NetSol Technologies Reports Second Quarter Fiscal Year 2007 Financial Results
- Revenues Rise 60% Year/Year to $7.2 million; Operating Income Increases 36% to $375,000 -
CALABASAS, CA -- (MARKET WIRE) -- 02/12/07 -- 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 second quarter of fiscal year 2007, ending December 31, 2006.
Second Quarter FY 2007 Consolidated Financial Highlights
-- Revenues increased 60% to $7.2 million
-- Operating income rose 36% to $375 thousand
-- GAAP EPS was ($0.27) due to one-time, non-cash charge of $4.3 million
relating to the financing for the acquisition of McCue Systems
-- EBITDA was $527 thousand, or $0.03 per basic and diluted share,
excluding the one-time non-cash charge
-- Pro forma EPS was ($0.02) per basic and diluted share, excluding the
one-time non-cash charge
NetSol Technologies, Inc. reported consolidated revenues of $7.2 million for the second quarter of fiscal year 2007, a 60% increase compared to the $4.5 million in revenues reported for the same period in fiscal year 2006. Consolidated gross profit for the second quarter was approximately $3.6 million, or 50%.
Net loss for the second quarter of fiscal year 2007 was approximately $4.6 million, or a loss of $0.27 per basic and diluted earnings per share, which compares to net income of $125 thousand, or $0.01 per basic and diluted earnings per share, reported in the second quarter of fiscal year 2006. The Company recorded a one-time, non-cash charge of $4.3 million relating to the financing for the acquisition of McCue Systems in June 2006. Excluding this one-time charge, NetSol would have reported EBITDA of $527 thousand, or $0.03 per basic and diluted share, and a net loss of $375 thousand, or a loss of $0.02 per basic and diluted share, for the second quarter of fiscal 2007.
Najeeb Ghauri, chairman and CEO, commented, "NetSol recorded strong revenue growth in the second quarter of fiscal 2007, driven by our ability to close contracts in the Asia Pacific and European markets. We also continued to make progress in the North American market, as the integration of McCue Systems proceeds according to plan. In addition, we are seeing strong growth in the Pakistan market, as evidenced by several, important non-traditional NetSol projects initiated with both the federal and Punjab governments.
"Our second quarter results also reflect a one-time, non-cash charge relating to the acquisition of McCue Systems in June 2006. With this charge, all costs relating to that acquisition are expensed and behind us, so we may now move forward aggressively in the North American market. We expect to have that division substantially integrated into the NetSol organization and leveraging our superior offshore capabilities by the end of this fiscal year."
Mr. Ghauri concluded, "Historically, NetSol posts its strongest results in the second half of the fiscal year. Our pipeline of orders for commercial finance products, particularly in the Chinese market and in Europe, indicate that this trend will continue. Moreover, our pipeline of business in Pakistan is stronger than ever. As a result, we continue to believe we can deliver revenues of approximately $30 million and improved operating profitability for fiscal year 2007."
Second Quarter Business Highlights
Asia-Pacific (APAC) Division
-- Signed two new multi-million dollar contracts for LeaseSoft with
global, blue chip brand names in the Captive Finance sector - one in
Australia, the other in China;
-- Continued to expand pipe line of opportunities in Australia, Thailand,
New Zealand and China; and
-- Expanded client and market reach beyond traditional leasing market
into local Pakistan market;
-- Successful implementation of Motor Transport Management Information
System (or MTMIS) in Lahore, with an additional 28 districts to go live by
the end of calendar year 2007.
Europe/Middle East (EMEA) Division
-- Completed major client projects on time and on budget to deliver
record UK service revenue - one significant project was with Investec Asset
Finance;
-- Introduced new products to support front and middle office operations
of leasing companies, providing end-to-end contract management - three
system implementations are currently scheduled or in progress, with
significant interest generated; and
-- Recorded the first sale of the division's newest software offering,
LeaseSoft Evolve, to broker Kennet Equipment Leasing for the management of
its own equipment leasing portfolio.
North America Division
-- Delivered LeasePak 6.0, the largest and most comprehensive release of
the product to date - receiving excellent customer response and reviews;
-- Initiated rollout of the IT Services line of business to the US
commercial finance technology sector, and
-- Integration of McCue Systems into NetSol Technologies is on track and
progressing well - with continued success in the leveraging of offshore
resources, improved internal resource utilization and effective marketing
efforts.
