NetSol Technologies Reports Third Quarter Fiscal Year 2009 Financial Results
NetSol Witnessing Improved Visibility in License and IT Services Revenue in Current Quarter as Business Stabilizes and Refocuses on Growth
EMERYVILLE, CA -- (MARKET WIRE) -- 05/12/09 -- NetSol Technologies Inc. "NetSol" (NASDAQ: NTWK) (NASDAQ DUBAI: NTWK), a U.S. corporation providing global business services and enterprise application solutions to private and public sector organizations worldwide, today announced third quarter financial results for fiscal year 2009, for the period ended March 31, 2009.
Nine Month Fiscal 2009 Results
-- Revenues totaled $19.6 million, down 25% nine months year-to-date
-- Service fees totaled $11.3 million year-to-date
-- Maintenance fees totaled $4.8 million year-to-date
-- License fees totaled $3.5 million year-to-date
-- Year-to-date GAAP net loss applicable to common shareholders of
$7.3 million, or a loss of $0.27 per fully diluted share, compared to
GAAP net income applicable to common shareholders of $3.5 million, or
$0.15 per fully diluted share, in the year ago period
-- Year-to-date EBITDA loss of $3.0 million, or EBITDA loss of $0.11 per
diluted share, versus EBITDA of $6.5 million, or $0.27 per diluted
share, in the year ago period
Najeeb Ghauri, NetSol Technologies chairman and chief executive officer, commented, "While our fiscal third quarter results reflect the most challenging period of the current global economic downturn on our business, I believe we made significant progress in terms of cost reductions as well as the streamlining of our global organizational structure. The combination of our North American and European businesses into one operating segment provides improved cost efficiencies and sales effectiveness across the combined organization. Most importantly, I believe the fiscal third quarter represents the trough of the current downturn for NetSol. Improved customer and sales pipeline activity are currently providing us confidence that we have turned the corner and expect to see improved financial performance in the coming quarters. We are very excited about our growth opportunities in China as well as traction in Latin American emerging economies.
"Strategically, during the fiscal third quarter we also made excellent progress within our SAP Practice Group as we secured a SAP services contract with a leading U.S. utility client representing excess of $1 million in projected annualized revenue and we also set the stage for the launch of our own proprietary SAP compatible software solutions. As part of our stated strategic objectives, during the quarter we set the foundation for key strategic alliances aimed at increasing our customer penetration of key geographic markets, diversifying our global delivery platform and ultimately driving growth. As a result of these efforts, shortly after the quarter end we launched Atheeb NetSol Limited, a new NetSol majority owned software engineering and joint venture company focused on serving the growing Saudi Arabian, GCC and Middle Eastern markets. We also signed a strategic partnership with Neptune Software extending the reach of NetSol's Financial Suite, LeaseSoft Evolve and attendant professional services in more than 12 African countries. I believe these key initiatives, with leading partners in their respective fields, provide additional growth drivers and strengthen NetSol's global market position," concluded Mr. Ghauri.
NetSol reported consolidated revenues of $5.0 million for the third quarter of fiscal year 2009, representing a 45% decline as compared to the $9.1 million in revenues reported for the same period a year ago.
U.S. GAAP (Generally Accepted Accounting Principles) net loss applicable to common shareholders for the third quarter of fiscal year 2009 was approximately $5.0 million, or a loss of $0.19 per diluted share, which compares to GAAP net income applicable to common shareholders of $2.2 million, or $0.09 per diluted share, in the same period of fiscal year 2008. Included in the fiscal third quarter 2009 financial results are exceptional expenses of $1.8 million for a doubtful debt reserve provision, one-time redundancy charge of approximately $200,000 and $1.0 million to modify a loan agreement with more favorable terms to NetSol.
NetSol reported an EBITDA loss of $3.5 million, or a loss of $0.13 per diluted share, for the third quarter of fiscal year 2009 compared to EBITDA of $3.2 million, or $0.13 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."
