NETSOL Technologies Reports Fiscal Second Quarter 2019 Financial Results
Revenue Growth of 18% to $17 Million and EPS of $0.25 Leads to Fifth Consecutive Quarter of Profitability
CALABASAS, Calif., Feb. 13, 2019 (GLOBE NEWSWIRE) -- NETSOL Technologies, Inc. (NASDAQ: NTWK), a global business services and enterprise application solutions provider, reported results for the fiscal second quarter ended December 31, 2018.
Second Quarter and Recent Operational Highlights
- Made significant strides in the ongoing implementation process for the deployment of NFS Ascent™ Retail and Wholesale platforms with European tier-one global auto captive in China related to the $30 million contract signed in September 2018.
- Commenced implementation of NFS Ascent Retail platform at captive auto leasing company of a major US based auto manufacturer in China.
- Successfully began the implementation process of NFS Ascent™ Wholesale module in Japan for German auto manufacturing giant as part of the ongoing international deployment associated with the previously announced 12-country, $110 million contract.
- Initiated process to implement NFS Ascent Solution in Singapore, Malaysia, Hong Kong and Thailand as part of the previously announced 12-country, $110 million contract.
- Secured a mid-six-figure SaaS contract with a leading automotive leasing company covering all of Canada for a key automotive brand to provide access to the LeasePak Cloud product.
- Appointed industry veteran Hui Liang as company’s President of China to expand footprint in the region and improve existing relationships with key customers.
- Generated nearly $1.8 million through successfully implementing change requests from various customers across major business regions.
- Dedicated additional resources to data science and blockchain development initiatives in both Pakistan and Thailand to create new tools and products focused on machine learning and vehicle tracking as part of the company’s broader Innovation Lab efforts.
Fiscal Second Quarter 2019 Financial Results
Total net revenues for the second quarter of fiscal 2019 were $17.0 million, compared with $14.4 million in the prior year period. The increase in total net revenues was primarily due to an increase in total license fees of $4.4 million, which was offset by a decrease in total services revenues of $1.8 million.
- Total license fees were $4.8 million, compared with $453,000 in the prior year period.
- Total maintenance fees were $3.7 million, compared with $3.7 million in the prior year period.
- Total services revenues were $8.5 million, compared with $10.3 million in the prior year period.
Gross profit for the second quarter of fiscal 2019 was $8.9 million (or 52.1% of total net revenues), compared to $6.7 million (or 46.3% of total net revenues) in the second quarter of fiscal 2018. The increase in gross profit as a percentage of net revenues was primarily due to an increase in total net revenues of $2.6 million, which was offset by an increase in the cost of revenues of $386,000.
Operating expenses for the second quarter of fiscal 2019 increased 5% to $6.7 million (or 39.2% of total net revenues) from $6.4 million (or 44.1% of total net revenues) for the second quarter of fiscal 2018. The increase in operating expenses was primarily due to increases in salaries and wages, research and development expenses and professional services expenses, which were offset by decreases in selling and marketing expenses, depreciation, and general and administrative expenses.
Net income attributable to NETSOL for the second quarter of fiscal 2019 totaled $2.9 million or $0.25 per diluted share, an improvement from net income of $634,000 or $0.06 per diluted share in the second quarter of fiscal 2018.
Non-GAAP adjusted EBITDA for the second quarter of fiscal 2019 totaled $4.1 million or $0.35 per diluted share, an improvement from $2.1 million or $0.19 per diluted share in the second quarter of fiscal 2018 (see note regarding “Use of Non-GAAP Financial Measures,” below for further discussion of this non-GAAP measure).
At December 31, 2018, cash and cash equivalents were $20.3 million, an increase from $10.0 million at the end of the prior year quarter.
“The second quarter was yet another period of strong, consistent performance for NETSOL, driven by various new business wins throughout our major operating regions as well as ongoing implementations for some of the larger contracts we’ve secured over the past few months," said company Co-Founder, Chairman and Chief Executive Officer Najeeb Ghauri. “Financially, this healthy combination translated to 18% revenue growth year-over-year as well as our fifth consecutive profitable quarter. Operationally, with a number of significant near-term opportunities before us, we remain highly confident in our ability to generate healthy top and bottom line results for the remainder of the year and remain in solid positioning to achieve our previously stated goal of double-digit topline growth for fiscal 2019.”
