NetSol Technologies Reports Fourth Quarter and Fiscal Year 2009 Financial Results
Fourth Quarter Revenue of $6.9 Million Reflects 36% Sequential Revenue Growth; Higher Sales and a Significant Reduction in Operating Expense Drive Improvements in Reducing Sequential Quarterly GAAP Net Loss and Returning to EBITDA Profitability
EMERYVILLE, CA -- (MARKET WIRE) -- 09/15/09 -- NetSol Technologies, Inc. "NetSol" (NASDAQ: NTWK) (NASDAQ DUBAI: NTWK), a U.S. corporation providing global business services and enterprise application solutions to private and public sector organizations worldwide, today announced fourth quarter financial results for fiscal year 2009, for the period ended June 30, 2009.
Fiscal Year 2009 Results
-- Revenues totaled $26.4 million, down 28% year-over-year -- Service fees totaled $15.2 million -- Maintenance fees totaled $6.5 million -- License fees totaled $4.8 million -- Full year GAAP net loss applicable to common shareholders of $8.2 million, or a loss of $0.30 per fully diluted share, compared to GAAP net income applicable to common shareholders of $4.8 million, or $0.19 per fully diluted share, in the year ago period -- Full year EBITDA loss of $2.5 million, or EBITDA loss of $0.09 per diluted share, versus EBITDA of $9.1 million, or $0.35 per diluted share, in the year ago period
Najeeb Ghauri, NetSol Technologies chairman and chief executive officer, commented, "NetSol's fiscal fourth quarter revenues exceeded the high end of our sequential growth range projection, rising 36%, driven by increased license and IT services sales. While our full year results reflect the challenges of the global economic downturn compared to a 2008 period which was the strongest in the company's history, NetSol's fiscal fourth quarter results provide clear evidence that our NetSol Financial Suite(TM) and global BestShoring® IT service offerings are gaining fresh momentum. The success of our comprehensive cost efficiency measures yielded an impressive 23% reduction in fiscal fourth quarter operating expenses as compared to the year ago period. Our more efficient operating expense base, combined with our renewed sequential revenue growth, drove material improvements in reducing the company's sequential quarterly GAAP net loss as well as supported an important return to quarterly EBITDA profitability.
"I am pleased to report we enter our fiscal year 2010 with a significantly stronger pipeline, and are also seeing excellent new opportunities in the government and defense sectors. Looking ahead to fiscal 2010, we anticipate stronger full year results in terms of top and bottom line performance. If we couple our more efficient global operating structure with the fresh momentum on the sales side, we currently forecast a quarterly GAAP breakeven revenue run rate of approximately $8.0 million, and $6.5 million on a cash basis," concluded Mr. Ghauri.
NetSol reported consolidated revenues of $6.9 million for the fourth quarter of fiscal year 2009, representing a 35% decline as compared to the $10.5 million in revenues reported for the same period a year ago.
U.S. GAAP (Generally Accepted Accounting Principles) net loss applicable to common shareholders for the fourth quarter of fiscal year 2009 was approximately $0.9 million, or a loss of $0.03 per diluted share, which compares to GAAP net income applicable to common shareholders of $1.3 million, or $0.05 per diluted share, in the same period of fiscal year 2008.
NetSol reported EBITDA of $0.6 million, or $0.02 per diluted share, for the fourth quarter of fiscal year 2009 compared to EBITDA of $2.6 million, or $0.09 per diluted share, in the year ago period.
EBITDA is defined as earnings before interest, taxes, depreciation and amortization. The Company uses EBITDA as a measure of the Company's operating trends. Investors are cautioned that EBITDA is not a measure of liquidity or of financial performance under Generally Accepted Accounting Principles (GAAP). The EBITDA numbers presented may not be comparable to similarly titled measures reported by other companies. EBITDA, while providing useful information, should not be considered in isolation or as an alternative to net income or cash flows as determined under GAAP. Consistent with the SEC Regulation G, the non-GAAP measures in this press release have been reconciled to the nearest GAAP measure, and this reconciliation is located under the financial table heading "Reconciliation to GAAP."
