Second Quarter Total Net Revenues of $17.6 million
Second Quarter GAAP Diluted EPS of $(0.09)
Second Quarter Adjusted EBITDA of $1.0 million
- Conference Call Scheduled for Today at 9 a.m. ET (6 a.m. PT) -
CALABASAS, Calif., Feb. 14, 2017 (GLOBE NEWSWIRE) -- NetSol Technologies, Inc. (Nasdaq:NTWK), a leading global provider of business services and enterprise application solutions to the finance and leasing industry for 20 years, today announced financial results for the fiscal 2017 second quarter ended December 31, 2016.
Fiscal 2017 Second Quarter Financial Results & Operational Highlights
Total net revenues for the second quarter of fiscal 2017 were $17.6 million, an increase of 9% from the prior year period.
- Total license fees were $5.4 million, up significantly from $0.7 million in the prior year period.
- Total maintenance fees were $3.8 million, an increase of 17% from $3.3 million in the prior year period.
- Total services revenues were $8.4 million, a decrease of 31% from $12.2 million in the prior year period.
Gross profit for the second quarter of fiscal 2017 was $8.4 million, or 47.8% of net revenues, an increase of 7% from $7.9 million, or 48.6% of net revenues, in the second quarter of fiscal 2016.
GAAP net loss attributable to NETSOL for the second quarter of fiscal 2017 was $0.99 million, or $(0.09) per diluted share, compared with net income of $0.88 million, or $0.08 per diluted share, in the second quarter of fiscal 2016. GAAP net loss attributable to NETSOL for the second quarter of fiscal 2017 includes $1.4 million of income attributable to non-controlling interest, compared to $0.88 million in the prior year period. The year-over-year increase in non-controlling interest was primarily driven by mix of profits between NETSOL’s wholly owned subsidiaries and joint ventures. GAAP net loss for the second quarter of fiscal 2017 was also impacted by approximately $0.6 million of loss from foreign currency exchange transactions.
Adjusted EBITDA1 for the second quarter of fiscal 2017 was $1.0 million, representing Adjusted EBITDA per diluted share of $0.09, compared with Adjusted EBITDA of $2.6 million, or Adjusted EBITDA per diluted share of $0.24, in the second quarter of fiscal 2016.
At December 31, 2016, cash and cash equivalents were $9.5 million, compared with $11.2 million at September 30, 2016 and $14.0 million at December 31, 2015.
In February 2017, NETSOL completed the implementation of NFS AscentTM for the Australian finance & leasing arm of a multinational German Auto Manufacturing corporation. This was the second implementation under an existing 10-year contract with this customer for the implementation, support and maintenance of NFS AscentTM in 12 countries.
At the end of the fiscal second quarter, NETSOL’s global pipeline exceeded $150 million. Pipeline highlights for the Americas included a leading software company based in the U.S., a global equipment manufacturer that is an existing NETSOL client in Asia Pacific, and several other smaller targets currently in discussions for NFS AscentTM, NFSTM, and LeasePakTM. Pipeline highlights for Asia Pacific and EMEA included a few large multi-national clients in discussions for platform upgrades to NFS AscentTM, multiple potential new logos for NFSTM, and strong pipeline growth in the emerging Indonesia market.
“Our fiscal second quarter results are highlighted by strong year-over-year growth in our license and maintenance revenues driven by new client implementations and cross-sales into our existing customer base,” said Najeeb Ghauri, CEO of NETSOL. “Demand remains solid across our solutions and geographies, our pipeline is growing, and our large twelve-country NFS Ascent implementation remains on track."
Ghauri continued, “In the past three months, we have initiated new productivity and cost reduction initiatives that we expect will drive additional margin expansion and earnings accretion beginning in the second half of fiscal 2017 and align our business with our strategy for long-term profitable growth. We currently expect these initiatives to result in approximately $1.5 million of cost savings in the second half of fiscal 2017, and approximately $4 million on an annualized basis beginning in fiscal 2018.”
Fiscal 2017 Financial Outlook
The Company’s financial outlook for the fiscal year ending June 30, 2017 is as follows:
- Total net revenues of $73 to $75 million for fiscal 2017.
- Non-GAAP Adjusted EBITDA, net, of $9 to $10 million for fiscal 2017.
Fiscal 2017 Second Quarter Conference Call|
|When:||Tuesday, February 14, 2017|
|Time:||9:00 a.m. Eastern Time|
|Note:||Once connected, please ask to be joined into the NETSOL Technologies call.|
A replay will be available one hour after the end of the conference call and can be accessed by dialing 1-877-344-7529 (domestic) or 1-412-317-0088 (international); the replay access code is 10099519. The replay will be available through Tuesday, February 21, 2017.
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.
