NetSol Technologies Reports Third Quarter Fiscal Year 2008 Financial Results
Revenues Increased 19% Year-Over-Year to $9.1 Million; Gross Margin Improved to 56%; Net Income Increased to $2.3 Million or $0.09 per Diluted Share; EBITDA Increased to $3.2 Million
CALABASAS, CA -- (MARKET WIRE) -- 05/13/08 -- NetSol Technologies Inc. ("NetSol") (NASDAQ: NTWK), a worldwide provider of global business services and enterprise application solutions, today announced financial results for the third quarter of fiscal year 2008, ending March 31, 2008.
Third Quarter Fiscal Year 2008 Consolidated Financial Highlights
-- Revenues increased 19% to $9.1 million
-- Services increased 23% to $4.6 million
-- License fees increased 17% to $3.0 million
-- Maintenance fees increased 11% to $1.5 million
-- Gross margin increased to 56% compared to 48% in the same period a year
ago
-- Operating income increased 245% year-over-year to $1.8 million
-- GAAP net income increased to $2.3 million, or $0.09 per diluted share,
versus a loss of $229,000, or a loss of ($0.01) per diluted share, in
the same period a year ago
-- EBITDA totaled $3.2 million, or $0.13 per diluted share, versus EBITDA
of $676,000, or $0.04 per diluted share, in the same period a year ago
-- Company reiterated guidance for fiscal year 2008: Annual revenue growth
between 25% to 30% and diluted earnings per share between $0.28 and
$0.32
Najeeb Ghauri, chairman and chief executive officer, commented, "Our third quarter results provide an excellent start to the second half of fiscal 2008, which is historically NetSol's stronger half-year period. With double-digit year-over-year growth in services, licenses, and maintenance fees translating into a significant rise in profitability, we remain on track to achieve our full year top and bottom line financial objectives. Complementing our significant financial progress, we recently launched our new BestShoring(TM) strategic initiative that represents our best practices approach to delivering our customers the BestSolution(TM). Unlike traditional outsourcing offshore vendors, BestShoring(TM) reflects our ability to draw upon NetSol's global delivery infrastructure, expertise, and workforce to construct the best possible solution at the best possible price.
"Additionally, during the quarter we made key strategic investments in our North American operations to strengthen and expand our presence in the region, a critical market for NetSol's future growth. To support this effort we made several key North American management appointments, including Greg Brinton as head of sales and Morgan Rees as senior vice president of marketing, working under the leadership of Mitch Van Wye, our chief operating officer in the region. We see these additions to NetSol's management, as well as our investments in infrastructure, as critical to supporting our long-term growth throughout the Americas, as well as supporting our new globally-focused BestShoring(TM) customer solutions. We are offering BestShoring(TM) enterprise solutions and global business services to both new clients in various vertical markets and our 35 plus existing clients in North America.
"As a global enterprise, it is NetSol's goal to progress with our operational objectives for each division while sustaining profitability and delivering excellent financial results. NetSol's double-digit revenue growth and strong net income performance reflect broad-based success towards our objectives of improving margins, effectively leveraging our worldwide infrastructure, and improving operating efficiencies while expanding each of our division's revenue streams," concluded Mr. Ghauri.
NetSol reported consolidated revenues of $9.1 million for the third quarter of fiscal year 2008, a 19% increase compared to the $7.6 million in revenues reported for the same period a year ago. Consolidated gross profit for the third quarter was approximately $5.1 million, or 56% of revenues.
GAAP (Generally Accepted Accounting Principles) net income for the third quarter of fiscal year 2008 was approximately $2.3 million, or $0.09 per diluted share, which compares to GAAP net loss of $229,000, or a loss of $0.01 per diluted share, in the same period of fiscal year 2007. NetSol reported EBITDA of $3.2 million, or $0.13 per diluted share, for the third quarter of fiscal year 2008 compared to EBITDA of $0.7 million, or $0.04 per diluted share, in the same period a year ago.
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 the third quarter of fiscal year 2008 with approximately $4.8 million in cash and cash equivalents.
Fiscal Third Quarter 2008 Business Highlights
-- Ranked in Software Magazine's Software 500 list of the world's largest
software and service providers, joining the Software 500 list for the first
time this year with a rank of 340 worldwide.
-- Had NetSol's Lahore-based IT development campus, "NetSol Village,"
achieve ISO 27001 certification from the International Organization for
Standardization (ISO), the world's largest developer and publisher of
International Standards.
-- Secured a contract valued at approximately $1.5 million with one of
the largest leasing companies in the Middle East.
-- Sold a new LeaseSoft license in China to a major European auto
manufacturer, maintaining robust momentum in the Chinese market.
-- Awarded a contract 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.
-- Launched the new LeasePak "Asset Focus Module," giving vehicle finance
and commercial equipment finance product managers a robust means for
tracking the revenue performance of financed assets.
-- Successfully implemented the LeaseSoft product suite for Dongfeng-
Nissan Automotive Finance (DNAF) China.
-- Had Venture Finance, a subsidiary of ABN Amro, go live with LeaseSoft
for its Block Discounting portfolio.
