NETSOL Technologies Reports Fiscal First Quarter 2022 Financial Results

  • Subscription and Support Revenue Jumped 20% to $6.2 Million, Representing a Nearly $25 Million Annualized Run Rate with Opportunities for Upside
  • Otoz Digital Retail Platform Partnership with MINI Anywhere Continues to Gain Traction with 10 Dealerships Now Subscribed and Additional States to be Enabled in the Coming Months; Targeting 100 Dealers by Fiscal Year-End 2022
  • Company Reaffirms Fiscal 2022 Total Revenues and Subscription and Support Revenues Guidance of at Least 10% and 20%, Respectively

CALABASAS, Calif., Nov. 11, 2021 (GLOBE NEWSWIRE) -- NETSOL Technologies, Inc. (Nasdaq: NTWK), a global business services and enterprise application solutions provider, reported results for the fiscal first quarter ended September 30, 2021.

Fiscal First Quarter 2022 and Recent Operational Highlights

  • Subscription (SaaS and Cloud) and support quarterly revenues increased 20% to $6.2 million, representing a nearly $25 million run rate over the coming twelve months with opportunities for upside.
  • Generated approximately $1.5 million by successfully implementing change requests from various customers across multiple regions during the fiscal first quarter.
  • Successfully renegotiated certain annual support contracts resulting in additional support revenue of approximately $1.0 million to be recognized over the term of the combined contracts.
  • NETSOL’s U.S. based mobility startup Otoz launched its digital automotive retail platform for BMW Group Financial Services in the U.S. for its key brand MINI Anywhere. MINI Anywhere is now live with 10 MINI dealerships as of October; Otoz is also scheduled to onboard additional California-based dealers before an expansion into Florida. Long term, the solution has the potential to be rolled out to over 100 MINI dealerships across all 50 states.
  • Regarding previously announced 12-country, $110 million contract with German auto manufacturing giant, the Company made continued progress with respect to additional NFS Ascent® implementations. The company began the NFS Ascent® implementation process in India during the quarter.
  • Signed an agreement with Motorcycle Group to deploy the cloud-based version of NETSOL’s flagship NFS Ascent® platform across the customer’s entire operations. This agreement marks the first official sale for NFS Ascent in the U.S. market.
  • Went “live” with NFS Ascent and NFS Ascent Digital in New Zealand for a leading Japanese equipment manufacturer.

Fiscal First Quarter 2022 Financial Results
Total net revenues for the first quarter of fiscal 2022 were $13.4 million, compared with $12.6 million in the prior year period. The increase in total net revenues was primarily driven by an increase in subscription and support revenues of $1.1 million, slightly offset by a decrease in total services revenues of $292,000.

  • Total license fees were $10,700, compared with $3,500 in the prior year period.
  • Total subscription (SaaS and Cloud) and support revenues were $6.2 million, compared with $5.2 million in the prior year period.
  • Total services revenues were $7.2 million, compared with $7.5 million in the prior year period.

Gross profit for the first quarter of fiscal 2022 decreased 14.7% to $5.4 million (or 40.6% of net revenues), compared to $6.4 million (or 50.5% of net revenues) in the first quarter of fiscal 2021. The decrease in gross profit was primarily due to increases in cost of revenues of $1.7 million, offset by a $773,000 increase in revenue. The increases in cost of sales were primarily due to increases in salaries and consulting costs of $1.1 million, travel costs of $110,000, depreciation of $58,000, and other costs of 407,000.

Operating expenses for the first quarter of fiscal 2022 increased 13.8% to $6.1 million (or 45.3% of sales) from $5.3 million (or 42.3% of sales) for the first quarter of fiscal 2021. The increase in operating expenses was primarily due to increases in selling and marketing, general and administrative, and research and development costs.

GAAP net income attributable to NETSOL for the first quarter of fiscal 2022 totaled $188,000 or $0.02 per diluted share, compared with GAAP net income of $718,000 or $0.06 per diluted share in the first quarter of fiscal 2021. GAAP net income attributable to NETSOL included a $1.3 million gain on foreign currency exchange transactions in the first quarter of fiscal 2022, which was an increase from a gain of $296,000 in the prior year period.

