NetSol Technologies Reports Fiscal 2016 Third-Quarter Results
-
Performance Reflects Continued Momentum throughout the Business
- 2016 Third Quarter Revenue Up 22% to $16M from Third Quarter Last Year
- Second Straight Quarter of Positive EPS; Headed Toward Full Year of Positive Earnings
- Company Reiterates Expectation of Minimum Total Net Revenues of $62 Million for Full Fiscal 2016 Year with Adjusted EPS Anticipated to Exceed $1.00 per Diluted Share
- Conference Call Scheduled Today at 9 a.m. ET (6 a.m. PT) -
CALABASAS, Calif., May 10, 2016 (GLOBE NEWSWIRE) -- NetSol Technologies, Inc. (Nasdaq:NTWK), a global business services and enterprise application solutions provider, today announced results for its fiscal 2016 third quarter ended March 31, 2016.
Fiscal 2016 Third-Quarter Financial Results
Total net revenues for the 2016 third quarter rose 22% to $16.0 million from $13.1 million in the same period last year.
- Total license fees were $1.8 million, compared with $1.2 million last year
- Total maintenance fees were $3.4 million, compared with $3.0 million last year; and
- Total services revenues advanced to $10.7 million from $8.8 million last year.
On a GAAP basis, net income for the third quarter improved to $849,000, or $0.08 per diluted share, as compared with a net loss of $1.6 million, or $(0.17) per share, in the third quarter of 2015.
Non-GAAP Adjusted EBITDA (which primarily removes depreciation and amortization and stock-based compensation) for the third quarter of 2016 was $3.2 million, or adjusted EPS of $0.30 per diluted share, as compared with adjusted EBITDA of $1.6 million, or adjusted EPS of $0.16 per diluted share, in the third quarter of 2015.
The reconciliation of adjusted EBITDA to net income, the most comparable financial measure based upon GAAP, as well as a further explanation of adjusted EBITDA, is included in the financial tables at the end of this press release.
Management Commentary
“The performance for the quarter came in as expected, reflecting multiple contracts underway for our entire portfolio of finance and leasing solutions,” said Najeeb Ghauri, CEO of NetSol. “We remain on track to achieve our guidance for the year and are excited about the progress being made on implementing our $100 million-plus multi-country deal.”
Naeem Ghauri, President and Head of Global Sales, said, “The 12-country NFS AscentTM implementation began ramping up in the 2016 fourth quarter in South Korea, South Africa, Australia and China, providing excellent reference points for our marketing efforts in Europe and North America. As a result, we are witnessing a marked improvement in our sales pipeline, which is a strong indicator of a growing market need for NFS Ascent, as companies look to improve their businesses processes and productivity, consolidate IT systems and create new, efficient ways of conducting business.”
Following is additional detail for the quarter:
- Gross profit rose to $7.5 million from $4.7 million last year;
- Operating expenses were nearly flat year-over-year; and
- The company purchased 705,000 shares of NetSol PK common stock during the third quarter and a total of 1.4 million shares for the first nine months of 2016 for $767,000, resulting in a decrease in non-controlling interest to 33.4%.
Fiscal 2016 First Nine Months Financial Results
For the first nine months of fiscal 2016, total net revenues advanced to $45.5 million, with services income comprising $31.9 million. This compares with total net revenues of $35.7 million for the same period one year ago, with services revenues comprising $21.6 million for first nine months of fiscal 2015. The company reported GAAP net income of $1.3 million, or $0.12 per diluted share, for the first nine months of fiscal 2016, versus a net loss of $4.9 million, or $(0.51) per share, for the same period last year.
Non-GAAP adjusted EBITDA for the fiscal 2016 year-to-date period doubled to $8.0 million, or adjusted EPS of $0.76 per diluted share, from $4.0 million, or adjusted EPS of $0.41 per diluted share, for the same period in fiscal 2015.
