NetSol Technologies Reports Fiscal First Quarter 2009 Financial Results
Revenue, GAAP Net Income and EBITDA Increase Year-Over-Year, Supported by a 33% Rise in License Fees
EMERYVILLE, CA -- (MARKET WIRE) -- 11/13/08 -- NetSol Technologies Inc. "NetSol" (NASDAQ: NTWK) (DIFX: NTWK), a U.S. corporation providing global business services and enterprise application solutions to private and public sector organizations worldwide, today announced fiscal first quarter 2009 financial results for period ended September 30, 2008.
Fiscal First Quarter 2009 Consolidated Financial Highlights
-- Revenues increased 7.5% year-over-year to $9.3 million
-- Service fees year-over-year were level at $5.2 million
-- License fees increased 33% to $2.5 million
-- Maintenance fees year-over-year were level at $1.6 million
-- GAAP net income increased to $1.0 million, or $0.04 per fully diluted
share, versus $844,000, or $0.04 per fully diluted share, in the year
ago period
-- EBITDA increased to $2.3 million, or $0.08 per diluted share,
representing a 25% EBITDA margin, versus EBITDA of $1.9 million, or
$0.08 per diluted share, in the year ago period
-- Based on the current global economic climate, NetSol is adjusting
fiscal year 2009 financial guidance to annual revenue growth between
20% to 25% over fiscal year 2008 levels and diluted earnings per share
between $0.25 to $0.30
Najeeb Ghauri, NetSol Technologies chairman and chief executive officer, commented, "Our year-over-year growth in fiscal first quarter 2009 revenue, net income and EBITDA are based on the strength offered by our comprehensive range of cost effective IT solutions as well as the geographic diversity of our global customer base and client delivery platform. NetSol experienced solid growth in license fees within our core NetSol Financial Suite (NFS) as well as rising interest for our Global Business Services, in what is historically our seasonally slowest quarter of the fiscal year, and despite a challenging global economic environment. During the quarter, we secured and expanded a number of high value customer relationships including Nissan Financial Services and a new global frame agreement with Daimler Financial Services, extending NetSol's relationship with its longest standing customer to additional international markets.
"We have also made significant progress in terms of establishing additional business drivers to help fuel our growth strategy for fiscal 2009 and beyond. The recent acquisition of Ciena Solutions, a U.S. based SAP systems consulting firm, and the launch of our new global Business Process Outsourcing (BPO) practice group add new high level IT services that can be offered to our global customer base as complementary solutions. We are also continuing to explore additional joint venture opportunities to further leverage our CMMI Maturity Level 5 'Center of Excellence' to its fullest.
"In analyzing the impact of the current global economic downtown we believe it is prudent at this time to make some adjustment in our guidance for fiscal 2009. Despite taking a more conservative approach with regards to the potential influence of the current global economic downturn on our business outlook, we continue to anticipate double-digit year-over-year growth in revenue and improved profitability in fiscal 2009. Our growth projections are based on the addition of our new SAP and BPO solutions, a healthy global pipeline and increasing traction in America, Asia and the Middle East.
"While I am disappointed that it was necessary to restate certain historical financial information as filed on November 10, we have moved expeditiously with a range of strategic actions to remedy the situation and ensure the company is employing the most stringent financial controls. I am committed more than ever to building on the momentum we have established in growing NetSol into a leading global IT services provider and ultimately moving forward to build shareholder value. NetSol is healthy and strong and I am dedicated to restoring confidence in this dynamic global growth story we have built. To these ends, our recently extended one million share repurchase program and frequent senior management buying reflect our belief, that based on the current value we see in our shares, NetSol represents one of the best investments we can make," concluded Mr. Ghauri.
NetSol reported consolidated revenues of $9.3 million for the first quarter of fiscal year 2009, a 7.5% increase compared to the $8.7 million in revenues reported for the same period a year ago. Consolidated gross profit for the fourth quarter was approximately $4.7 million, or 51% of total revenues.
U.S. GAAP (Generally Accepted Accounting Principles) net income for the first quarter of fiscal year 2009 was approximately $1.0 million, or $0.04 per diluted share, which compares to GAAP net income of $844,000, or $0.04 per diluted share, in the same period of fiscal year 2008. NetSol reported EBITDA of $2.3 million, or $0.08 per diluted share, for the first quarter of fiscal year 2009, compared to EBITDA of $1.9 million, or $0.08 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 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 First Quarter 2009 Business Highlights
-- NetSol management and the Board of Directors approved the extension of
the Company's one million share stock repurchase program.
-- Opened NetSol's new global headquarters in Emeryville, California,
providing a larger, centrally located high-tech facility to accommodate
NetSol's global growth.
-- Secured a new frame agreement with Daimler Financial Services,
extending NetSol's relationship with its longest standing customer into
the regions of Asia Pacific and Africa.