Non-GAAP adjusted EBITDA for the first quarter of fiscal 2022 totaled $770,000 or $0.07 per diluted share, compared with non-GAAP adjusted EBITDA of $1.6 million or $0.14 per diluted share in the first quarter of fiscal 2021 (see note regarding “Use of Non-GAAP Financial Measures,” below for further discussion of this non-GAAP measure).

At September 30, 2021, cash and cash equivalents were $27.0 million, a decrease from $33.7 million at June 30, 2021.

Stock Repurchase Program
On July 30, 2020, NETSOL’s Board of Directors approved a stock repurchase program that authorized potential repurchases of up to $2 million of its common stock over a six-month period. All shares permitted to be purchased under this July 2020 plan were purchased during the plan’s original date and prior to the conclusion of the extension of the plan. On May 21, 2021, the Board of Directors authorized an additional repurchase plan of up to $2 million worth of shares of common stock through November 20, 2021. Under the program, the Company may repurchase its common stock in the open market from time-to-time, in amounts, at prices, and at such times as the Company deems appropriate, subject to market conditions and federal and state laws governing such transactions. NETSOL expects to fund the repurchase with its existing cash balance and cash generated from operations.

As of September 30, 2021, the Company had repurchased 691,528 shares of its common stock at an aggregate value of $2,464,887.

Management Commentary
“In the first quarter we capitalized on the strong momentum built over the course of the past year and are firmly positioned to achieve our growth goals for fiscal 2022,” said NETSOL Co-Founder, Chairman and Chief Executive Officer Najeeb Ghauri. “Within our core business, the pipeline and mix of opportunities remains robust, particularly in our European and North American growth markets, giving us confidence in our ability to drive additional contract signings over the coming months. Within our more venture-focused operations, the rollout of the Otoz Digital Retail Platform in partnership with MINI Anywhere has been a resounding early success; with 10 dealerships subscribed and additional states going online in the near future, we are encouraged by the initial response and total opportunity. Longer term, we will continue to push the boundaries for new ownership and payment models, supporting our customers where they are today and where they want to go in the future.”

Company CFO Roger Almond added: “Our strong financial performance during the quarter was highlighted by an increase in recurring revenues of 10% sequentially and 20% over the prior year, respectively. As we conservatively begin the process of welcoming our employees back to work across our global footprint, we expect a return to sales growth with a related increase in expenses to support our increased business activity. Our cash position remains near record levels, providing additional resources to support our core business as well as strategic investments in high-return, long-term opportunities, including our work in the Otoz Innovation Lab. With these factors in consideration, we are reiterating our full year revenue outlook of 10% topline growth and 20% subscription revenue growth throughout the balance of the year.”

Conference Call
NETSOL Technologies management will hold a conference call today (November 11, 2021) at 4:30 p.m. Eastern time (1:30 p.m. Pacific time) to discuss these financial results. A question and answer session will follow management's presentation.

U.S. dial-in: 877-407-0789
International dial-in: 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 Gateway Investor Relations at 949-574-3860.

The conference call will be broadcasted live and available for replay here and via the Investor Relations section of NETSOL’s website.

A replay of the conference call will be available after 7:30 p.m. Eastern time through November 25, 2021.

Toll-free replay number: 844-512-2921
International replay number: 412-317-6671
Replay ID: 13724399

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 more than 1300 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 finance and leasing lifecycle.

About Otoz
Otoz, a division of NETSOL Technologies Inc. (Nasdaq: NTWK), provides business-to-business, white-label technology solutions for new mobility. The Otoz suite of agile and customizable mobility solutions ranges from car sharing and subscription products to AI-enabled chatbots, allowing businesses to engage consumers and facilitate the complete transaction lifecycle intelligently and digitally. Otoz technologies empower automotive companies and start-ups to launch digital retailing and new mobility models quickly and efficiently. The technology Otoz has developed is cloud-native and supported by artificial intelligence (AI), machine learning (ML), internet of things (IoT) and blockchain. Otoz technology drives utilization, while supporting robust and efficient operations.