1 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 in Schedule 4 of this press release. Beginning with the fourth quarter of fiscal 2016, NetSol has revised its calculation of Adjusted EBITDA to exclude the portion of Adjusted EBITDA that is attributable to its subsidiaries that have a minority interest.
About NETSOL Technologies
NETSOL Technologies, Inc. (Nasdaq:NTWK) is a worldwide provider of IT and enterprise software solutions primarily serving the global Leasing and Finance industry. The Company’s suite of applications are backed by 40 years of domain expertise and supported by a committed team of 1,500+ professionals placed in eight strategically located support and delivery centers throughout the world. NFSTM, LeasePakTM, LeaseSoft or NFS AscentTM – help companies transform their Finance and Leasing operations, providing a fully automated asset-based finance solution covering the complete leasing and finance lifecycle.
Investors can receive news releases and invitations to special events by accessing our online signup form at http://ir.netsoltech.com/email-alerts.
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.
|NETSOL Technologies, Inc. and Subsidiaries|
|Schedule 1: Consolidated Balance Sheets|
|As of December 31,||As of June 30,|
|Cash and cash equivalents||$||9,505,383||$||11,557,527|
|Accounts receivable, net of allowance of $495,760 and $492,498||5,840,490||9,691,229|
|Accounts receivable, net - related party||4,303,380||5,691,178|
|Revenues in excess of billings||17,646,488||10,493,096|
|Revenues in excess of billings - related party||469,030||804,168|
|Other current assets||2,904,650||2,214,628|
|Total current assets||40,669,421||40,451,826|
|Property and equipment, net||21,873,277||22,774,435|
|Intangible assets, net||18,423,439||19,674,033|
|LIABILITIES AND STOCKHOLDERS' EQUITY|
|Accounts payable and accrued expenses||$||7,373,097||$||5,962,770|
|Current portion of loans and obligations under capitalized leases||4,368,930||4,440,084|
|Common stock to be issued||88,324||88,324|
|Total current liabilities||14,637,155||15,230,392|
|Long term loans and obligations under capitalized leases; less current maturities||501,554||477,692|
|Commitments and contingencies|
|Preferred stock, $.01 par value; 500,000 shares authorized;||-||-|
|Common stock, $.01 par value; 14,500,000 shares authorized;|
|10,993,054 shares issued and 10,958,275 outstanding as of December 31, 2016 and|
|10,713,372 shares issued and 10,686,093 outstanding as of June 30, 2016||109,931||107,134|
|Treasury stock (34,779 shares and 27,279 shares)||(454,310||)||(415,425||)|
|Stock subscription receivable||(450,220||)||(783,172||)|
|Other comprehensive loss||(18,628,395||)||(18,730,494||)|
|Total NetSol stockholders' equity||63,521,466||64,303,629|
|Total stockholders' equity||77,488,934||77,641,331|
|Total liabilities and stockholders' equity||$||92,627,643||$||93,349,415|
|NETSOL Technologies, Inc. and Subsidiaries|
|Schedule 2: Consolidated Statement of Operations|
|For the Three Months||For the Six Months|
|Ended December 31,||Ended December 31,|
|License fees - related party||-||-||246,957||-|
|Maintenance fees - related party||51,345||31,755||181,976||189,986|
|Services - related party||1,464,901||2,635,675||3,379,473||4,823,083|
|Total net revenues||17,638,112||16,191,697||32,639,670||29,496,801|
|Cost of revenues:|
|Salaries and consultants||5,979,804||5,083,412||11,873,153||10,244,661|
|Depreciation and amortization||1,318,764||1,461,466||2,649,636||2,935,701|
|Total cost of revenues||9,200,535||8,321,569||18,108,989||16,377,303|
|Selling and marketing||2,713,478||2,002,990||5,057,516||3,701,394|
|Depreciation and amortization||271,485||285,616||540,582||576,788|
|General and administrative||3,933,413||3,378,829||8,552,609||6,583,517|
|Research and development cost||91,607||117,924||184,539||229,994|
|Total operating expenses||7,009,983||5,785,359||14,335,246||11,091,693|
|Income (loss) from operations||1,427,594||2,084,769||195,435||2,027,805|
|Other income and (expenses)|
|Loss on sale of assets||(32,339||)||(2,333||)||(34,742||)||(14,206||)|
|Loss on foreign currency exchange transactions||(621,887||)||(134,527||)||(1,036,783||)||(248,246||)|
|Total other income (expenses)||(686,114||)||(53,033||)||(1,105,888||)||(140,372||)|
|Net income (loss) before income taxes||741,480||2,031,736||(910,453||)||1,887,433|
|Income tax provision||(338,884||)||(273,275||)||(378,759||)||(348,498||)|
|Net income (loss)||402,596||1,758,461||(1,289,212||)||1,538,935|