“NETSOL’s total global pipeline remains robust, especially in our APAC region, where we are seeing demand grow for both our products and services,” added President and Head of Sales Naeem Ghauri. “Additionally, we are continuing to benefit from our local business knowledge and strong relationships as many of our competitors struggle to establish a presence in the region. Going forward, we are cognizant of the various, emerging macro-economic challenges in China and will continue to monitor these issues closely. However, we are still seeing healthy interest from our existing customers who are investing in our systems to derive additional efficiencies that should aid them in addressing potential corrections in their respective markets. Looking ahead to the remainder of the year, we are currently in good positioning on a number of customer ‘shortlists’ for large-scale programs where we believe we have a good chance of success and remain bullish on our forecasts for fiscal 2019.”
NETSOL Technologies management will hold a conference call today (February 13, 2019) at 11:00 a.m. Eastern time (8:00 a.m. Pacific time) to discuss these financial results. A question and answer session will follow management's presentation.
U.S. dial-in: 1-877-407-0789
International dial-in: 1-201-689-8562
Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Liolios at 1-949-574-3860.
A replay of the conference call will be available after 2:00 p.m. Eastern time on the same day through February 27, 2019.
Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 13687282
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 is backed by 40 years of domain expertise and supported by a committed team of approximately 1,350 professionals placed in eight strategically located support and delivery centers throughout the world. NFS, LeasePak, LeaseSoft or NFS Ascent – help companies transform their Finance and Leasing operations, providing a fully automated asset-based finance solution covering the complete leasing and finance lifecycle.
Certain statements in this press release are forward-looking in nature, including, but not limited to, expected net revenue and the demand for and sales lifecycle of 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.
Use of Non-GAAP Financial Measures
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.
Investor Relations Contact:
Matt Glover and Tom Colton
NETSOL Technologies, Inc. and Subsidiaries
Schedule 1: Consolidated Balance Sheets
|As of December 31,||As of June 30,|
|Cash and cash equivalents||$||20,320,804||$||22,088,853|
|Accounts receivable, net of allowance of $376,178 and $610,061||7,852,296||12,775,461|
|Accounts receivable, net - related party||2,944,290||3,374,272|
|Revenues in excess of billings||13,832,654||14,285,778|
|Revenues in excess of billings - related party||62,323||-|
|Convertible note receivable - related party||3,156,500||2,123,500|
|Other current assets||4,092,921||2,703,032|
|Total current assets||52,261,788||57,350,896|
|Revenues in excess of billings, net - long term||-||1,206,669|
|Property and equipment, net||14,005,541||16,165,491|
|Long term investment||2,689,005||3,217,162|
|Intangible assets, net||9,637,010||12,247,196|
LIABILITIES AND STOCKHOLDERS' EQUITY
|Accounts payable and accrued expenses||$||7,468,984||$||7,873,809|
|Current portion of loans and obligations under capitalized leases||7,627,426||8,595,919|
|Common stock to be issued||88,324||88,324|
|Total current liabilities||19,890,036||22,507,633|
|Loans and obligations under capitalized leases; less current maturities||345,473||330,596|
|Commitments and contingencies|
|Preferred stock, $.01 par value; 500,000 shares authorized;||-||-|
|Common stock, $.01 par value; 14,500,000 shares authorized;|
|11,860,310 shares issued and 11,654,457 outstanding as of December 31, 2018 and|
|11,708,469 shares issued and 11,502,616 outstanding as of June 30, 2018||118,603||117,085|
|Treasury stock (At cost, 205,853 shares and 205,853 shares|
|as of December 31, 2018 and June 30, 2018, respectively)||(1,205,024||)||(1,205,024||)|
|Stock subscription receivable||(221,000||)||(221,000||)|
|Other comprehensive loss||(28,446,811||)||(24,386,071||)|
|Total NetSol stockholders' equity||57,672,427||62,789,635|
|Total stockholders' equity||67,909,873||76,936,052|
|Total liabilities and stockholders' equity||$||88,145,382||$||99,774,281|
NETSOL Technologies, Inc. and Subsidiaries
Schedule 2: Consolidated Statement of Operations
|For the Three Months||For the Six Months|
|Ended December 31,||Ended December 31,|
|License fees - related party||-||217,105||-||261,513|
|Maintenance fees - related party||127,030||101,251||228,379||204,214|
