NetSol Technologies Reports Strong Continued Quarterly Revenue Growth and Profitability With Earnings of $0.03 Per Diluted Share for Fiscal 2012 Third Quarter

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Company Raises Outlook Based on Increased Strength of Business

CALABASAS, Calif., May 7, 2012 (GLOBE NEWSWIRE) -- NetSol Technologies, Inc. (Nasdaq:NTWK), a worldwide provider of global IT and enterprise application solutions, today reported financial results for its fiscal 2012 third quarter ended March 31, 2012.

The company drove continued sequential quarterly revenue growth in the third fiscal quarter, increasing 23% to $10.6 million, representing one of the company's strongest quarters to date. This compared with $8.6 million in the preceding quarter, and $6.2 million in the fiscal 2012 first quarter.

"In the fiscal third quarter NetSol saw strength across each business line and in all geographic regions," said Najeeb Ghauri, chairman and CEO of NetSol. "We believe that the business has regained its footing and that our growth initiatives are building momentum. Given the relative strength of the third quarter and our current insights into the balance of the year, we are increasingly confident the company will deliver a much stronger second half than first half 2012."

License revenue for the fiscal 2012 third quarter was $3.0 million, compared with $2.0 million in the preceding second quarter, and $3.7 million in the comparable period in fiscal 2011.

Maintenance revenue in the fiscal 2012 third quarter was $1.8 million, compared with $2.1 million in the preceding second quarter, and $1.9 million for the same period last fiscal year.

Services revenue was $5.8 million, up sequentially from $4.4 million in the second quarter, and compared with $5.3 million for the third quarter of fiscal 2011.

Recent Company Highlights:

NFS™ Suite

  • Signed new agreement with Chongqing Auto Finance, Ltd., to provide finance and leasing solutions to automotive financing companies, bringing NetSol's current client count in China to 17;
  • Signed $4 million agreement with the captive finance arm of major Japanese auto manufacturer;
  • Partnered with Abeam Consulting to develop and support businesses in the asset finance and leasing industry in Japan and NEC India to develop business in the asset finance and leasing industry in India;
  • Implemented next generation of NFS for a Thai stock exchange listed bank; and,
  • Began several enhancement projects, including one for a large auto manufacturer in Australia.

LeasePak™ & LeaseSoft ™Business

  • Leading European bank extended its LeaseSoft license and a leading automobile manufacture went live with LeasePak; and,
  • Began the integration of LeasePak with Vertex® O Series, a tax platform that centralizes all corporate tax processing and data and supports tax compliance with automation capabilities and extensive tax rule research.

Vroozi Business

  • Inked new agreement with a prominent U.S. media company to implement a full B2B e-commerce search engine suite, bringing the number of smartOCI™ customers to 9;
  • Expanded product line with smartOCI Catalog Manager™, a new tool to help customers with exchanging and loading content between purchasing organizations and suppliers; and,
  • Added e-commerce veteran Mike Sundell as VP, technology.

Services

  • AtheebNetSol, a joint venture in Saudi Arabia, signed four new agreements in the areas of cyber security, application development and consulting, and collectively valued at approximately $2.0 million; and,
  • Signed a consultancy and services agreement with premier auto manufacturer in Thailand.

Total operating expenses for the fiscal 2012 third quarter were $3.5 million, compared with $3.5 million in the second quarter, and $2.0 million for the fiscal 2011 third quarter. The increase primarily reflects expenses associated with Vroozi, as well as enhanced infrastructure and resources in China and the company's Thailand offices. There was also a reduction of $860,000 on account of a settlement of lease abandonment liability in the comparable period which resulted in a reduction of operating expenses.

Operating income for the third quarter of fiscal 2012 was $2.2 million, compared with $1.2 million in the preceding second quarter, and $4.8 million in the third quarter of fiscal 2011.

Net income for the fiscal third quarter was $1.7 million, equal to $0.03 per diluted share, compared with $3.3 million, or $0.06 per diluted share, in the comparable period in the prior fiscal year. Weighted average number of diluted shares outstanding for the period was 61.8 million shares compared with 52.5 million shares diluted for the third quarter of fiscal 2011.

At December 31, 2011, cash, cash equivalents amounted to $9.1 million, reflecting the recently completed financing that netted $5.7 million.

Financial Outlook

Given the relative strength of the company's business throughout the year, NetSol currently expects revenue growth of 30% to 40% for the second half of the fiscal year compared with the first half of the year. This is an increase from its previous guidance of growth of 10% to 15%. The company also said that it anticipates achieving profitability for the full 2012 fiscal year.

Conference Call Today
When: Monday, May 7
Time: 11:00 a.m. Eastern
Phone: 1-877-941-0844 (domestic)
  1-480-629-9645 (international)
Passcode: 4534723
Webcast: http://www.netsoltech.com/IR/event-presentation.php
Archived: 90 days

A telephone playback of the conference call will also be available until 11:59 p.m. Eastern time, Monday, May 14, 2012. Listeners should call (800) 406-7325 (domestic) or (303) 590-3030 (international) and use reservation 4534723 to access the playback.

About NetSol Technologies

NetSol Technologies, Inc. (www.netsoltech.com) is a worldwide provider of global IT and enterprise application solutions that include credit and finance portfolio management systems, SAP consulting and services, custom development, systems integration, and technical services for the global Financial, Leasing, Insurance, Energy, and Technology markets. Headquartered in Calabasas, Calif., NetSol's product and services offerings have achieved ISO 9001, ISO 20000, ISO 27001, and SEI (Software Engineering Institute) CMMI (Capability Maturity Model) Maturity Level 5 assessments, a distinction shared by only 178 companies worldwide. The company's clients include Fortune 500 manufacturers, global automakers, financial institutions, utilities, technology providers, and government agencies. NetSol has delivery and support locations in San Francisco, London, Beijing, Bangkok, Lahore, Adelaide and Riyadh.

