NETSOL Technologies Reports Fiscal Fourth Quarter and Full Year 2022 Financial Results

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CALABASAS, Calif., Sept. 27, 2022 (GLOBE NEWSWIRE) -- NETSOL Technologies, Inc. (Nasdaq: NTWK), a global business services and enterprise application solutions provider, reported results for the fiscal fourth quarter and full year ended June 30, 2022.

Fiscal Fourth Quarter 2022 and Recent Operational Highlights

  • NETSOL signed a contract with a notable Swedish bank to implement NFS Ascent® in Sweden, Norway, Denmark and Finland with an estimated value of $5 million over the five-year contract period.
  • NETSOL was awarded a contract by the Government of Khyber Pakhtunkhwa under the World Bank Funded “Khyber Pakhtunkhwa Revenue Mobilization and Public Resource Management Program” to provide a document management system. The contract is valued at approximately $2.2 million.
  • We successfully went live with our cloud-based NFS Ascent® Retail Platform for a bank in the United Kingdom. The Retail Platform constitutes both NFS Ascent® Omni Point of Sale and NFS Ascent® Contract Management System. This contract will provide additional subscription fees of approximately $1 million over the coming 5 years.
  • We went live with NFS Ascent® and NFS Ascent® Digital in New Zealand for a leading Japanese equipment manufacturer and in addition signed a statement of work which will generate approximately $1 million.
  • We onboarded another 7 dealers of a leading German Auto Manufacturer in the U.S. on our digital retailing solution OtozTM bringing the total to 24 at June 30, 2022.

Fiscal Fourth Quarter 2022 Financial Results

Total net revenues for the fourth quarter of fiscal 2022 were $13.5 million, compared with $15.4 million in the prior year period. The decrease in total net revenues was primarily driven by decreases in license revenue of $0.6 million and services revenue of $1.7 million, offset by an increase in subscription and support revenue of $0.5 million.

  • Total license fees were $0.95 million, compared with $1.5 million in the prior year period.
  • Total subscription (SaaS and Cloud) and support revenues were $6.1 million, compared with $5.6 million in the prior year period.
  • Total services revenues were $6.5 million, compared with $8.2 million in the prior year period.

Gross profit for the fourth quarter of fiscal 2022 was $4.8 million (or 36% of net revenues), compared to $7.5 million (or 49% of net revenues) in the fourth quarter of fiscal 2021. The decrease in gross profit was primarily due to a decrease in revenues of $1.8 million and an increase in cost of sales of $0.9 million driven by increases in salaries and consulting costs of $0.7 million.

Operating expenses for the fourth quarter of fiscal 2022 were $6.4 million (or 47% of sales), compared to $6.4 million (or 41% of sales) for the fourth quarter of fiscal 2021. Operating expenses remained flat as the increase in research and development costs of $0.3 million was offset by the decrease in salaries and wages of $0.3 million.

GAAP net loss attributable to NETSOL for the fourth quarter of fiscal 2022 totaled $2.2 million or $0.19 per diluted share, compared with GAAP net income of $1.9 million or $0.17 per diluted share in the fourth quarter of fiscal 2021.

Non-GAAP adjusted EBITDA for the fourth quarter of fiscal 2022 totaled $(1.4) million or $0.12 per diluted share, compared with non-GAAP adjusted EBITDA of $2.9 million or $0.26 per diluted share in the fourth quarter of fiscal 2021 (see note regarding “Use of Non-GAAP Financial Measures,” below for further discussion of this non-GAAP measure).

At June 30, 2022, cash and cash equivalents were $24 million, a decrease from $33.7 million at June 30, 2021.

Management Commentary

“We returned to revenue growth for fiscal 2022 increasing 4.2% after two years of revenue decline in fiscal years 2020 and 2021,” said NETSOL Co-Founder, Chairman and Chief Executive Officer Najeeb Ghauri. “We believe we have robust traction in the current pipeline for fiscal 2023 as we aim for double digit revenue growth. Our pipeline in the North American market is healthy and strong. We are working on potential projects for both multinational and US based major Tier 1 captive finance companies. Our Flagship NFS Ascent offering is in a strong position as we are gaining momentum both for SaaS and license offerings. Additionally, we have a robust pipeline in the European markets as our team in the UK are working diligently to secure new customers in the retail sector. We have also signed up a few more Otoz digital platforms through MINI Anywhere across the US to a total of 30 dealerships to date.”