Business Highlights
-- North American and European operations combined in management
restructuring and streamlining of the global operations
-- Comprehensive cost cutting program to reduce operating expenses by $6
million to $8 million annually and support the company's return to long-
term profitability
-- Toyota Motor Finance China Co. Ltd. went live with NetSol Technologies
suite of financial products
-- Leading global automobile manufacturer implementing NetSol Financial
Suite (NFS) products for 300 dealers in Latin America as NetSol increases
market penetration in the Latin American region
-- New customer agreement from Maroof Hospital for the implementation of
a new Hospital Management System, expanding NetSol's presence in the global
healthcare vertical
-- NetSol's SAP practice group secures services contract with a leading
U.S.-based energy utility company, representing in excess of $1 million in
projected annualized revenue
-- NetSol joins Winshuttle's SHUTTLEpro partner program to offer SAP Data
Entry and Extraction Tools
-- Rackspace Hosting and NetSol announce solution partnership
Conference Call & Webcast Information
Following the distribution of the fiscal third quarter 2009 financial results, NetSol will host a conference call at 11:00 a.m. ET (8:00 a.m. PT) to review the quarterly financial and operational performance. Najeeb Ghauri, NetSol Technologies chairman and chief executive officer, will host the call, which will be webcast live. The webcast and a supporting slide presentation will be made available on the investor relations section of the NetSol corporate website at www.netsoltech.com. Telephone access to the conference call will be 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 two hours following the conclusion of the call and for the following 30 day period. 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 # 322543. An archived replay of the conference webcast will also be available on the investor relations section of the NetSol corporate website at www.netsoltech.com.
About NetSol Technologies Inc.
NetSol Technologies, Inc. (NASDAQ: NTWK) (NASDAQ DUBAI: NTWK) is a worldwide provider of global business services and enterprise application solutions. Since its inception in 1995, NetSol has used its BestShoring(TM) practices and highly experienced resources in analysis, development, quality assurance, and implementation to deliver high-quality, cost-effective solutions. Specialized by industry, these product and services offerings include credit and finance portfolio management systems, hospital/healthcare information management systems (HIMS), SAP consulting and services, custom development, systems integration, and technical services for the global Financial, Healthcare, Insurance, Energy, and Technology markets. NetSol's commitment to quality is demonstrated by its achievement of the ISO 9001, ISO 27001, and SEI (Software Engineering Institute) CMMI (Capability Maturity Model) Maturity Level 5 assessments, a distinction shared by fewer than 100 companies worldwide. NetSol Technologies' clients include Fortune 500 manufacturers, global automakers, financial institutions, utilities, technology providers, and government agencies. Headquartered in Emeryville, California, NetSol Technologies has operations and offices in Adelaide, Beijing, Bangkok, Lahore, and London.
To learn more about NetSol Technologies, Inc., visit www.netsoltech.com.
To join the NetSol Technologies, Inc. email communications list, visit: http://www.b2i.us/irpass.asp?BzID=897&to=ea&s=0.
NetSol Technologies, Inc. Forward-looking Statement
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
(Unaudited)
For the Three Months For the Nine Months
Ended March 31, Ended March 31,
2009 2008 2009 2008
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
(Restated) (Restated)
------------ ------------ ------------ ------------
Net Revenues:
License fees $ 324,845 $ 2,998,867 $ 3,502,632 $ 7,769,226
Maintenance fees 1,664,492 1,482,654 4,771,519 4,556,450
Services 3,033,684 4,585,292 11,320,846 13,800,844
------------ ------------ ------------ ------------
Total revenues 5,023,021 9,066,813 19,594,997 26,126,520
Cost of revenues
Salaries and
consultants 2,629,081 2,620,722 7,652,671 7,342,743
Travel 280,390 394,841 993,290 972,998
Repairs and
maintenance 81,536 99,262 290,436 332,448