Fourth Quarter Business Highlights
-- Signed a significant new NetSol Financial Suite(TM) contract with
Minsheng Financial Leasing Company to deploy NetSol's industry leading
leasing suite
-- Secured a new licensing agreement with a major Chinese captive finance
company to implement the NetSol Financial Suite(TM) (NetSol Financial
Suite(TM)), including NetSol's flagship LeaseSoft solution
-- Major international automotive manufacturer signs LeaseSoft license
contract for captive finance in China
-- Secured new European customer contract to implement Wholesale Finance
System for a Netherlands based finance company
-- NetSol Technologies Europe wins a new contract to deploy its LeaseSoft
suite at United Kingdom based nationwide loan company
-- NetSol and Atheeb Group form Atheeb NetSol Limited, a software
engineering and joint venture company focused on Saudi Arabia, GCC, and The
Middle East
-- NetSol and Grupo Karims form NetSol GK Latin America, an IT services
and software development joint venture serving the Americas
-- Announced new Neptune Software plc partnership, as well as first joint
customer win, extending the reach of the NetSol Financial Suite (NetSol
Financial Suite(TM)) and LeaseSoft Evolve product in Africa, as leasing is
rapidly expanding as a financing solution across the continent
-- Launched beta version of smartOCI, an SAP compatible multiple catalog
search engine
-- Subsequent to the quarter end, NetSol teamed with a top 5 U.S. defense
contractor with a joint bid submitted for a significant multi-million
dollar military contract in Pakistan
Conference Call & Webcast Information
Following the distribution of the fiscal fourth quarter and full year 2009 financial results, NetSol will host a conference call today at 11:00 a.m. ET (8:00 a.m. PT) to review the quarterly financial and operational performance. Najeeb Ghauri, NetSol Technologies chairman and chief executive officer, will host the call, which will be webcast live. The webcast and a supporting slide presentation will be made available on the investor relations section of the NetSol corporate website at www.netsoltech.com. Telephone access to the conference call will be available in North America by dialing +1 (877) 407-0782 or internationally by dialing +1 (201) 689-8567.
An audio replay of the conference call will be available approximately two hours following the conclusion of the call and for the following 30 day period. To access the replay in North America, dial +1 (877) 660-6853 or, when calling internationally, dial +1 (201) 612-7415, using replay account code # 286 and conference ID # 331287. An archived replay of the conference webcast will also be available on the investor relations section of the NetSol corporate website at www.netsoltech.com.
About NetSol Technologies, Inc.
NetSol Technologies, Inc. (NASDAQ: NTWK) (NASDAQ DUBAI: NTWK) is a worldwide provider of global business services and enterprise application solutions. Since its inception in 1995, NetSol has used its BestShoring® practices and highly experienced resources in analysis, development, quality assurance, and implementation to deliver high-quality, cost-effective solutions. Specialized by industry, these product and services offerings include credit and finance portfolio management systems, hospital/healthcare information management systems (HIMS), SAP consulting and services, custom development, systems integration, and technical services for the global Financial, Healthcare, Insurance, Energy, and Technology markets. NetSol's commitment to quality is demonstrated by its achievement of the ISO 9001, ISO 27001, and SEI (Software Engineering Institute) CMMI (Capability Maturity Model) Maturity Level 5 assessments, a distinction shared by fewer than 100 companies worldwide. NetSol Technologies' clients include Fortune 500 manufacturers, global automakers, financial institutions, utilities, technology providers, and government agencies. Headquartered in Emeryville, California, NetSol Technologies has operations and offices in Adelaide, Bangkok, Beijing, Lahore, London, and San Pedro Sula.
To learn more about NetSol Technologies, Inc., visit www.netsoltech.com
To join the NetSol Technologies, Inc. email communications list, visit: http://www.b2i.us/irpass.asp?BzID=897&to=ea&s=0
NetSol Technologies, Inc. Forward-looking Statement
This press release may contain forward looking statements relating to the development of the Company's products and services and future operation results, including statements regarding the Company that are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. The words "believe," "expect," "anticipate," "intend," variations of such words, and similar expressions, identify forward looking statements, 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.
NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
For the quarter ended For the Year ened
June 30, 2009 June 30, 2008 June 30, 2009 June 30, 2008
------------- ------------- ------------- -------------
Net Revenues:
License fees $ 1,283,700 $ 4,915,813 $ 4,786,332 $ 12,685,039
Maintenance
fees 1,727,900 1,749,871 6,499,419 6,306,321
Services 3,841,580 3,849,971 15,162,426 17,650,815
------------- ------------- ------------- -------------
Total
revenues 6,853,180 10,515,655 26,448,177 36,642,175
Cost of
revenues
Salaries and
consultants 2,135,294 2,728,921 9,787,965 10,071,664
Travel 341,589 746,745 1,334,879 1,719,743
Repairs and
maintenance 80,051 72,692 370,487 405,140
Insurance 39,371 85,283 174,761 239,043
Depreciation
and
amortization 598,358 551,166 2,214,211 1,398,454
Other 1,107,766 548,587 3,316,031 1,890,100
------------- ------------- ------------- -------------
Total cost
of
sales 4,302,429 4,733,394 17,198,334 15,724,144
------------- ------------- ------------- -------------
Gross profit 2,550,751 5,782,261 9,249,843 20,918,031
Operating
expenses:
Selling and
marketing 636,374 904,562 3,115,883 3,722,470
Depreciation
and
amortization 497,716 517,321 1,973,997 1,939,502
Bad debt
expense (26,973) 55,016 2,393,685 58,293
Salaries and
wages 745,859 945,402 3,443,390 3,703,836
Professional
services,
including
non-cash
compensation 338,187 413,490 1,215,939 837,598
General and
adminstrative 896,667 1,170,091 3,590,118 3,447,113
------------- ------------- ------------- -------------
Total
operating
expenses 3,087,830 4,005,882 15,733,012 13,708,812
------------- ------------- ------------- -------------
Income from
operations (537,079) 1,776,379 (6,483,169) 7,209,219
Other income
and
(expenses):
Loss on sale
of assets (96,564) (2,440) (404,820) (35,484)
Beneficial
conversion
feature (23,052) - (40,277) -
Loss on
extinguishment
of debt - - (1,000,000) -
Interest
expense (327,547) (82,043) (1,294,293) (626,708)
Interest
income 44,423 35,234 291,030 195,103
Gain on sale
of
subsidiary
shares 351,522 - 351,522 1,240,808
Gain on
foreign
currency
exchange
rates 549,733 1,430,669 2,371,487 2,020,839
Other income
and
(expenses) 21,229 29,600 68,747 148,544
------------- ------------- ------------- -------------
Total other
income
(expenses) 519,744 1,411,020 343,396 2,943,102
------------- ------------- ------------- -------------
Net income
(loss) before
minority
interest in
subsidiary (17,335) 3,187,399 (6,139,773) 10,152,321
Minority
interest in
subsidiary (843,904) (1,749,625) (1,816,143) (5,038,115)
Income taxes (11,501) (75,710) (91,132) (121,982)
------------- ------------- ------------- -------------
Net income
(loss) (872,740) 1,362,064 (8,047,048) 4,992,224
Dividend
required for
preferred
stockholders (33,508) (33,508) (134,400) (178,541)
------------- ------------- ------------- -------------
Net income
(loss)
applicable to
common
shareholders (906,248) 1,328,556 (8,181,448) 4,813,683
Other
comprehensive
loss:
Translation
adjustment (114,548) (1,329,381) (4,151,474) (2,394,994)
------------- ------------- ------------- -------------
Comprehensive
income (loss) $ (1,020,796) $ (825) $ (12,332,922) $ 2,418,689
============= ============= ============= =============
Net income
(loss) per
share:
Basic $ (0.03) $ 0.05 $ (0.30) $ 0.20
============= ============= ============= =============
Diluted $ (0.03) $ 0.05 $ (0.30) $ 0.19
============= ============= ============= =============
Weighted
average number
of shares
outstanding
Basic 28,706,163 25,425,042 26,937,500 24,118,538
Diluted 28,706,163 27,303,554 26,937,500 25,997,049
NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of June 30, As of June 30,
2009 2008
Restated
-------------- --------------
ASSETS
Current assets:
Cash and cash equivalents $ 4,403,762 $ 6,275,238
Restricted Cash 5,000,000 -
Accounts receivable, net of allowance for
doubtful accounts of $2,504,714 and
$108,538 for 2009 and 2008 respectively 11,394,844 10,988,888
Revenues in excess of billings 5,686,277 11,053,042
Other current assets 2,307,246 2,406,407
-------------- --------------
Total current assets 28,792,129 30,723,575
Property and equipment, net of accumulated
depreciation 9,186,163 9,176,780
Other assets, long-term 204,823 1,866,437
Intangibles:
Product licenses, renewals, enhancements,
copyrights, trademarks, and tradenames,
net 13,802,607 10,837,856
Customer lists, net 1,344,019 1,732,761
Goodwill 9,439,285 9,439,285
-------------- --------------
Total intangibles 24,585,911 22,009,902
-------------- --------------
Total assets $ 62,769,026 $ 63,776,694
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 5,106,266 $ 4,116,659
Current portion of loans and obligations
under capitalized leases 6,207,830 2,280,110
Other payables - acquisitions 103,226 846,215
Unearned revenues 3,473,228 3,293,728
Due to officers - 184,173
Dividend to preferred stockholders