Fiscal 2016 Business Outlook
The company continues to expect minimum revenues of $62 million for fiscal 2016. Adjusted EPS is expected to exceed $1.00 per diluted share for fiscal 2016.
Fiscal 2016 Third Quarter Conference Call
| When: | Tuesday, May 10, 2016 |
| Time: | 9:00 a.m. Eastern Time |
| Phone: | 1-844-868-9327 (domestic) |
| 1-412-317-6595 (international) | |
| Note: | Once connected, please ask to be joined into the NetSol Technologies call. |
A live webcast will be available online within the investor relations section of NetSol’s website at http://www.netsoltech.com. A replay of the webcast will be available one hour following conclusion of the live call, and will be archived for one year.
About NetSol Technologies
NetSol Technologies, Inc. (Nasdaq:NTWK) is a worldwide provider of IT and enterprise software solutions primarily serving the global leasing and financing industry. The Company’s suite of applications are backed by 40 years of domain expertise and supported by a committed team of more than 1,500 professionals placed in eight strategically located support and delivery centers throughout the world.
Forward-Looking Statements
Certain statements in this press release are forward-looking in nature, including, but not limited to, expected net revenue and adjusted EPS amounts for the full fiscal year and the growing market need for NFS Ascent, and accordingly, are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. The words “expects,” “anticipates,” variations of such words, and similar expressions, identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, 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. The subject Companies expressly disclaim any obligation or undertaking to update or revise any forward-looking statement contained herein to reflect any change in the company's expectations with regard thereto or any change in events, conditions or circumstances upon which any statement is based.
(Tables Follow)
| NetSol Technologies, Inc. and Subsidiaries | |||||||
| Consolidated Balance Sheets | |||||||
| As of March 31, | As of June 30, | ||||||
| ASSETS | 2016 | 2015 | |||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 11,881,159 | $ | 14,168,957 | |||
| Restricted cash | 90,000 | 90,000 | |||||
| Accounts receivable, net of allowance of $501,496 and $524,565 | 6,072,413 | 6,480,344 | |||||
| Accounts receivable, net - related party | 6,467,551 | 3,491,899 | |||||
| Revenues in excess of billings | 8,860,248 | 5,267,275 | |||||
| Other current assets | 2,756,621 | 2,012,190 | |||||
| Total current assets | 36,127,992 | 31,510,665 | |||||
| Investment | 555,556 | - | |||||
| Property and equipment, net | 23,178,350 | 25,119,634 | |||||
| Intangible assets, net | 20,276,715 | 22,815,467 | |||||
| Goodwill | 9,516,568 | 9,516,568 | |||||
| Total assets | $ | 89,655,181 | $ | 88,962,334 | |||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
| Current liabilities: | |||||||
| Accounts payable and accrued expenses | $ | 6,354,959 | $ | 5,952,561 | |||
| Current portion of loans and obligations under capitalized leases | 4,538,218 | 3,896,353 | |||||
| Unearned revenues | 3,412,019 | 4,897,327 | |||||
| Common stock to be issued | 88,324 | 88,324 | |||||
| Total current liabilities | 14,393,520 | 14,834,565 | |||||
| Long term loans and obligations under capitalized leases; less current maturities | 315,653 | 487,492 | |||||