Insurance 43,478 30,005 135,390 153,760
Depreciation and
amortization 532,099 316,652 1,615,853 847,288
Other 917,051 522,013 2,208,265 1,341,513
------------ ------------ ------------ ------------
Total cost
of sales 4,483,635 3,983,495 12,895,905 10,990,750
------------ ------------ ------------ ------------
Gross profit 539,386 5,083,318 6,699,092 15,135,770
Operating expenses:
Selling and
marketing 629,145 898,686 2,479,509 2,817,908
Depreciation and
amortization 501,239 477,630 1,476,281 1,422,181
Bad debt expense 1,772,188 - 2,420,658 3,277
Salaries and
wages 773,757 1,034,784 2,697,531 2,758,434
Professional
services,
including
non-cash
compensation 257,926 125,107 877,752 424,108
General and
adminstrative 862,623 781,828 2,693,451 2,277,022
------------ ------------ ------------ ------------
Total operating
expenses 4,796,878 3,318,035 12,645,182 9,702,930
------------ ------------ ------------ ------------
Income (loss) from
operations (4,257,491) 1,765,283 (5,946,090) 5,432,840
Other income and
(expenses):
Gain (loss) on
sale of assets (127,558) (891) (308,256) (33,044)
Interest expense (483,501) (121,719) (983,971) (544,665)
Interest income 177,771 84,431 246,607 159,869
Gain on sale of
subsidiary
shares - 1,240,808 - 1,240,808
Loss on
extinguishment
of debt (1,000,000) - (1,000,000) -
Exchange gain
/(loss) on
foreign currency 8,902 388,859 1,821,754 590,170
Other income and
(expenses) 15,378 59,031 47,518 118,944
------------ ------------ ------------ ------------
Total other
income
(expenses) (1,409,008) 1,650,519 (176,348) 1,532,082
------------ ------------ ------------ ------------
Net income (loss)
before minority
interest in
subsidiary (5,666,500) 3,415,802 (6,122,438) 6,964,922
Minority interest
in subsidiary -
restated in 2008 689,584 (1,159,134) (972,238) (3,288,490)
Income taxes (21,594) (15,314) (79,631) (46,272)
------------ ------------ ------------ ------------
Net income (loss) (4,998,510) 2,241,354 (7,174,308) 3,630,160
Dividend required
for preferred
stockholders (33,140) (33,508) (100,892) (145,033)
------------ ------------ ------------ ------------
Net income (loss)
applicable to
common
shareholders (5,031,650) 2,207,846 (7,275,200) 3,485,127
Other comprehensive
income (loss):
Translation
adjustment
- restated
in 2008 (179,358) (634,280) (4,036,926) (1,065,613)
------------ ------------ ------------ ------------
Comprehensive
income (loss) $ (5,211,008) $ 1,573,566 $(11,312,126) $ 2,419,514
============ ============ ============ ============
Net income (loss)
per share:
Basic $ (0.19) $ (0.09) $ (0.27) $ (0.15)
============ ============ ============ ============
Diluted $ (0.19) $ (0.09) $ (0.27) $ (0.15)
============ ============ ============ ============
Weighted average
number of shares
outstanding
Basic 26,601,587 25,205,995 26,350,098 23,686,204
Diluted 26,601,587 25,665,924 26,350,098 24,146,133
NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of As of
March 31, June 30,
2009 2008
(Unaudited) (Audited)
(Restated)
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 2,481,591 $ 6,275,238
Restricted cash 5,000,000 -
Accounts receivable, net of allowance for
doubtful accounts 11,182,706 10,988,888
Revenues in excess of billings 6,728,374 11,053,042
Other current assets 2,145,522 2,406,407
------------ ------------
Total current assets 27,538,193 30,723,575
Property and equipment, net of accumulated
depreciation 9,463,524 10,220,545
Other assets, long-term 204,823 822,672
Intangibles:
Product licenses, renewals, enhancements,
copyrights, trademarks, and tradenames, net 12,452,357 10,837,856
Customer lists, net 1,535,328 1,732,761
Goodwill 9,439,285 9,439,285
------------ ------------
Total intangibles 23,426,970 22,009,902
------------ ------------
Total assets $ 60,633,510 $ 63,776,694
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 4,833,319 $ 4,116,659
Current portion of loans and obligations
under capitalized leases 6,103,585 2,280,110
Other payables - acquisitions 103,226 846,215
Unearned revenues 3,358,180 3,293,728
Due to officers - 184,173
Dividend to preferred stockholders payable 49,974 33,508
Loans payable, bank 2,108,919 2,932,551
------------ ------------
Total current liabilities 16,557,203 13,686,944
Obligations under capitalized leases, less
current maturities 1,046,801 332,307
Convertible notes payable 5,786,456 -