First Nine Months of Fiscal Year 2008 Consolidated Financial Highlights
-- Revenues for the first nine months increased 26% to $26.1 million
-- Service fees increased 40% to $13.8 million
-- License fees increased 13% to $7.8 million
-- Maintenance fees increased nearly 14% to $4.6 million
-- Gross margin improved to 58%, compared to 50% for the same nine months
period a year ago
NetSol reported consolidated revenues of $26.1 million for the first nine months of fiscal year 2008, a 26% increase compared to the $20.7 million in revenues reported for the same period in fiscal year 2007. Consolidated gross profit for the first nine months was $15.1 million, or 58% of revenues.
GAAP net income for the first nine months of fiscal year 2008 was approximately $5.2 million, or $0.21 per diluted share, compared to a net loss of $6.2 million, or ($0.35) per diluted share, in the same period of fiscal year 2007. EBITDA increased to $8.0 million, or $0.33 per diluted share, as compared to an EBITDA loss of $3.4 million, or ($0.18) per diluted share, in the same period a year ago.
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, and Tina Gilger, chief financial officer, 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 # 283654. 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) 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 50 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.
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 (UNAUDITED)
For the Three Months For the Nine Months
Ended March 31, Ended March 31,
2008 2007 2008 2007
------------ ------------ ------------ ------------
Net Revenues:
Licence fees $ 2,998,867 $ 2,554,289 $ 7,769,226 $ 6,851,496
Maintenance fees 1,482,654 1,335,893 4,556,450 3,990,096
Services 4,585,292 3,725,784 13,800,844 9,864,055
------------ ------------ ------------ ------------
Total revenues 9,066,813 7,615,966 26,126,520 20,705,647
Cost of revenues
Salaries and
consultants 2,620,722 2,234,809 7,342,743 6,608,606
Travel 394,841 447,288 972,998 1,195,315
Repairs and
maintenance 99,262 133,961 332,448 313,514
Insurance 30,005 51,294 153,760 153,595
Depreciation and
amortization 316,652 279,405 847,288 693,703
Other 522,013 790,927 1,341,513 1,479,478
------------ ------------ ------------ ------------
Total cost of
sales 3,983,495 3,937,684 10,990,750 10,444,211
------------ ------------ ------------ ------------
Gross profit 5,083,318 3,678,282 15,135,770 10,261,436
Operating expenses:
Selling and
marketing 898,686 825,586 2,817,908 2,105,920
Depreciation and
amortization 477,630 483,801 1,422,181 1,389,704
Bad debt expense - (231) 3,277 117,267
Salaries and
wages 1,034,784 915,481 2,758,434 2,914,707
Professional
services,
including
non-cash
compensation 114,436 254,359 413,437 774,203
General and
adminstrative 792,499 687,881 2,287,693 2,202,182
------------ ------------ ------------ ------------
Total operating
expenses 3,318,035 3,166,877 9,702,930 9,503,983
------------ ------------ ------------ ------------
Income from
operations 1,765,283 511,405 5,432,840 757,453
Other income and
(expenses):
Gain (loss) on
sale of assets (891) (6,729) (33,044) (19,067)
Beneficial
conversion
feature - - - (2,208,334)
Amortization of
debt discount
and capitalized
cost of debt - - - (2,803,691)
Liquidation
damages - (47,057) - (180,890)
Fair market value
of warrants
issued - (33,987) - (33,987)
Interest expense (121,651) (83,819) (544,597) (543,342)
Interest income 84,363 46,867 159,801 265,916
Gain on sale of
subsidiary
shares 1,240,808 - 1,240,808 -
Other income and
(expenses) 447,889 10,081 709,113 88,935
------------ ------------ ------------ ------------
Total other
income
(expenses) 1,650,518 (114,644) 1,532,081 (5,434,460)
------------ ------------ ------------ ------------
Net income (loss)
before minority
interest in
subsidiary 3,415,801 396,761 6,964,921 (4,677,007)
Minority interest
in subsidiary (1,098,703) (568,237) (1,756,509) (1,374,081)
Income taxes (15,314) (57,655) (46,272) (126,620)
------------ ------------ ------------ ------------
Net income (loss) 2,301,784 (229,131) 5,162,140 (6,177,708)
Dividend required
for preferred
stockholders (33,508) (94,088) (145,033) (159,686)
Subsidiary dividend
(minority holders
portion) - - (817,173) -
Bonus stock
distribution
(minority holders
portion) - - (545,359) -
------------ ------------ ------------ ------------
Net income (loss)
applicable to
common
shareholders 2,268,276 (323,219) 3,654,575 (6,337,394)
Other comprehensive
gain:
Translation
adjustment (910,838) 81,564 (1,401,831) 203,343
------------ ------------ ------------ ------------
Comprehensive
income (loss) $ 1,357,438 $ (241,655) $ 2,252,744 $ (6,134,051)
============ ============ ============ ============
Net income (loss)
per share:
Basic $ 0.09 $ (0.02) $ 0.21 $ (0.36)
============ ============ ============ ============
Diluted $ 0.09 $ (0.01) $ 0.21 $ (0.35)
============ ============ ============ ============
Weighted average
number of shares
outstanding