Company CFO Roger Almond added: “Our subscription and support segment were a key growth driver during the year. As our workforce continues to return to the office across our global footprint, we expect growth will accelerate in the quarters ahead, which will require a related increase in expenses to support our increased business activity moving forward. Our cash position remains strong, providing the resources to support our core business growth as well as strategic investments in high-return, long-term opportunities, such as the promising work of the Otoz Innovation Lab.”

Conference Call

NETSOL Technologies management will hold a conference call today (September 27, 2022) at 9:00 a.m. Eastern time (6:00 a.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 10 minutes prior to the start time. An operator will register your name and organization.

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

For interested individuals unable to join the conference call, a dial-in replay of the call will be available until October 11, 2022.

Toll-free replay number: 844-512-2921
International replay number: 412-317-6671
Replay ID: 13732869

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 1750 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:

NetSol Technologies Investor Relations
818-222-9195

investors@netsoltech.com


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

   As of   As of
ASSETS
 		June 30, 2022   June 30, 2021
Current assets:      
Cash and cash equivalents $ 23,963,797     $ 33,705,154  
Accounts receivable, net of allowance of $156,846 and $166,231   8,669,202       4,184,096  
Revenues in excess of billings, net of allowance of $136,839 and $136,976   14,571,776       14,680,131  
Other current assets, net of allowance of $1,243,633 and $1,243,633   2,223,361       3,009,393  
Total current assets   49,428,136       55,578,774  
Revenues in excess of billings, net - long term   853,601       957,603  
Convertible note receivable - related party, net of allowance of $4,250,000 and $4,250,000   -       -  
Property and equipment, net   9,382,624       12,091,812  
Right of use of assets - operating leases   969,163       1,345,869  
Long term investment   1,059,368       3,155,852  
Other assets   25,546       55,127  
Intangible assets, net   1,587,670       3,904,656  
Goodwill   9,302,524       9,516,568  
Total assets $ 72,608,632     $ 86,606,261  
       
LIABILITIES AND STOCKHOLDERS' EQUITY      
Current liabilities:      
Accounts payable and accrued expenses $ 6,813,541     $ 6,696,035  
Current portion of loans and obligations under finance leases   8,567,145       11,366,171  
Current portion of operating lease obligations   548,678       857,729  
Unearned revenue   4,901,562       4,556,626  
Total current liabilities   20,830,926       23,476,561  
Loans and obligations under finance leases; less current maturities   476,223       699,841  
Operating lease obligations; less current maturities   447,260       564,257  
Total liabilities   21,754,409       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;      
12,196,570 shares issued and 11,257,539 outstanding as of June 30, 2022 and      
12,181,585 shares issued and 11,265,064 outstanding as of June 30, 2021   121,966       121,816  
Additional paid-in-capital   128,181,844       129,018,826  
Treasury stock (at cost, 939,031 shares and 916,521 shares       
as of June 30, 2022 and June 30, 2021, respectively)    (3,920,856 )     (3,820,750 )
Accumulated deficit   (39,652,438 )     (38,801,282 )
Other comprehensive loss   (39,363,085 )     (31,868,481 )
Total NetSol stockholders' equity   45,367,431       54,650,129  
Non-controlling interest   5,486,792       7,215,473  
Total stockholders' equity   50,854,223       61,865,602  
Total liabilities and stockholders' equity $ 72,608,632     $ 86,606,261  


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

  For the Years
  Ended June 30,
   2022    2021
Net Revenues:      
License fees $ 4,539,260     $ 6,249,924  
Subscription and support   28,284,759       22,173,745  
Services   24,423,960       26,448,171  
Services - related party   -       48,775  
Total net revenues   57,247,979       54,920,615  
       
Cost of revenues:      
Salaries and consultants   24,528,155       20,969,298  
Travel   1,036,623       663,403  
Depreciation and amortization   2,949,093       2,990,689  
Other   4,996,934       3,944,197  
Total cost of revenues   33,510,805       28,567,587  
       
Gross profit   23,737,174       26,353,028  
       
Operating expenses:      
Selling and marketing   7,220,022       6,555,004  
Depreciation and amortization   863,180       965,625  
General and administrative   15,390,141       15,437,382  
Research and development cost   1,342,154       674,168  
Total operating expenses   24,815,497       23,632,179  
       