Long term loans; less current maturities 416,341 411,608
------------ ------------
Total liabilities 23,806,801 14,430,859
Minority interest 5,661,417 7,857,969
Commitments and contingencies - -
Stockholders' equity:
Preferred stock, 5,000,000 shares
authorized; 1,920 issued and outstanding 1,920,000 1,920,000
Common stock, $.001 par value; 95,000,000
shares authorized;
26,666,987 issued and 26,438,491 outstanding
as of March 31, 2009
25,545,482 issued and 25,525,886 outstanding
as of June 30, 2008 26,667 25,545
Additional paid-in-capital 77,320,715 74,950,286
Treasury stock (228,496; 19,596 shares) (396,008) (35,681)
Accumulated deficit (40,346,904) (33,071,702)
Stock subscription receivable (692,654) (600,907)
Common stock to be issued 118,325 1,048,249
Other comprehensive loss (6,784,849) (2,747,924)
------------ ------------
Total stockholders' equity 31,165,292 41,487,866
------------ ------------
Total liabilities and stockholders' equity $ 60,633,510 $ 63,776,694
============ ============
NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(Unaudited)
For Nine Months
Ended March 31,
2009 2008
(Restated)
------------ ------------
Cash flows from operating activities:
Net income (loss) $ (7,174,308) $ 3,630,160
Adjustments to reconcile net income to
net cash (used in) provided by
operating activities:
Depreciation and amortization 3,092,134 2,269,469
Provision for uncollectible accounts 2,420,658 3,277
Loss on sale of assets - 33,044
Gain on sale of subsidiary shares in
Pakistan 308,256 (1,240,808)
Minority interest in subsidiary -
restated in 2008 972,238 3,288,490
Stock issued for services 227,516 48,163
Stock based compensation expense 147,639 24,320
Beneficial feature of convertible notes
payable 17,225 -
Changes in operating assets and
liabilities:
Increase in accounts receivable (3,934,511) (2,087,736)
Increase (decrease) in other current
assets 3,175,947 (4,885,181)
Increase (decrease) in accounts
payable and accrued expenses 588,689 (510,968)
------------ ------------
Net cash (used in) provided by operating
activities (158,517) 572,230
Cash flows from investing activities:
Purchases of property and equipment (1,501,508) (1,985,651)
Sales of property and equipment 13,376 120,436
Payments of acquisition payable (973,758) (879,007)
Purchase of treasury stock (360,328) -
Increase in intangible assets (5,281,642) (2,219,673)
------------ ------------
Net cash used in investing activities (8,103,860) (4,963,895)
Cash flows from financing activities:
Proceeds from sale of common stock 377,421 1,500,000
Proceeds from the exercise of stock options
and warrants 526,569 2,800,917
Purchase of subsidary stock in Pakistan (250,000) 1,765,615
Finance costs incurred for sale of common
stock - (10,000)
Purchase of treasury stock - (25,486)
Restricted cash (5,000,000) -
Proceeds from convertible notes payable 6,000,000 -
Proceeds from bank loans 3,843,541 3,862,759
Payments on bank loans (235,486) (1,245,846)
Dividend Paid to Preferred Shareholders (33,876) -
Bank overdraft 161,134 -
Payments on capital lease obligations &
loans - net (467,397) (3,462,334)
------------ ------------
Net cash provided by financing activities 4,921,906 5,185,625
Effect of exchange rate changes in cash (453,177) 44,390
------------ ------------
Net increase in cash and cash equivalents (3,793,648) 838,350
Cash and cash equivalents, beginning of period 6,275,238 4,010,164
------------ ------------
Cash and cash equivalents, end of period $ 2,481,591 $ 4,848,514
============ ============
NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
RECONCILIATION TO GAAP
(Unaudited)
Three Months Nine Months
Ended Ended
March 31, March 31,
2009 2009
------------ ------------
Net (loss) before preferred dividend,
per GAAP $ (4,998,510) $ (7,174,308)
Income Taxes 21,594 79,631
Depreciation and amortization 1,033,338 3,092,134
Interest expense 483,501 983,971
------------ ------------
EBITDA (loss) $ (3,460,077) $ (3,018,572)
============ ============
Weighted Average number of shares outstanding
Basic 26,601,587 26,350,098
Diluted 26,695,173 26,443,684
------------ ------------
Basic EBITDA EPS $ (0.13) $ (0.11)
============ ============
Diluted EBITDA EPS $ (0.13) $ (0.11)
============ ============
Contact -- Investor Relations: Christopher Chu Grayling Phone: +1 646-284-9426 Email: [email protected]
Released May 12, 2009