| Total liabilities | 14,709,173 | 15,322,057 | |||||
| Commitments and contingencies | |||||||
| Stockholders' equity: | |||||||
| Preferred stock, $.01 par value; 500,000 shares authorized; | - | - | |||||
| Common stock, $.01 par value; 14,500,000 shares authorized; | |||||||
| 10,558,600 shares issued and 10,531,321 outstanding as of March 31, 2016 and | |||||||
| 10,307,826 shares issued and 10,280,547 outstanding as of June 30, 2015 | 105,586 | 103,078 | |||||
| Additional paid-in-capital | 120,513,094 | 119,209,807 | |||||
| Treasury stock (27,279 shares) | (415,425 | ) | (415,425 | ) | |||
| Accumulated deficit | (39,412,605 | ) | (40,726,121 | ) | |||
| Stock subscription receivable | (947,353 | ) | (1,204,603 | ) | |||
| Other comprehensive loss | (18,898,747 | ) | (17,167,100 | ) | |||
| Total NetSol stockholders' equity | 60,944,550 | 59,799,636 | |||||
| Non-controlling interest | 14,001,458 | 13,840,641 | |||||
| Total stockholders' equity | 74,946,008 | 73,640,277 | |||||
| Total liabilities and stockholders' equity | $ | 89,655,181 | $ | 88,962,334 | |||
| NetSol Technologies, Inc. and Subsidiaries | |||||||||||||
| Consolidated Statement of Operations | |||||||||||||
| For the Three Months | For the Nine Months | ||||||||||||
| Ended March 31, | Ended March 31, | ||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||
| Net Revenues: | |||||||||||||
| License fees | $ | 1,358,469 | $ | 1,215,201 | $ | 3,261,514 | $ | 4,900,469 | |||||
| Maintenance fees | 3,388,526 | 2,978,587 | 9,641,236 | 8,963,240 | |||||||||
| Services | 8,159,490 | 7,022,982 | 24,487,467 | 16,650,646 | |||||||||
| License fees - related party | 484,644 | - | 484,644 | - | |||||||||
| Maintenance fees - related party | 28,423 | 43,948 | 218,409 | 237,523 | |||||||||
| Services - related party | 2,554,347 | 1,813,197 | 7,377,430 | 4,901,792 | |||||||||
| Total net revenues | 15,973,899 | 13,073,915 | 45,470,700 | 35,653,670 | |||||||||
| Cost of revenues: | |||||||||||||
| Salaries and consultants | 5,542,829 | 4,895,515 | 15,468,284 | 13,310,632 | |||||||||
| Travel | 543,672 | 760,065 | 1,779,134 | 1,772,289 | |||||||||
| Depreciation and amortization | 1,483,695 | 1,912,492 | 4,419,396 | 5,514,812 | |||||||||
| Other | 860,868 | 792,737 | 2,822,347 | 2,129,646 | |||||||||
| Total cost of revenues | 8,431,064 | 8,360,809 | 24,489,161 | 22,727,379 | |||||||||
| Gross profit | 7,542,835 | 4,713,106 | 20,981,539 | 12,926,291 | |||||||||
| Operating expenses: | |||||||||||||
| Selling and marketing | 1,896,295 | 1,712,151 | 5,597,689 | 4,419,466 | |||||||||
| Depreciation and amortization | 321,230 | 551,127 | 898,018 | 1,569,903 | |||||||||
| General and administrative | 3,957,028 | 3,997,186 | 10,859,751 | 11,584,696 | |||||||||
| Research and development cost | 132,123 | 84,038 | 362,117 | 230,740 | |||||||||
| Total operating expenses | 6,306,676 | 6,344,502 | 17,717,575 | 17,804,805 | |||||||||
| Income (loss) from operations | 1,236,159 | (1,631,396 | ) | 3,263,964 | (4,878,514 | ) | |||||||
| Other income and (expenses) | |||||||||||||
| Gain (loss) on sale of assets | 14,848 | 6,496 | 642 | (74,099 | ) | ||||||||
| Interest expense | (56,070 | ) | (45,234 | ) | (196,399 | ) | (165,592 | ) | |||||
| Interest income | 29,673 | 97,094 | 117,084 | 261,091 | |||||||||
| Gain (loss) on foreign currency exchange transactions | 12,955 | (247,845 | ) | (235,291 | ) | (589,707 | ) | ||||||