First Half FY 2007 Consolidated Financial Highlights
-- Revenues for the first half rose 46% to $13.1 million
-- GAAP EPS was ($0.34) due to one-time, non-cash charge of $5.0 million
recorded for the first six months relating to the financing for the
acquisition of McCue Systems
-- EBITDA for the first half was $911 thousand, or $0.05 per basic and
diluted share, excluding the one-time non-cash charge
-- Pro Forma EPS of ($0.05), excluding the one-time non-cash charge
NetSol Technologies, Inc. reported consolidated revenues of $13.1 million for the first half of fiscal year 2007, a 46% increase compared to the $9.0 million in revenues reported for the same period in fiscal year 2006. Consolidated gross profit for the first six months was $6.6 million, or 50%.
Net loss for the first six months of fiscal year 2007 was approximately $5.9 million, or a loss of $0.34 per basic and diluted earning per share, which compares to net income of $328 thousand, or $0.02 per basic and diluted earnings per share in the same period of fiscal year 2006. The Company recorded a one-time, non-cash charge of $5.0 million relating to the financing for the acquisition of McCue Systems in June 2006. Excluding this one-time charge, NetSol would have reported EBITDA of $911 thousand, or $0.05 per basic and diluted share, and a net loss of $937 thousand, or a loss of $0.05 per basic and diluted share, for the first half of fiscal year 2007.
Conference Call Information
NetSol Technologies will host a conference call at 5:00 p.m. ET (2:00 p.m. PT) today to review these results. The call will be web cast live and may be accessed via http://audioevent.mshow.com/322520/, noting conference ID #7826805. Investors may also dial +1 (800) 374-2501 (U.S.) or +1 (706) 634- 2468 (international), noting conference ID #7826805.
An audio replay of the conference call will be available approximately one hour following the conclusion of the call through 5:00 p.m. ET on March 7, 2007. To access the replay, dial +1 (800) 642-1687 (US) or (706) 645-9291 (international), conference ID # 7826805. An archived replay of the conference web cast also will be available on the NetSol Technologies web site at http://www.netsoltek.com/investors/frame.html
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 certification 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. NetSol's largest customer, DaimlerChrysler Services, ranks the Company as a preferred vendor in 40+ countries. Headquartered in Calabasas, CA, NetSol Technologies also has operations and/or offices in London, San Francisco, Adelaide, Beijing, Toronto, and Lahore and Karachi, Pakistan. To learn more about NetSol Technologies, visit the Company's web site at www.netsoltek.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 - DECEMBER 31, 2006
(UNAUDITED)
For the Three Months For the Six Months
Ended December 31, Ended December 31,
2006 2005 2006 2005
------------ ------------ ------------ ------------
Revenues:
Licence fees $ 2,718,795 $ 1,699,760 $ 4,297,207 $ 2,162,238
Maintenance fees 1,359,239 561,318 2,654,203 1,087,233
Services 3,149,087 2,263,295 6,138,271 5,744,887
------------ ------------ ------------ ------------
Total revenues 7,227,121 4,524,373 13,089,681 8,994,358
Cost of revenues
Salaries and
consultants 2,441,724 1,345,283 4,373,797 2,486,817
Travel 432,344 94,138 748,027 239,970
Communication 38,935 28,705 81,000 52,509
Depreciation and
amortization 188,726 154,985 351,244 277,653
Other 484,254 353,923 932,343 587,435
------------ ------------ ------------ ------------
Total cost of
sales 3,585,983 1,977,034 6,486,411 3,644,384
------------ ------------ ------------ ------------
Gross profit 3,641,138 2,547,339 6,603,270 5,349,974
Operating expenses:
Selling and
marketing 579,941 412,570 931,743 731,434
Depreciation and
amortization 489,004 564,855 968,867 1,117,386
Bad debt expense 51,690 7,728 117,498 7,728
Salaries and
wages 1,183,184 552,714 2,271,451 1,089,090
Professional
services,
including
non-cash
compensation 236,562 115,188 497,432 254,299
General and
adminstrative 725,679 619,455 1,572,285 1,190,546
------------ ------------ ------------ ------------
Total operating
expenses 3,266,060 2,272,510 6,359,276 4,390,483
------------ ------------ ------------ ------------
Income from operations 375,078 274,829 243,994 959,491
Other income and
(expenses):
Gain (loss) on
sale of assets (58) 4,219 (12,338) 4,610
Beneficial
conversion
feature (2,208,334) (5,192) (2,208,334) (11,761)
Amortization of
debt discount
and capitalized
cost of debt (2,069,033) - (2,803,691) -
Liquidation
damages (133,833) - (133,833) -
Fair market
value of
warrants issued - - - (9,489)
Gain on