Income (loss) from operations   (1,078,323 )     2,720,849  
       
Other income and (expenses)      
Loss on sale of assets   (205,288 )     (191,935 )
Interest expense   (369,801 )     (394,289 )
Interest income   1,655,883       1,017,432  
Gain (loss) on foreign currency exchange transactions   4,327,590       (597,433 )
Share of net loss from equity investment   (2,021,480 )     (253,819 )
Other income (expense)   (218,840 )     987,444  
Total other income (expenses)   3,168,064       567,400  
       
Net income before income taxes   2,089,741       3,288,249  
Income tax provision   (988,938 )     (1,026,617 )
Net income   1,100,803       2,261,632  
Non-controlling interest   (1,951,959 )     (483,375 )
Net income (loss) attributable to NetSol $ (851,156 )   $ 1,778,257  
       
       
       
Net income (loss) per share:      
Net income (loss) per common share      
Basic $ (0.08 )   $ 0.15  
Diluted $ (0.08 )   $ 0.15  
       
Weighted average number of shares outstanding      
Basic   11,250,219       11,499,983  
Diluted   11,250,219       11,499,983  


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

   For the Years 
   Ended June 30,
  2022   2021
Cash flows from operating activities:          
Net income $        1,100,803     $          2,261,632  
Adjustments to reconcile net income to net cash provided by operating activities:           
Depreciation and amortization          3,812,273                3,956,314  
Provision for bad debts               23,388                 (332,325 )
Goodwill impairment             214,044                               -  
Share of net loss from investment under equity method          2,021,480                   253,819  
Loss on sale of assets             205,288                   191,935  
Gain on forgiveness of loan                         -                 (469,721 )
Stock based compensation             104,347                   342,153  
Changes in operating assets and liabilities:          
Accounts receivable        (5,669,262 )              6,861,454  
Revenues in excess of billing        (1,273,693 )              2,839,709  
Other current assets             469,194                 (857,708 )
Accounts payable and accrued expenses          1,121,308                   474,098  
Unearned revenue             931,452                   204,563  
Net cash provided by operating activities          3,060,622              15,725,923  
           
Cash flows from investing activities:          
Purchases of property and equipment        (2,609,205 )            (2,551,283 )
Sales of property and equipment             349,058                   188,233  
Investment in associates                         -                 (155,500 )
Net cash used in investing activities        (2,260,147 )            (2,518,550 )
           
Cash flows from financing activities:          
Purchase of treasury stock           (100,106 )            (2,364,781 )
Purchase of subsidiary treasury stock           (950,352 )                             -  
Proceeds from bank loans             941,841                1,898,013  
Payments on finance lease obligations and loans - net        (1,270,104 )               (698,797 )
Net cash used in financing activities        (1,378,721 )            (1,165,565 )
Effect of exchange rate changes        (9,163,111 )              1,496,516  
Net increase (decrease) in cash and cash equivalents        (9,741,357 )            13,538,324  
Cash and cash equivalents at beginning of the period        33,705,154              20,166,830  
Cash and cash equivalents at end of period $      23,963,797     $        33,705,154  


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

  For the Year Ended   For the Year Ended
  June 30, 2022   June 30, 2021
       
Net Income (loss) attributable to NetSol $ (851,156 )   $ 1,778,257  
Non-controlling interest   1,951,959       483,375  
Income taxes   988,938       1,026,617  
Depreciation and amortization   3,812,273       3,956,314  
Interest expense   369,801       394,289  
Interest (income)   (1,655,883 )     (1,017,432 )
EBITDA $ 4,615,932     $ 6,621,420  
Add back:      
Non-cash stock-based compensation   104,347       342,153  
Adjusted EBITDA, gross $ 4,720,279     $ 6,963,573  
Less non-controlling interest (a)   (2,903,457 )     (1,588,701 )
Adjusted EBITDA, net $ 1,816,822     $ 5,374,872  
       
       
Weighted Average number of shares outstanding      
Basic   11,250,219       11,499,983  
Diluted   11,250,219       11,499,983  
       
Basic adjusted EBITDA $ 0.16     $ 0.47  
Diluted adjusted EBITDA $ 0.16     $ 0.47  
       
       
(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 $ 1,951,959     $ 483,375  
Income Taxes   258,468       147,688  
Depreciation and amortization   1,096,709       1,115,734  
Interest expense   109,361       121,740  
Interest (income)   (526,567 )     (319,674 )
EBITDA $ 2,889,930     $ 1,548,863  
Add back:      
Non-cash stock-based compensation   13,527       39,838  
Adjusted EBITDA of non-controlling interest $ 2,903,457     $ 1,588,701  
       

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Source: NETSOL Technologies Inc.

Released September 27, 2022