|Services - related party||286,001||1,236,508||568,123||3,090,385|
|Total net revenues||17,002,627||14,446,435||33,399,172||27,265,211|
|Cost of revenues:|
|Salaries and consultants||4,497,054||5,362,092||9,517,616||10,826,252|
|Depreciation and amortization||880,048||1,168,103||1,817,652||2,341,216|
|Total cost of revenues||8,144,056||7,758,082||16,302,543||15,765,049|
|Selling and marketing||2,048,303||1,932,140||3,749,629||3,643,436|
|Depreciation and amortization||193,779||222,785||406,011||468,658|
|General and administrative||4,002,059||4,026,706||8,408,779||7,814,264|
|Research and development cost||424,652||189,891||742,807||374,976|
|Total operating expenses||6,668,793||6,371,522||13,307,226||12,301,334|
|Income (loss) from operations||2,189,778||316,831||3,789,403||(801,172||)|
|Other income and (expenses)|
|Gain (loss) on sale of assets||(3,504||)||(8,939||)||48,790||(16,069||)|
|Gain on foreign currency exchange transactions||2,536,755||1,737,967||2,547,667||2,754,329|
|Share of net loss from equity investment||(298,293||)||(203,336||)||(597,984||)||(270,898||)|
|Total other income (expenses)||2,406,078||1,546,098||2,324,502||2,507,707|
|Net income before income taxes||4,595,856||1,862,929||6,113,905||1,706,535|
|Income tax provision||(264,872||)||(200,927||)||(501,786||)||(225,798||)|
|Net income attributable to NetSol||$||2,855,629||$||634,421||$||3,818,218||$||264,923|
|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:|
|Adjustments to reconcile net income|
|to net cash provided by (used in) operating activities:|
|Depreciation and amortization||2,223,663||2,809,874|
|Share of net loss from investment under equity method||597,984||270,898|
|(Gain) loss on sale of assets||(48,790||)||16,069|
|Stock based compensation||869,743||833,530|
|Changes in operating assets and liabilities:|
|Accounts receivable - related party||(219,538||)||(1,637,829||)|
|Revenues in excess of billing||(7,633,216||)||602,676|
|Revenues in excess of billing - related party||(91,279||)||(32,308||)|
|Other current assets||(1,409,746||)||(524,547||)|
|Accounts payable and accrued expenses||139,331||887,824|
|Net cash provided by (used in) operating activities||3,154,647||(2,054,989||)|
|Cash flows from investing activities:|
|Purchases of property and equipment||(1,441,237||)||(543,123||)|
|Sales of property and equipment||519,645||193,241|
|Convertible note receivable - related party||(1,033,000||)||(500,000||)|
|Investment in WRLD3D||-||(50,000||)|
|Net cash used in investing activities||(1,954,592||)||(899,882||)|
|Cash flows from financing activities:|
|Proceeds from the exercise of stock options and warrants||65,000||215,311|
|Proceeds from exercise of subsidiary options||2,650||7,755|
|Purchase of treasury stock||-||(601,020||)|
|Dividend paid by subsidiary to non-controlling interest||(566,465||)||(417,853||)|
|Proceeds from bank loans||382,240||708,457|
|Payments on capital lease obligations and loans - net||(289,027||)||(361,814||)|
|Net cash used in financing activities||(405,602||)||(449,164||)|
|Effect of exchange rate changes||(2,562,502||)||(764,269||)|
|Net decrease in cash and cash equivalents||(1,768,049||)||(4,168,304||)|
|Cash and cash equivalents at beginning of the period||22,088,853||14,172,954|
|Cash and cash equivalents at end of period||$||20,320,804||$||10,004,650|
NETSOL Technologies, Inc. and Subsidiaries
Schedule 4: Reconciliation to GAAP
|Three Months||Three Months||Six Months||Six Months|
|December 31, 2018||December 31, 2017||December 31, 2018||December 31, 2017|
|Net Income (loss) before preferred dividend, per GAAP||$||2,855,629||$||634,421||$||3,818,218||$||264,923|
|Depreciation and amortization||1,073,827||1,390,888||2,223,663||2,809,874|
|Non-cash stock-based compensation||437,695||405,721||869,743||833,530|
|Adjusted EBITDA, gross||$||5,940,761||$||3,653,643||$||8,891,164||$||5,325,204|
|Less non-controlling interest (a)||(1,887,861||)||(1,562,303||)||(2,640,530||)||(2,264,167||)|
|Adjusted EBITDA, net||$||4,052,900||$||2,091,340||$||6,250,634||$||3,061,037|
|Weighted Average number of shares outstanding|
|Basic adjusted EBITDA||$||0.35||$||0.19||$||0.54||$||0.28|
|Diluted adjusted EBITDA||$||0.35||$||0.19||$||0.54||$||0.28|
|(a)The reconciliation of adjusted EBITDA of non-controlling interest|
|to net income attributable to non-controlling interest is as follows|
|Net Income attributable to non-controlling interest||$||1,475,355||$||1,027,581||$||1,793,901||$||1,215,814|
|Depreciation and amortization||338,278||465,138||704,132||932,320|
|Non-cash stock-based compensation||37,435||42,094||69,339||84,150|
|Adjusted EBITDA of non-controlling interest||$||1,887,861||$||1,562,303||$||2,640,530||$||2,264,167|
Released February 13, 2019