-- Mercedes-Benz Financial Services Taiwan went live with NetSol's
LeaseSoft Contract Management System (CMS), a key product offering
within the NetSol Financial Suite of products.
-- Secured a multi-million dollar NetSol Financial Suite contract with the
North American finance division of a major Asian-based automobile
manufacturer, extending the market penetration of LeasePak, NetSol
North America's flagship lease management system.
-- European division has successfully launched its multi-product strategy
in Europe by signing a recent multi-million dollar agreement with a
major European Bank, reflecting an enhanced ability to service the auto
leasing and asset finance markets in Central and Eastern Europe.
-- European division launched its Managed IT Services Division to leverage
the Company's BestShoring(TM) model in Europe.
-- Launched new global Business Process Outsourcing (BPO) service offering
as a new revenue driver within the Company's BestShoring(TM) business
model.
-- Increased penetration in the high growth Middle East market for the
NetSol Financial Suite of products and Global Business Services
following the previously announced contract win with Al-Amthal Leasing,
one of the largest leasing companies in Saudi Arabia.
Conference Call & Webcast Information
NetSol will host a conference call at 11:00 a.m. ET (8:00 a.m. PT) to review the quarterly results. Najeeb Ghauri, NetSol 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 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. 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 # 302542. 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 Inc.
NetSol Technologies (NASDAQ: NTWK) (DIFX: NTWK) is a U.S. corporation providing global business services and enterprise application solutions to private and public sector organizations worldwide. NetSol uses its BestShoring™ practices and highly experienced resources in analysis, development, quality assurance, and implementation to deliver high-quality, cost-effective solutions. Organized into specialized industries, 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) Maturity 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. With its global headquarters located in Emeryville, California, NetSol Technologies has operations and offices in London, Los Angeles, Sydney, Beijing, Bangkok, and Lahore.
To learn more about NetSol Technologies Inc., visit www.netsoltech.com.
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.
Financial Tables Follow
NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
For the Three Months
Ended September 30,
2008 2007
------------ ------------
Net Revenues:
License fees $ 2,529,808 $ 1,903,552
Maintenance fees 1,593,734 1,583,420
Services 5,177,425 5,166,265
------------ ------------
Total revenues 9,300,967 8,653,237
Cost of revenues:
Salaries and consultants 2,640,713 2,321,030
Travel 485,936 266,828
Repairs and maintenance 106,665 114,154
Insurance 32,839 38,645
Depreciation and amortization 551,325 258,907
Other 751,068 387,891
------------ ------------
Total cost of revenues 4,568,546 3,387,455
------------ ------------
Gross profit 4,732,421 5,265,782
Operating expenses:
Selling and marketing 969,518 832,493
Depreciation and amortization 480,208 464,647
Bad debt expense - 2,439
Salaries and wages 979,254 907,879
Professional services, including non-cash
compensation 306,886 160,050
General and administrative 868,117 678,573
------------ ------------
Total operating expenses 3,603,983 3,046,081
------------ ------------
Income from operations 1,128,438 2,219,701
Other income and (expenses)
Loss on sale of assets (165,738) (32,223)
Interest expense (203,892) (233,804)
Interest income 27,941 33,863
Gain on foreign currency exchange rates 2,007,882 55,986
Fair market value of options issued (117,300) -
Other income 16,454 55,961
------------ ------------
Total other expenses 1,565,347 (120,217)
------------ ------------
Net income before minority interest in
subsidiary 2,693,785 2,099,484
Minority interest in subsidiary
(restated 2007) (1,629,761) (1,152,107)
Income taxes (7,182) (32,441)
------------ ------------
Net income (restated 2007) 1,056,842 914,936
Dividend required for preferred stockholders (33,876) (71,157)
------------ ------------
Net income (loss) applicable to common
shareholders (restated 2007) 1,022,966 843,779
Other comprehensive income (loss):
Translation adjustment (2,895,310) 162,403
------------ ------------
Comprehensive income (restated 2007) $ (1,872,344) $ 1,006,182
============ ============
Net income per share (restated 2007):
Basic $ 0.04 $ 0.04
============ ============
Diluted $ 0.04 $ 0.04
============ ============
Weighted average number of shares outstanding
Basic 26,307,175 21,425,235
Diluted 28,029,442 22,844,361
NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of As of
9/30/08 6/30/08
(Unaudited) (Audited)
(Restated)
ASSETS
Current assets:
Cash and cash equivalents $ 9,778,690 $ 6,275,238
Certificates of deposit 106,949 -
Accounts receivable, net of allowance for
