Third Quarter Total Net Revenues increased 12.4% year-over-year to a Q3 Record of $17.9 million
Third Quarter Net Income of $0.7 million and Diluted EPS of $0.06
Third Quarter Adjusted EBITDA of $2.3 million
- Conference Call Scheduled for Today at 9 a.m. ET (6 a.m. PT) -
CALABASAS, Calif., May 22, 2017 (GLOBE NEWSWIRE) -- NetSol Technologies, Inc. (Nasdaq:NTWK), a leading global provider of enterprise application solutions and business services to the finance and leasing industry, today announced financial results for the fiscal 2017 third quarter ended March 31, 2017.
Fiscal 2017 Third Quarter Financial Results
Total net revenues for the third quarter of fiscal 2017 were $17.9 million, an increase of 12.4% from the prior year period.
- Total license fees were $5.7 million, an increase of 210.9% from $1.8 million in the prior year period.
- Total maintenance fees were $3.6 million, an increase of 5.1% from $3.4 million in the prior year period.
- Total services revenues were $8.6 million, a decrease of 19.5% from $10.7 million in the prior year period.
- On-track to deliver record revenues in fiscal year 2017.
Gross profit for the third quarter of fiscal 2017 was $9.0 million, or 50.1% of net revenues, an increase of 21.7% from $7.4 million, or 46.3% of net revenues, in the third quarter of fiscal 2016.
Net income attributable to NETSOL for the third quarter of fiscal 2017 was $0.7 million, or $0.06 per diluted share, compared with $0.8 million, or $0.08 per diluted share, in the third quarter of fiscal 2016.
Adjusted EBITDA1 for the third quarter of fiscal 2017 was $2.3 million, representing Adjusted EBITDA per diluted share of $0.21, compared with Adjusted EBITDA of $2.3 million, or Adjusted EBITDA per diluted share of $0.21, in the third quarter of fiscal 2016.
At March 31, 2017, cash and cash equivalents were $8.5 million, compared with $11.6 million at June 30, 2016 and $11.9 million at March 31, 2016.
 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.
“We are pleased to deliver solid revenue growth and margin improvement in the fiscal third quarter,” said Najeeb Ghauri, Founder, Chairman and Chief Executive Officer of NETSOL. “We had a strong quarter for NFS Ascent license and services revenue, and for the first time, Ascent revenue exceeded fees from our legacy NFS solution suite. Conversely, our legacy NFS-related revenue was lower-than-expected in the fiscal third quarter, driven by a slowdown in new license and services fees as several of our NFS clients are beginning to explore with us a migration path to our next-generation NFS Ascent platform. Looking ahead, we view this inflection point in our revenue growth mix as a long-term positive for NETSOL and believe we are well-positioned to continue to build off this solid foundation. Nevertheless, we expect this tactical shift in our clients’ demand will continue to impact our results in the fourth quarter. In addition, the non-conversion of some new client contracts also impacted our fiscal third quarter results. We have reduced our fiscal year 2017 guidance to reflect these factors. Despite our tempered outlook for fiscal 2017, the strong fundamental drivers of our business remain unchanged, and we remain very optimistic about NETSOL’s future growth potential. Finally, I am pleased with the progress we have made on our recently announced costs reduction initiatives, as this helped us to improve our bottom-line in the quarter. We are on track to deliver $1.5 million of cost savings in the second half of fiscal 2017 and $4 million on an annualized basis beginning in fiscal 2018.”
Naeem Ghauri, President of NETSOL Global Sales and Marketing, provided additional color on the Company’s sales pipeline, “We have a robust global pipeline of new business opportunities, including our NFS Ascent pipeline which continues to expand across the Americas, Europe and Asia Pacific. Ascent has become referenceable for new clients as several of the implementations are now live and being used by thousands of users across our APAC region. Our pipeline includes both upgrades from legacy NFS to NFS Ascent as well as organic opportunities from new prospects. Many of these potential opportunities represent multi-country, multi-million dollar implementations.” Naeem Ghauri continued, “While we are highly encouraged by the growth of our NFS Ascent pipeline, we are also experiencing elongated sales cycles that require in-depth evaluation and stringent procurement processes within tier-one organizations. However, we have extensive experience working within these processes, and expect to come out on the other end with positive outcomes.”
Fiscal 2017 Financial Outlook
The Company has revised its financial outlook for the fiscal year ending June 30, 2017 as follows:
- Total net revenues of $66 to $67 million for fiscal 2017.