Forward-Looking Statements
This press release may contain forward-looking statements relating to the development of the Company's products and services and future operating results, including statements regarding the Company that are subject to certain risks and uncertainties such as the effect of disparate stay at home orders and social distancing requirements imposed internationally by COVID-19 and its resultant impact on our financials and the world economy 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, as well as the delay in recovery or a prolonged economic downturn that effects our Company, our customers and the world economy. 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
Gateway Investor Relations

NETSOL Technologies, Inc. and Subsidiaries
Schedule 1: Consolidated Balance Sheets

  As of   As of
September 30, 2021   June 30, 2021
Current assets:      
Cash and cash equivalents $ 26,999,876     $ 33,705,154  
Accounts receivable, net of allowance of $176,986and $166,231   6,043,444       4,184,096  
Accounts receivable - related party, net of allowance of $1,373,099 and $1,373,099   -       -  
Revenues in excess of billings, net of allowance of $70,919and $136,976   16,164,012       14,680,131  
Revenues in excess of billings - related party, net of allowance of $8,163and $8,163   -       -  
Other current assets, net of allowance of $1,243,633and $1,243,633   2,937,927       3,009,393  
Total current assets   52,145,259       55,578,774  
Revenues in excess of billings, net - long term   969,456       957,603  
Convertible note receivable - related party, net of allowance of $4,250,000 and $4,250,000   -       -  
Property and equipment, net   10,821,869       12,091,812  
Right of use of assets - operating leases   1,197,453       1,345,869  
Long term investment   2,995,104       3,155,852  
Other assets   59,638       55,127  
Intangible assets, net   3,183,317       3,904,656  
Goodwill   9,516,568       9,516,568  
Total assets $ 80,888,664     $ 86,606,261  
Current liabilities:      
Accounts payable and accrued expenses $ 6,369,870     $ 6,696,035  
Current portion of loans and obligations under finance leases   10,423,215       11,366,171  
Current portion of operating lease obligations   828,879       857,729  
Unearned revenue   3,387,902       4,556,626  
Total current liabilities   21,009,866       23,476,561  
Loans and obligations under finance leases; less current maturities   396,771       699,841  
Operating lease obligations; less current maturities   438,423       564,257  
Total liabilities   21,845,060       24,740,659  
Commitments and contingencies      
Stockholders' equity:      
Preferred stock, $.01 par value; 500,000 shares authorized;   -       -  
Common stock, $.01 par value; 14,500,000 shares authorized;      
12,183,570 shares issued and 11,244,539 outstanding as of September 30, 2021 and      
12,181,585 shares issued and 11,265,064 outstanding as of June 30, 2021   121,836       121,816  
Additional paid-in-capital   129,030,982       129,018,826  
Unexpected eval class (      
as of September 30, 2021 and June 30, 2021, respectively)   (3,920,856 )     (3,820,750 )
Accumulated deficit   (38,613,313 )     (38,801,282 )
Other comprehensive loss   (34,013,886 )     (31,868,481 )
Total NetSol stockholders' equity   52,604,763       54,650,129  
Non-controlling interest   6,438,841       7,215,473  
Total stockholders' equity   59,043,604       61,865,602  
Total liabilities and stockholders' equity $ 80,888,664     $ 86,606,261  

NETSOL Technologies, Inc. and Subsidiaries
Schedule 2: Consolidated Statement of Operations

      For the Three Months
      Ended September 30,
        2021       2020  
Net Revenues:      
  License fees $ 10,716     $ 3,475  
  Subscription and support   6,230,389       5,171,863  
  Services   7,179,656       7,472,040  
    Total net revenues   13,420,761       12,647,378  
Cost of revenues:      
  Salaries and consultants   5,662,410       4,526,649  
  Travel   214,132       103,752  
  Depreciation and amortization   765,735       707,249  
  Other   1,335,461       928,153  
    Total cost of revenues   7,977,738       6,265,803  
Gross profit   5,443,023       6,381,575  
Operating expenses:      
  Selling and marketing   1,619,993       1,609,604  
  Depreciation and amortization   214,271       221,790  
  General and administrative   3,973,139       3,427,636  
  Research and development cost   275,230       85,989  
    Total operating expenses   6,082,633       5,345,019  
Income (loss) from operations   (639,610 )     1,036,556  
Other income and (expenses)      
  Loss on sale of assets   (110,600 )     (21,742 )
  Interest expense   (101,013 )     (103,327 )
  Interest income   443,133       200,821  
  Gain on foreign currency exchange transactions   1,284,148       296,041  
  Share of net loss from equity investment   (160,965 )     (107,850 )
  Other income   3,029       87,272  
    Total other income (expenses)   1,357,732       351,215  
Net income before income taxes   718,122       1,387,771  
Income tax provision   (167,627 )     (264,294 )
Net income   550,495       1,123,477  
  Non-controlling interest   (362,526 )     (405,923 )
Net income attributable to NetSol $ 187,969     $ 717,554  
Net income per share:      
  Net income per common share      
    Basic $ 0.02     $ 0.06  
    Diluted $ 0.02     $ 0.06  
Weighted average number of shares outstanding      
  Basic   11,254,205       11,787,233  
  Diluted   11,254,205       11,787,233  