| Other income | 25,258 | 607,111 | 200,256 | 625,650 | |||||||||
| Total other income (expenses) | 26,664 | 417,622 | (113,708 | ) | 57,343 | ||||||||
| Net income (loss) before income taxes | 1,262,823 | (1,213,774 | ) | 3,150,256 | (4,821,171 | ) | |||||||
| Income tax provision | (106,209 | ) | (107,398 | ) | (454,707 | ) | (235,157 | ) | |||||
| Net income (loss) | 1,156,614 | (1,321,172 | ) | 2,695,549 | (5,056,328 | ) | |||||||
| Non-controlling interest | (307,135 | ) | (315,073 | ) | (1,382,033 | ) | 214,888 | ||||||
| Net income (loss) attributable to NetSol | $ | 849,479 | $ | (1,636,245 | ) | $ | 1,313,516 | $ | (4,841,440 | ) | |||
| Net income (loss) per common share | |||||||||||||
| Basic | $ | 0.08 | $ | (0.17 | ) | $ | 0.13 | $ | (0.51 | ) | |||
| Diluted | $ | 0.08 | $ | (0.17 | ) | $ | 0.12 | $ | (0.51 | ) | |||
| Weighted average number of shares outstanding | |||||||||||||
| Basic | 10,427,664 | 9,914,321 | 10,338,740 | 9,573,336 | |||||||||
| Diluted | 10,643,479 | 9,914,321 | 10,554,555 | 9,573,336 | |||||||||
| NetSol Technologies, Inc. and Subsidiaries | ||||||
| Consolidated Statement of Cash Flows | ||||||
| For the Nine Months | ||||||
| Ended March 31, | ||||||
| 2016 | 2015 | |||||
| Cash flows from operating activities: | ||||||
| Net income (loss) | $ | 2,695,549 | $ | (5,056,328 | ) | |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||
| Depreciation and amortization | 5,317,414 | 7,084,715 | ||||
| Provision for bad debts | 49,605 | - | ||||
| (Gain) loss on sale of assets | (642 | ) | 74,099 | |||
| Stock issued for services | 694,693 | 1,119,721 | ||||
| Fair market value of warrants and stock options granted | 145,716 | 466,866 | ||||
| Changes in operating assets and liabilities: | ||||||
| Accounts receivable | 115,428 | (2,369,950 | ) | |||
| Accounts receivable - related party | (3,111,316 | ) | (198,640 | ) | ||
| Revenues in excess of billing | (3,248,121 | ) | (2,734,788 | ) | ||
| Other current assets | (838,913 | ) | 188,048 | |||
| Accounts payable and accrued expenses | 617,112 | 1,008,270 | ||||
| Unearned revenue | (1,305,724 | ) | 2,984,297 | |||
| Net cash provided by operating activities | 1,130,801 | 2,566,310 | ||||
| Cash flows from investing activities: | ||||||
| Purchases of property and equipment | (2,523,865 | ) | (2,499,314 | ) | ||
| Sales of property and equipment | 556,280 | 209,718 | ||||
| Investment | (555,556 | ) | - | |||
| Purchase of subsidiary shares from open market | (767,397 | ) | (577,222 | ) | ||
| Net cash used in investing activities | (3,290,538 | ) | (2,866,818 | ) | ||
| Cash flows from financing activities: | ||||||
| Proceeds from sale of common stock | 64,931 | 1,863,000 | ||||
| Proceeds from the exercise of stock options and warrants | 728,699 | 116,400 | ||||
| Proceeds from exercise of subsidiary options | 16,744 | 12,306 | ||||
| Restricted cash | - | 2,438,844 | ||||
| Dividend paid by subsidiary to Non controlling interest | - | (780,106 | ) | |||
| Proceeds from bank loans | 1,334,285 | - | ||||
| Payments on capital lease obligations and loans - net | (736,405 | ) | (3,459,143 | ) | ||
| Net cash provided by financing activities | 1,408,254 | 191,301 | ||||
| Effect of exchange rate changes | (1,536,315 | ) | (466,130 | ) | ||
| Net decrease in cash and cash equivalents | (2,287,798 | ) | (575,337 | ) | ||