Basic 25,205,995 18,311,290 23,686,204 17,680,115
Diluted 25,665,924 18,311,290 24,146,133 17,680,115
NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET – AS OF MARCH 31, 2008
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 4,848,513
Accounts receivable, net of allowance for
doubtful accounts of $168,443 10,227,903
Revenues in excess of billings 12,006,231
Other current assets 2,933,047
-----------
Total current assets 30,015,694
Property and equipment, net of accumulated
depreciation 8,153,405
Other assets, long-term 800,435
Intangibles:
Product licenses, renewals, enhancements,
copyrights, trademarks, and tradenames, net 9,137,381
Customer lists, net 1,906,422
Goodwill 7,786,032
-----------
Total intangibles 18,829,835
------------
Total assets $ 57,799,369
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 3,323,046
Current portion of loans and obligations under
capitalized leases 605,551
Other payables - acquisitions 83,399
Unearned revenues 3,616,555
Due to officers 184,173
Dividend to preferred stockholders payable 33,508
Loans payable, bank 1,977,689
-----------
Total current liabilities 9,823,921
Obligations under capitalized leases, less
current maturities 270,927
Long term loans; less current maturities 552,166
------------
Total liabilities 10,647,014
Minority interest 5,834,732
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; 45,000,000
shares authorized; 25,247,568 issued and
outstanding 25,248
Additional paid-in-capital 75,299,379
Treasury stock (35,681)
Accumulated deficit (33,477,767)
Stock subscription receivable (600,907)
Common stock to be issued 64,612
Other comprehensive loss (1,877,261)
-----------
Total stockholders' equity 41,317,623
------------
Total liabilities and stockholders' equity $ 57,799,369
============
NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Nine Months
Ended March 31,
2008 2007
------------ ------------
Cash flows from operating activities:
Net income (loss) applicable to common
shareholders $ 5,162,140 $ (6,177,708)
Adjustments to reconcile net income (loss)
applicable to common
shareholders to net cash provided by
(used in) operating activities:
Depreciation and amortization 2,269,469 2,083,407
Bad debt expense 3,277 117,267
Loss on sale of assets 33,044 19,067
Gain on sale of subsidiary shares in
Pakistan (1,240,808) -
Minority interest in subsidiary 1,756,509 1,374,081
Stock issued for services 48,163 88,099
Stock issued for convertible note payable
interest - 311,868
Fair market value of warrants and stock
options granted 24,320 33,987
Beneficial conversion feature - 2,208,334
Amortization of debt discount and
capitalized cost of debt - 2,803,691
Changes in operating assets and
liabilities:
Decrease/(increase) in accounts
receivable (2,087,736) (1,913,135)
Increase in other current assets (4,885,181) (2,793,410)
(Decrease)/increase in accounts payable
and accrued expenses (510,968) 1,716,251
------------ ------------
Net cash provided by (used in) operating
activities 572,229 (128,201)
Cash flows from investing activities:
Purchases of property and equipment (1,985,651) (1,282,427)
Sales of property and equipment 120,436 208,419
Net proceeds of certificates of deposit - 1,737,481
Payment for acquisition (879,007) (4,027,753)
Increase in intangible assets (2,219,673) (2,001,502)
------------ ------------
Net cash used in investing activities (4,963,895) (5,365,782)
Cash flows from financing activities:
Proceeds from sale of common stock 1,500,000 30,093
Proceeds from the exercise of stock options 2,800,917 704,250
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 in restricted cash - 4,533,555
Proceeds from loans from officers - 165,000
Proceeds from bank loans 3,862,759 -
Payments on bank loans (1,245,846) -
Capital lease obligations & loans (net) (3,462,334) 874,128
------------ ------------
Net cash provided by financing activities 5,185,625 6,307,026
Effect of exchange rate changes in cash 44,390 76,159
------------ ------------
Net increase in cash and cash equivalents 838,349 889,202
Cash and cash equivalents, beginning of period 4,010,164 2,493,768
------------ ------------
Cash and cash equivalents, end of period $ 4,848,513 $ 3,382,970
============ ============
NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
RECONCILIATION TO GAAP
(UNAUDITED)
Three Months Nine Months
Ended Ended
March 31, 2008 March 31, 2008
-------------- --------------
Net income per GAAP (applicable to common
shareholders) $ 2,301,785 $ 5,162,140
Income taxes 15,314 46,272
Depreciation and amortization 794,282 2,285,985
Interest expense 121,651 544,597
-------------- --------------
EBITDA income $ 3,233,032 $ 8,038,994
============== ==============
Weighted average number of shares outstanding
Basic 25,205,995 23,686,204
Diluted 25,665,924 24,146,133
-------------- --------------
Basic EBITDA EPS $ 0.13 $ 0.34
============== ==============
Diluted EBITDA EPS $ 0.13 $ 0.33
============== ==============
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 May 13, 2008