,615 -
Finance costs incurred for sale of common
stock (10,000) -
Purchase of treasury stock (25,486) -
Reduction of restricted cash - 4,533,555
Proceeds from loans from officers - 165,000
Proceeds from bank loans 5,441,870 -
Payments on bank loans (99,936) -
Payments on capital lease obligations &
loans - net (3,409,496) 2,359,017
------------ ------------
Net cash provided by financing activities 8,445,394 9,095,915
Effect of exchange rate changes in cash 90,597 106,285
------------ ------------
Net increase in cash and cash equivalents 2,265,074 1,516,396
Cash and cash equivalents, beginning of year 4,010,164 2,493,768
------------ ------------
Cash and cash equivalents, end of year $ 6,275,238 $ 4,010,164
============ ============
NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
RECONCILIATION TO GAAP
(UNAUDITED)
For the Three For the Year
Months Ended Ended
June 30, 2008 June 30, 2008
------------- -------------
Net income per GAAP (applicable to common
shareholders) $ 2,059,908 $ 7,222,049
Income taxes 75,710 121,982
Depreciation and amortization 1,068,487 3,354,472
Interest expense 82,043 626,640
------------- -------------
EBITDA income $ 3,286,148 $ 11,325,143
============= =============
Weighted average number of shares
outstanding
Basic 25,425,042 24,118,538
Diluted 27,303,554 25,997,049
------------- -------------
Basic EBITDA EPS $ 0.13 $ 0.47
============= =============
Diluted EBITDA EPS $ 0.12 $ 0.44
============= =============
Contacts: NetSol Technologies, Inc. Tina Gilger Chief Financial Officer Tel: +1 818-222-9195, x112 Investor Relations Christopher Chu Grayling Global Tel: +1-646-284-9426 Email: [email protected]
Released September 18, 2008