payable 44,409 33,508
Loans payable, bank 2,458,757 2,932,551
-------------- --------------
Total current liabilities 17,393,716 13,686,944
Obligations under capitalized leases, less
current maturities 1,090,901 332,307
Convertible Notes Payable 5,809,508 -
Long-term loans; less current maturities 1,113,832 411,608
-------------- --------------
Total liabilities 25,407,957 14,430,859
Minority interest 6,383,310 7,857,969
Commitments and contingencies - -
Stockholders' equity:
Preferred stock, 5,000,000 shares
authorized; 1,920 issued and outstanding 1,920,000 1,920,000
Common stock, $.001 par value; 95,000,000
shares authorized; 30,046,987;
25,545,482 issued and outstanding 30,047 25,545
Additional paid-in-capital 78,198,523 74,950,286
Treasury stock (396,008) (35,681)
Accumulated deficit (41,253,152) (33,071,702)
Stock subscription receivable (842,619) (600,907)
Common stock to be issued 220,365 1,048,249
Other comprehensive loss (6,899,397) (2,747,924)
-------------- --------------
Total stockholders' equity 30,977,759 41,487,866
-------------- --------------
Total liabilities and stockholders'
equity $ 62,769,026 $ 63,776,694
============== ==============
NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(Unaudited)
For the Years
Ended June 30,
2009 2008
Restated
------------ ------------
Cash flows from operating activities:
Net income (loss) $ (8,047,048) $ 4,992,224
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization 4,188,208 3,337,956
Bad debt expense 2,393,685 58,293
Loss on sale of assets 404,820 35,484
Gain on sale of subsidiary shares in
Pakistan (351,522) (1,240,808)
Minority interest in subsidiary 1,816,143 5,038,115
Stock issued for services 346,817 167,926
Fair market value of warrants and stock
options granted 261,472 24,320
Beneficial conversion feature 40,277 -
Changes in operating assets and
liabilities:
Increase in accounts receivable (4,679,496) (4,123,995)
Decrease in other current assets 3,740,567 (4,980,504)
Decrease in long-term assets 43,889 229,622
Increase in accounts payable and accrued
expenses 1,073,775 233,408
------------ ------------
Net cash provided by/(used in) operating
activities 1,231,588 3,772,041
Cash flows from investing activities:
Purchases of property and equipment (2,093,618) (4,435,755)
Sales of property and equipment 65,096 15,838
Payments of acquisition payable (742,989) (879,007)
Increase in intangible assets (6,662,774) (4,829,369)
------------ ------------
Net cash used in investing activities (9,434,284) (10,128,293)
Cash flows from financing activities:
Proceeds from sale of common stock 712,770 1,500,000
Proceeds from the exercise of stock options
and warrants 563,929 3,282,827
Purchase of subsidary stock in Pakistan (281,347) -
Proceeds from sale of subsidiary stock 558,535 1,765,615
Finance costs incurred for sale of common
stock - (10,000)
Purchase of treasury stock (360,328) (25,486)
Restricted cash (5,000,000) -
Proceeds from convertible notes payable 6,000,000 -
Dividend Paid to Preferred Shareholders (33,508) -
Bank overdraft 159,551 85,335
Proceeds from bank loans 3,843,541 5,441,870
Payments on bank loans 947,870 (99,936)
Payments on capital lease obligations &
loans - net (539,497) (3,409,496)
------------ ------------
Net cash provided by financing activities 6,571,516 8,530,729
Effect of exchange rate changes in cash (240,296) 90,597
------------ ------------
Net increase in cash and cash equivalents (1,871,477) 2,265,074
Cash and cash equivalents, beginning of year 6,275,238 4,010,164
------------ ------------
Cash and cash equivalents, end of year $ 4,403,762 $ 6,275,238
============ ============
NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
RECONCILIATION TO GAAP
(Unaudited)
Three Months Three Months Fiscal Year Fiscal Year
Ended Ended Ended Ended
June 30, 2009 June 30, 2008 June 30, 2009 June 30, 2008
------------- ------------- ------------- -------------
Net Income
(loss) before
preferred
dividend, per
GAAP $ (872,740) $ 1,362,064 $ (8,047,048) $ 4,992,224
Income Taxes 11,501 75,710 91,132 121,982
Depreciation
and
amortization 1,096,074 1,068,487 4,188,208 3,337,956
Interest
expense 327,547 82,043 1,294,293 626,708
------------- ------------- ------------- -------------
EBITDA (loss) $ 562,382 $ 2,588,304 $ (2,473,415) $ 9,078,870
============= ============= ============= =============
Weighted Average
number of
shares
outstanding
Basic 28,706,163 25,425,042 26,937,500 24,118,538
Diluted 28,706,163 27,303,554 26,937,500 25,997,049
------------- ------------- ------------- -------------
Basic EBITDA EPS $ 0.02 $ 0.10 $ (0.09) $ 0.38
============= ============= ============= =============
Diluted EBITDA
EPS $ 0.02 $ 0.09 $ (0.09) $ 0.35
============= ============= ============= =============
Contact - Investor Relations: Christopher Chu Grayling Phone: +1 646-284-9426 Email: [email protected]
Released September 15, 2009