- Non-GAAP Adjusted EBITDA, net, of $5 to $6 million for fiscal 2017.
Revision to Prior Period Financial Statements
During the preparation of the Company’s Form 10-Q for the nine months ended March 31, 2017, misstatements were identified regarding the timing of revenue recognition for the complex 12-country NFS Ascent contract. NETSOL will amend its financial statements for the quarters ended September 30, 2015, December 31, 2015, September 30, 2016 and December 31, 2016. The cumulative impact to the Company’s financial results from the amendment is immaterial for the fiscal year ended June 30, 2016 and the nine months ended March 31, 2017. The Company has disclosed further in detail in its Form 10-Q for the period ended March 31, 2017, which will be filed today with the Securities Exchange Commission.
Fiscal 2017 Third Quarter Conference Call
|When:||Monday, May 22, 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 10106843. The replay will be available through Monday, May 29, 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.
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. 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, EBITDA, 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 March 31,||As of June 30,|
|Cash and cash equivalents||$||8,450,115||$||11,557,527|
|Accounts receivable, net of allowance of $494,011 and $492,498||10,301,949||9,691,229|
|Accounts receivable, net - related party||4,414,635||5,691,178|
|Revenues in excess of billings||20,893,955||10,493,096|
|Revenues in excess of billings - related party||94,685||804,168|
|Other current assets||3,040,774||2,214,628|
|Total current assets||47,196,113||40,451,826|
|Property and equipment, net||21,205,976||22,774,435|
|Intangible assets, net||17,662,773||19,674,033|
|LIABILITIES AND STOCKHOLDERS' EQUITY|
|Accounts payable and accrued expenses||$||7,404,181||$||5,962,770|
|Current portion of loans and obligations under capitalized leases||5,650,475||4,440,084|
|Common stock to be issued||88,324||88,324|
|Total current liabilities||17,168,622||15,230,392|
|Long term loans and obligations under capitalized leases; less current maturities||499,515||477,692|
|Commitments and contingencies|
|Preferred stock, $.01 par value; 500,000 shares authorized;||-||-|
|Common stock, $.01 par value; 14,500,000 shares authorized;|
|11,132,349 shares issued and 11,097,570 outstanding as of March 31, 2017 and|
|10,713,372 shares issued and 10,686,093 outstanding as of June 30, 2016||111,324||107,134|
|Treasury stock (34,779 shares and 27,279 shares)||(454,310||)||(415,425||)|
|Stock subscription receivable||(359,070||)||(783,172||)|
|Other comprehensive loss||(18,797,496||)||(18,730,494||)|
|Total NetSol stockholders' equity||65,016,120||64,303,629|
|Total stockholders' equity||80,553,151||77,641,331|
|Total liabilities and stockholders' equity||$||98,221,288||$||93,349,415|
|NETSOL Technologies, Inc. and Subsidiaries|
|Schedule 2: Consolidated Statement of Operations|
|For the Three Months||For the Nine Months|
|Ended March 31,||Ended March 31,|
|License fees - related party||-||484,644||246,957||484,644|
|Maintenance fees - related party||51,698||28,423||233,674||218,409|
|Services - related party||1,624,132||2,554,347||5,003,605||7,377,430|
|Total net revenues||17,949,320||15,973,899||50,884,575||45,470,700|
|Cost of revenues:|
|Salaries and consultants||6,161,110||5,691,530||18,034,263||15,936,191|
|Depreciation and amortization||1,340,188||1,483,695||3,989,824||4,419,396|
|Total cost of revenues||8,953,115||8,579,765||27,062,104||24,957,068|
|Selling and marketing||2,439,948||1,896,295||7,497,464||5,597,689|
|Depreciation and amortization||284,642||321,230||825,224||898,018|
|General and administrative||4,329,798||3,808,327||12,882,407||10,391,844|
|Research and development cost||101,193||132,123||285,732||362,117|
|Total operating expenses||7,155,581||6,157,975||21,490,827||17,249,668|
|Income (loss) from operations||1,840,624||1,236,159||2,331,644||3,263,964|
|Other income and (expenses)|
|Gain (loss) on sale of assets||1,647||14,848||(33,095||)||642|