forgiveness of
debt - 3,335 - 6,976
Interest expense (211,615) (86,862) (461,406) (165,885)
Interest income 128,303 94,629 219,049 179,041
Other income and
(expenses) 39,192 (22,142) 80,392 (54,645)
Income taxes (13,741) 7,751 (66,565) (66,811)
------------ ------------ ------------ ------------
Total other
expenses (4,469,119) (4,262) (5,386,726) (117,964)
------------ ------------ ------------ ------------
Net income (loss)
before minority
interest in
subsidiary (4,094,041) 270,567 (5,142,732) 841,527
Minority interest
in subsidiary (558,571) (145,532) (805,845) (512,745)
------------ ------------ ------------ ------------
Net income (loss) (4,652,612) 125,035 (5,948,577) 328,782
Dividend required
for preferred
stockholders (65,598) - (65,598) -
------------ ------------ ------------ ------------
Net income (loss)
applicable to
common
shareholders (4,718,210) 125,035 (6,014,175) 328,782
Other comprehensive
gain:
Translation
adjustment 195,269 437,660 121,779 316,840
------------ ------------ ------------ ------------
Comprehensive
income (loss) $ (4,522,941) $ 562,695 $ (5,892,396) $ 645,622
============ ============ ============ ============
Net income (loss)
per share:
Basic $ (0.27) $ 0.01 $ (0.34) $ 0.02
============ ============ ============ ============
Diluted $ (0.27) $ 0.01 $ (0.34) $ 0.02
============ ============ ============ ============
Weighted average
number of shares
outstanding
Basic 17,514,634 14,064,968 17,280,675 13,981,426
Diluted 17,514,634 14,793,396 17,280,675 14,546,887
NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET - DECEMBER 31, 2006
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 2,707,147
Accounts receivable, net of allowance for
doubtful accounts of $106,090 8,305,346
Revenues in excess of billings 6,492,027
Other current assets 2,107,134
-----------
Total current assets 19,611,654
Property and equipment, net of accumulated
depreciation 6,368,104
Intangibles:
Product licenses, renewals, enhancements,
copyrights, trademarks, and tradenames, net 5,794,466
Customer lists, net 2,774,727
Goodwill 6,092,906
-----------
Total intangibles 14,662,099
------------
Total assets $ 40,641,857
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 5,095,034
Current portion of notes and obligations under
capitalized leases 712,816
Other payables - acquisitions 58,451
Billings in excess of revenues 1,290,255
Due to officers 400,533
Dividend to preferred stockholders payable 65,598
Loans payable, bank 1,229,911
-----------
Total current liabilities 8,852,598
Obligations under capitalized leases, less
current maturities 219,014
------------
Total liabilities 9,071,612
Minority interest 2,432,891
Commitments and contingencies -
Stockholders' equity:
Preferred stock, 5,000,000 shares authorized;
5,500 issued and outstanding 5,500,000
Common stock, $.001 par value; 45,000,000
shares authorized; 17,973,801 issued
and outstanding 17,974
Additional paid-in-capital 62,280,151
Treasury stock (10,194)
Accumulated deficit (37,686,216)
Stock subscription receivable (944,750)
Common stock to be issued 278,270
Other comprehensive loss (297,881)
-----------
Total stockholders' equity 29,137,354
------------
Total liabilities and stockholders' equity $ 40,641,857
============
NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
RECONCILIATION TO GAAP
(UNAUDITED)
Three Months Six Months
Ended Ended
Dec. 31, Dec. 31,
2006 2006
------------ ------------
Net loss per GAAP $ (4,652,612) $ (5,948,577)
One-time, non-cash expenses:
Beneficial conversion feature 2,208,334 2,208,334
Amortization of debt discount and
capitalized cost of debt 2,069,033 2,803,691
------------ ------------
4,277,367 5,012,025
Pro-forma loss $ (375,245) $ (936,552)
Weighted average number of shares outstanding
Basic and diluted 17,514,634 17,280,675
------------ ------------
Pro-forma EPS $ (0.02) $ (0.05)
============ ============
EBITDA - GAAP (3,749,526) (4,100,495)
One-time, non-cash expenses:
Beneficial conversion feature 2,208,334 2,208,334
Amortization of debt discount and
capitalized cost of debt 2,069,033 2,803,691
------------ ------------
4,277,367 5,012,025
------------ ------------
Pro-forma EBITDA $ 527,841 $ 911,530
============ ============
Weighted average number of shares outstanding
Basic and diluted 17,514,634 17,280,675
------------ ------------
Pro-forma EBITDA EPS $ 0.03 $ 0.05
============ ============
Contacts: NetSol Technologies, Inc. Andrew Lea Vice President, Marketing & Corporate Communications Tel: +1 650-348-0650, ext 1171 Email: [email protected] Investor Relations Christopher Chu The Global Consulting Group Tel: +1-646-284-9426 Email: [email protected]
Released February 12, 2007