NETSOL Technologies, Inc. and Subsidiaries
Schedule 3: Consolidated Statement of Cash Flows

        For the Three Months
        Ended September 30,
          2021       2020  
Cash flows from operating activities:      
  Net income $ 550,495     $ 1,123,477  
  Adjustments to reconcile net income      
    to net cash provided by operating activities:      
  Depreciation and amortization   980,006       929,039  
  Provision for bad debts   (45,274 )     (258,160 )
  Share of net loss from investment under equity method   160,965       107,850  
  Loss on sale of assets   110,600       21,742  
  Stock based compensation   3,003       90,995  
  Changes in operating assets and liabilities:      
    Accounts receivable   (2,034,434 )     3,823,299  
    Revenues in excess of billing   (1,952,228 )     394,995  
    Other current assets   (35,342 )     (393,253 )
    Accounts payable and accrued expenses   (43,293 )     255,239  
    Unearned revenue   (1,086,151 )     (1,383,619 )
  Net cash provided by (used in) operating activities   (3,391,653 )     4,711,604  
Cash flows from investing activities:      
  Purchases of property and equipment   (216,112 )     (489,289 )
  Sales of property and equipment   19,705       32,673  
  Investment in associates   -       (60,500 )
  Net cash used in investing activities   (196,407 )     (517,116 )
Cash flows from financing activities:      
  Purchase of treasury stock   (100,106 )     (464,676 )
  Proceeds from bank loans   -       697,295  
  Payments on finance lease obligations and loans - net   (363,464 )     (143,506 )
  Net cash provided by (used in) financing activities   (463,570 )     89,113  
Effect of exchange rate changes   (2,653,648 )     434,934  
Net increase (decrease) in cash and cash equivalents   (6,705,278 )     4,718,535  
Cash and cash equivalents at beginning of the period   33,705,154       20,166,830  
Cash and cash equivalents at end of period $ 26,999,876     $ 24,885,365  

NETSOL Technologies, Inc. and Subsidiaries
Schedule 4: Reconciliation to GAAP

  For the Three Months Ended   For the Three Months Ended
  September 30, 2021   September 30, 2020
Net Income (loss) attributable to NetSol $ 187,969     $ 717,554  
Non-controlling interest   362,526       405,923  
Income taxes   167,627       264,294  
Depreciation and amortization   980,006       929,039  
Interest expense   101,013       103,327  
Interest (income)   (443,133 )     (200,821 )
EBITDA $ 1,356,008     $ 2,219,316  
Add back:      
Non-cash stock-based compensation   3,003       90,995  
Adjusted EBITDA, gross $ 1,359,011     $ 2,310,311  
Less non-controlling interest (a)   (588,879 )     (698,844 )
Adjusted EBITDA, net $ 770,132     $ 1,611,467  
Weighted Average number of shares outstanding      
Basic   11,254,205       11,787,233  
Diluted   11,254,205       11,787,233  
Basic adjusted EBITDA $ 0.07     $ 0.14  
Diluted adjusted EBITDA $ 0.07     $ 0.14  
(a)The reconciliation of adjusted EBITDA of non-controlling interest    
to net income attributable to non-controlling interest is as follows      
Net Income (loss) attributable to non-controlling interest $ 362,526     $ 405,923  
Income Taxes   52,666       48,649  
Depreciation and amortization   287,631       264,565  
Interest expense   29,400       31,520  
Interest (income)   (143,344 )     (65,957 )
EBITDA $ 588,879     $ 684,700  
Add back:      
Non-cash stock-based compensation   -       14,144  
Adjusted EBITDA of non-controlling interest $ 588,879     $ 698,844  



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Source: NETSOL Technologies Inc.