|Gain (loss) on foreign currency exchange transactions||390,897||12,955||(645,886||)||(235,291||)|
|Other income (expense)||(219||)||25,258||28,164||200,256|
|Total other income (expenses)||359,197||26,664||(746,691||)||(113,708||)|
|Net income (loss) before income taxes||2,199,821||1,262,823||1,584,953||3,150,256|
|Income tax provision||(61,604||)||(106,209||)||(440,363||)||(454,707||)|
|Net income (loss)||2,138,217||1,156,614||1,144,590||2,695,549|
|Net income (loss) attributable to NetSol||$||699,968||$||849,479||$||(1,854,537||)||$||1,313,516|
|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 Nine Months|
|Ended March 31,|
|Cash flows from operating activities:|
|Adjustments to reconcile net income|
|to net cash provided by (used in) operating activities:|
|Depreciation and amortization||4,815,048||5,317,414|
|Provision for bad debts||732||49,605|
|(Gain) Loss on sale of assets||33,095||(642||)|
|Stock issued for services||1,998,968||694,693|
|Fair market value of warrants and stock options granted||26,956||145,716|
|Changes in operating assets and liabilities:|
|Accounts receivable - related party||405,009||(3,111,316||)|
|Revenues in excess of billing||(10,388,695||)||(3,078,655||)|
|Revenues in excess of billing - related party||553,767||15,507|
|Other current assets||419,704||(838,913||)|
|Accounts payable and accrued expenses||337,890||617,112|
|Net cash provided by (used in) operating activities||(2,018,592||)||1,130,801|
|Cash flows from investing activities:|
|Purchases of property and equipment||(1,315,922||)||(2,523,865||)|
|Sales of property and equipment||149,430||556,280|
|Purchase of treasury stock||(38,885||)||-|
|Purchase of subsidiary shares from open market||-||(767,397||)|
|Net cash used in investing activities||(2,110,932||)||(3,290,538||)|
|Cash flows from financing activities:|
|Proceeds from sale of common stock||-||64,931|
|Proceeds from the exercise of stock options and warrants||785,479||728,699|
|Proceeds from exercise of subsidiary options||54,377||16,744|
|Dividend paid by subsidiary to non-controlling interest||(968,657||)||-|
|Proceeds from bank loans||1,484,162||1,334,285|
|Payments on capital lease obligations and loans - net||(251,040||)||(736,405||)|
|Net cash provided by financing activities||1,104,321||1,408,254|
|Effect of exchange rate changes||(82,209||)||(1,536,315||)|
|Net decrease in cash and cash equivalents||(3,107,412||)||(2,287,798||)|
|Cash and cash equivalents, beginning of the period||11,557,527||14,168,957|
|Cash and cash equivalents, end of period||$||8,450,115||$||11,881,159|
|NETSOL Technologies, Inc. and Subsidiaries|
|Schedule 4: Reconciliation to GAAP|
|Three Months||Three Months||Nine Months||Nine Months|
|March 31, 2017||March 31, 2016||March 31, 2017||March 31, 2016|
|Net Income (loss) before preferred dividend, per GAAP||$||699,968||$||849,479||$||(1,854,537||)||$||1,313,516|
|Depreciation and amortization||1,624,830||1,804,925||4,815,048||5,317,414|
|Non-cash stock-based compensation||478,345||368,674||2,025,924||840,409|
|Adjusted EBITDA, gross||$||4,336,124||$||3,462,819||$||8,521,799||$||9,387,394|
|Less non-controlling interest (a)||(2,045,028||)||(1,186,132||)||(4,860,826||)||(3,884,124||)|
|Adjusted EBITDA, net||$||2,291,096||$||2,276,687||$||3,660,973||$||5,503,270|
|Weighted Average number of shares outstanding|
|Basic adjusted EBITDA||$||0.21||$||0.22||$||0.34||$||0.53|
|Diluted adjusted EBITDA||$||0.21||$||0.21||$||0.33||$||0.52|
|(a)The reconciliation of adjusted EBITDA of non-controlling interest|
|to net income attributable to non-controlling interest is as follows|
|Net Income attributable to non-controlling interest||$||1,438,249||$||307,135||$||2,999,127||$||1,382,033|
|Depreciation and amortization||538,118||790,065||1,587,412||2,346,603|
|Non-cash stock-based compensation||50,898||74,662||176,155||123,501|
|Adjusted EBITDA of non-controlling interest||$||2,045,028||$||1,186,132||$||4,860,826||$||3,884,124|
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 nine month periods ended March 31, 2017 and 2016 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.