|Net income (loss) attributable to NetSol||$||(985,676||)||$||875,065||$||(2,751,395||)||$||464,037|
|Net income (loss) per share:|
|Net income (loss) per common share|
|Weighted average number of shares outstanding|
|NETSOL Technologies, Inc. and Subsidiaries|
|Schedule 3: Consolidated Statement of Cash Flows|
|For the Six Months|
|Ended December 31,|
|Cash flows from operating activities:|
|Net income (loss)||$||(1,289,212||)||$||1,538,935|
|Adjustments to reconcile net income (loss)|
|to net cash provided by operating activities:|
|Depreciation and amortization||3,190,218||3,512,489|
|Provision for bad debts||1,026||37,043|
|Loss on sale of assets||34,742||14,206|
|Stock issued for services||1,525,775||326,019|
|Fair market value of warrants and stock options granted||21,804||145,716|
|Changes in operating assets and liabilities:|
|Accounts receivable - related party||829,285||(2,383,828||)|
|Revenues in excess of billing||(7,219,089||)||520,071|
|Revenues in excess of billing - related party||285,791||15,866|
|Other current assets||585,147||(758,802||)|
|Accounts payable and accrued expenses||334,241||142,008|
|Net cash provided by operating activities||69,398||2,031,618|
|Cash flows from investing activities:|
|Purchases of property and equipment||(1,074,316||)||(1,177,443||)|
|Sales of property and equipment||181,087||357,933|
|Purchase of treasury stock||(38,885||)||-|
|Purchase of non-controlling interest in subsidiary||-||(347,623||)|
|Net cash used in investing activities||(1,637,669||)||(1,167,133||)|
|Cash flows from financing activities:|
|Proceeds from sale of common stock||-||64,931|
|Proceeds from the exercise of stock options and warrants||429,452||194,680|
|Proceeds from exercise of subsidiary options||18,089||-|
|Dividend paid by subsidiary to Non controlling interest||(968,657||)||-|
|Proceeds from bank loans||-||306,750|
|Payments on capital lease obligations and loans - net||(69,998||)||(530,733||)|
|Net cash provided by (used in) financing activities||(591,114||)||35,628|
|Effect of exchange rate changes||107,241||(1,082,297||)|
|Net decrease in cash and cash equivalents||(2,052,144||)||(182,184||)|
|Cash and cash equivalents, beginning of the period||11,557,527||14,168,957|
|Cash and cash equivalents, end of period||$||9,505,383||$||13,986,773|
|NETSOL Technologies, Inc. and Subsidiaries|
|Schedule 4: Reconciliation to GAAP|
|Three Months||Three Months||Six Months||Six Months|
|December 31, 2016||December 31, 2015||December 31, 2016||December 31, 2015|
|Net Income (loss) before preferred dividend, per GAAP||$||(985,676||)||$||875,065||$||(2,751,395||)||$||464,037|
|Depreciation and amortization||1,590,249||1,747,082||3,190,218||3,512,489|
|Non-cash stock-based compensation||682,123||393,985||-||1,547,579||471,735|
|Adjusted EBITDA, gross||$||3,052,563||$||4,209,660||$||3,890,090||$||5,924,575|
|Less non-controlling interest (a)||(2,037,286||)||(1,642,461||)||(2,717,103||)||(2,697,992||)|
|Adjusted EBITDA, net||$||1,015,277||$||2,567,199||$||1,172,987||$||3,226,583|
|Weighted Average number of shares outstanding|
|Basic adjusted EBITDA||$||0.09||$||0.25||$||0.11||$||0.31|
|Diluted adjusted EBITDA||$||0.09||$||0.24||$||0.11||$||0.31|
|(a)The reconciliation of adjusted EBITDA of non-controlling interest|
|to net income attributable to non-controlling interest is as follows|
|Net Income attributable to non-controlling interest||$||1,388,272||$||883,396||$||1,462,183||$||1,074,898|
|Depreciation and amortization||523,368||730,672||1,049,294||1,556,538|
|Non-cash stock-based compensation||61,059||26,442||125,257||48,839|
|Adjusted EBITDA of non-controlling interest||$||2,037,286||$||1,642,461||$||2,717,103||$||2,697,992|
From time to time, NETSOL may refer to Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, Amortization and Stock-based Compensation) and “non-GAAP adjusted EBITDA per diluted share or Adjusted EBITDA per diluted share” 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 EBITDA per diluted share or Adjusted EBITDA per diluted share is not derived in accordance with GAAP and should not be considered by the reader as an alternative to reported GAAP diluted EPS. The reconciliation of GAAP and non-GAAP financial measures for the three and six month periods ended December 31, 2016 and 2015 are included in the above table. NETSOL’s management believes that Adjusted EBITDA and Adjusted EBITDA per diluted share 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 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.