| Cash and cash equivalents, beginning of the period | 14,168,957 | 11,462,695 | ||||
| Cash and cash equivalents, end of period | $ | 11,881,159 | $ | 10,887,358 | ||
| NetSol Technologies, Inc. and Subsidiaries | ||||||||||||
| Reconciliation to GAAP | ||||||||||||
| Three Months | Three Months | Nine Months | Nine Months | |||||||||
| Ended | Ended | Ended | Ended | |||||||||
| March 31, 2016 | March 31, 2015 | March 31, 2016 | March 31, 2015 | |||||||||
| Net Income (loss) before preferred dividend, per GAAP | $ | 849,479 | $ | (1,636,245 | ) | $ | 1,313,516 | $ | (4,841,440 | ) | ||
| Income Taxes | 106,209 | 107,398 | 454,707 | 235,157 | ||||||||
| Depreciation and amortization | 1,804,925 | 2,463,619 | 5,317,414 | 7,084,715 | ||||||||
| Interest expense | 56,070 | 45,234 | 196,399 | 165,592 | ||||||||
| Interest (income) | (29,673 | ) | (97,094 | ) | (117,084 | ) | (261,091 | ) | ||||
| EBITDA | $ | 2,787,010 | $ | 882,912 | $ | 7,164,952 | $ | 2,382,933 | ||||
| Add back: | ||||||||||||
| Non-cash stock-based compensation | 368,674 | 668,807 | 840,409 | 1,586,587 | ||||||||
| Adjusted EBITDA | $ | 3,155,684 | $ | 1,551,719 | $ | 8,005,361 | $ | 3,969,520 | ||||
| Adjusted EBITDA margin | 19.76 |
% | 11.87 |
% | 17.61 |
% | 11.13 |
% | ||||
| Weighted Average number of shares outstanding | ||||||||||||
| Basic | 10,427,664 | 9,914,321 | 10,338,740 | 9,573,336 | ||||||||
| Diluted | 10,643,479 | 9,937,750 | 10,554,555 | 9,596,765 | ||||||||
| Basic adjusted EBITDA | $ | 0.30 | $ | 0.16 | $ | 0.77 | $ | 0.41 | ||||
| Diluted adjusted EBITDA | $ | 0.30 | $ | 0.16 | $ | 0.76 | $ | 0.41 | ||||
From time to time, NetSol may refer to Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, Amortization and Stock-based Compensation) and “non-GAAP adjusted diluted EPS or Adjusted EPS” in its conference calls and discussions with investors and analysts in connection with the company’s reported historical financial results. Adjusted EBITDA does not represent cash flows from operations as defined by generally accepted accounting principles (“GAAP”), is not derived in accordance with GAAP and should not be considered by the reader as an alternative to net income (the most comparable GAAP financial measure to Adjusted EBITDA). Non-GAAP adjusted diluted EPS or Adjusted EPS does not measure diluted EPS as defined by GAAP, is not derived in accordance with GAAP and should not be considered by the reader as an alternative to reported diluted EPS. The reconciliation of GAAP and non-GAAP financial measures for the three and nine month periods ended March 31, 2016 and 2015 are included in the above table. NetSol’s management believes that Adjusted EBITDA and Adjusted EPS are helpful as an indicator of the current financial performance of the company. NetSol also adjusts for non-cash items, such as stock-based compensation as we believe these are not representative of our ongoing operating performance and we believe excluding these costs provide a useful metric by which to compare performance from period to period. Management strongly encourages investors to review the company’s consolidated financial statements in their entirety and to not rely on any single financial measure in evaluating the company.
Investor Contacts:
PondelWilkinson
Matt Sheldon | Roger Pondel
investors@netsoltech.com
(310) 279-5980
Media Contacts:
PondelWilkinson
George Medici | gmedici@pondel.com
(310) 279-5968
Released May 10, 2016