doubtful accounts 13,886,153 10,988,888
Revenues in excess of billings 12,099,722 11,053,042
Other current assets 2,118,275 2,406,407
------------ ------------
Total current assets 37,989,789 30,723,575
Property and equipment, net of accumulated
depreciation 8,324,257 9,176,780
Other assets, long-term 981,957 1,866,437
Intangibles:
Product licenses, renewals, enhancements,
copyrights, trademarks, and tradenames, net 9,988,525 10,837,856
Customer lists, net 1,559,101 1,732,761
Goodwill 9,439,285 9,439,285
------------ ------------
Total intangibles 20,986,911 22,009,902
------------ ------------
Total assets $ 68,282,914 $ 63,776,694
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 3,123,928 $ 4,116,659
Current portion of loans and obligations
under capitalized leases 4,133,872 2,280,110
Other payables - acquisitions 103,226 846,215
Unearned revenues 4,037,556 3,293,728
Due to officers - 184,173
Dividend to preferred stockholders payable 33,876 33,508
Cash dividend to minority shareholders of
subsidiary 315,889 -
Loans payable, bank 2,559,509 2,932,551
------------ ------------
Total current liabilities 14,307,856 13,686,944
Obligations under capitalized leases, less
current maturities 267,358 332,307
Convertible notes payable 6,000,000 -
Long term loans; less current maturities 296,698 411,608
------------ ------------
Total liabilities 14,871,912 14,430,859
Minority interest 7,136,565 7,857,969
Commitments and contingencies - -
Stockholders' equity:
Preferred stock, 5,000,000 shares
authorized; 1,920; 4,130 issued and
outstanding 1,920,000 1,920,000
Common stock, $.001 par value; 95,000,000
shares authorized; 26,219,770; 25,545,482
issued and 26,051,274; 25,525,886
outstanding 26,220 25,545
Additional paid-in-capital 76,657,363 74,950,286
Treasury stock (168,496; 19,596 shares) (321,008) (35,681)
Accumulated deficit (32,048,738) (33,071,702)
Stock subscription receivable (708,904) (600,907)
Common stock to be issued 392,737 1,048,249
Other comprehensive loss (5,643,233) (2,747,924)
------------ ------------
Total stockholders' equity 40,274,437 41,487,866
------------ ------------
Total liabilities and stockholders'
equity $ 62,282,914 $ 63,776,694
============ ============
NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months
Ended Sept 30,
2008 2007
------------ ------------
Cash flows from operating activities:
Net income (restated 2007) $ 1,056,842 $ 914,936
Adjustments to reconcile net income to net
cash (used in) provided by operating
activities:
Depreciation and amortization 1,031,533 723,554
Provision for uncollectible accounts - -
Loss on sale of assets 165,738 32,223
Minority interest in subsidiary
(restated 2007) 1,629,761 1,152,107
Stock issued for services 33,163 -
Fair market value of warrants and stock
options granted 207,000 24,320
Changes in operating assets and liabilities:
Increase in accounts receivable (3,942,317) (353,500)
Increase in other current assets (1,960,129) (1,080,375)
Decrease in accounts payable and accrued
expenses (259,967) (1,130,337)
------------ ------------
Net cash (used in) provided by operating
activities (2,038,376) 282,928
Cash flows from investing activities:
Purchases of property and equipment (930,058) (745,901)
Sales of property and equipment 40,900 85,076
Payments of acquisition payable (742,989) (879,007)
Purchase of treasury stock (285,328) -
Short-term investments held for sale (113,738) -
Increase in intangible assets (689,544) (841,312)
------------ ------------
Net cash used in investing activities (2,720,757) (2,381,144)
Cash flows from financing activities:
Proceeds from sale of common stock 150,000 250,000
Proceeds from the exercise of stock options
and warrants 520,569 903,499
Purchase of subsidiary stock in Pakistan (250,000) -
Proceeds from convertible notes payable 6,000,000 -
Proceeds from bank loans 1,768,212 2,444,291
Payments on bank loans (75,732) (25,110)
Bank overdraft 257,502 -
Payments on capital lease obligations
& loans - net (121,418) (692,353)
------------ ------------
Net cash provided by financing activities 8,249,133 2,880,327
Effect of exchange rate changes in cash 13,451 44,966
------------ ------------
Net increase in cash and cash equivalents 3,503,451 827,077
Cash and cash equivalents, beginning of year 6,275,239 4,010,164
------------ ------------
Cash and cash equivalents, end of quarter $ 9,778,690 $ 4,837,241
============ ============
NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
RECONCILIATION TO GAAP
(UNAUDITED)
Three Months
Ended
Sept. 30, 2008
--------------
Net income per GAAP (applicable to common shareholders) $ 1,056,842
Income taxes 7,182
Depreciation and amortization 1,031,533
Interest expense 203,892
--------------
EBITDA income $ 2,299,449
==============
Weighted average number of shares outstanding
Basic 26,307,175
Diluted 28,029,442
--------------
Basic EBITDA EPS $ 0.09
==============
Diluted EBITDA EPS $ 0.08
==============
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
Released November 13, 2008