Investors can receive news releases and invitations to special events by accessing our online signup form at http://bit.ly/NetSol_Investor_Signup_Form.

The NetSol Technologies, Inc. logo is available at https://www.globenewswire.com/newsroom/prs/?pkgid=9832

Forward-Looking Statements

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 "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
Condensed Consolidated Balance Sheets
     
   As of March 31,   As of June 30, 
   2012   2011 
ASSETS    
Current assets:    
Cash and cash equivalents  $ 9,118,206  $ 4,172,802
Restricted Cash  90,000  5,700,000
Accounts receivable, net   14,654,748  15,062,503
Revenues in excess of billings  9,310,578  7,601,230
Other current assets  2,631,360  2,053,904
Total current assets  35,804,892  34,590,439
Investment under equity method  --  --
Property and equipment, net  16,877,321  16,014,461
Intangibles:    
Product licenses, renewals, enhancements, copyrights, trademarks, and tradenames, net  29,077,051  25,602,195
Goodwill  9,653,330  9,439,285
Total intangibles  38,730,382  35,041,480
Total assets  $ 91,412,594  $ 85,646,379
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current liabilities:    
Accounts payable and accrued expenses  $ 4,624,876  $ 4,730,027
Due to officers  --  --
Current portion of loans and obligations under capitalized leases  1,955,872  7,062,535
Other payables - acquisitions  103,226  103,226
Unearned revenues  3,359,913  2,653,460
Convertible notes payable , current portion  --  2,745,524
Loans payable, bank  2,198,769  2,319,377
Common stock to be issued  106,700  400,700
Total current liabilities  12,349,356  20,014,849
Obligations under capitalized leases, less current maturities  196,137  285,472
Convertible notes payable less current maturities  3,692,792  --
Long term loans; less current maturities  1,950,165  434,884
Total liabilities  18,188,450  20,735,205
Commitments and contingencies    
Stockholders' equity:    
Common stock, $.001 par value; 95,000,000 shares authorized; 74,746,688 & 55,531,855 issued and outstanding as of March 31, 2012 and June 30, 2011  74,747  55,532
Additional paid-in-capital  105,787,566  97,886,492
Treasury stock  (415,425)  (396,008)
Accumulated deficit  (33,585,470)  (34,130,944)
Stock subscription receivable  (2,033,710)  (2,198,460)
Other comprehensive loss  (10,187,687)  (8,805,922)
Total NetSol shareholders' equity  59,640,021  52,410,690
Non-controlling interest  13,584,123  12,500,484
Total stockholders' equity  73,224,144  64,911,174
Total liabilities and stockholders' equity  $ 91,412,594  $ 85,646,379
 
 
NetSol Technologies, Inc. and Subsidiaries
Condensed Consolidated Statement of Operations
         
   For the Three Months   For the Nine Months 
   Ended March 31,   Ended March 31, 
         
  2012 2011 2012 2011
Net Revenues:        
License fees  2,968,498  3,652,170  6,092,203  10,259,027
Maintenance fees  1,824,585  1,896,318  5,983,073  5,589,746
Services  5,817,465  5,278,960  13,370,032  13,806,994
Total net revenues   10,610,548  10,827,448  25,445,308  29,655,767
         
Cost of revenues:        
Salaries and consultants   2,741,717  2,448,517  7,412,931  6,562,685
Travel   372,578  237,694  912,420  708,082
Repairs and maintenance   109,868  79,068  280,785  207,585
Insurance   40,103  32,924  107,319  95,003
Depreciation and amortization   830,646  840,050  2,432,261  2,150,274
Other   818,804  412,693  1,756,629  1,004,690
Total cost of revenues  4,913,716  4,050,946  12,902,345  10,728,319
Gross profit  5,696,832  6,776,502  12,542,963  18,927,448
Operating expenses:        
Selling and marketing  835,153  560,879  2,270,566  2,047,726
Depreciation and amortization  403,177  313,865  883,881  848,168
Bad debt expense  --  717  --  254,996
Salaries and wages  1,099,503  956,465  3,058,090  2,613,627
Professional services, including non-cash compensation   138,094  165,010  561,754  455,371
Lease abandonment charges   --  (858,969)  --  (858,969)
General and adminstrative  1,056,725  831,131  3,214,430  2,837,218
Total operating expenses  3,532,652  1,969,096  9,988,721  8,198,137
         
Income from operations  2,164,180  4,807,406  2,554,242  10,729,311
Other income and (expenses)        
Gain (loss) on sale of assets  (666)  2,284  (3,940)  (13,302)
Interest expense  (167,972)  (148,661)  (587,136)  (755,781)
Interest income  26,672  48,851  66,741  143,270
Gain on foreign currency exchange transactions  421,098  224,531  460,317  897,767
Share of net loss from equity investment  (140,554)  (78,269)  (240,554)  (220,506)
Beneficial conversion feature  (52,665)  (105,445)  (126,912)  (401,019)
Other (expense)   139,377  (5,105)  122,671  (62,406)
Total other income (expenses)  225,290  (61,814)  (308,813)  (411,977)
Net income before income taxes  2,389,470  4,745,592  2,245,429  10,317,334
Income taxes  (32,921)  (13,735)  (64,460)  (25,459)
Net income after tax  2,356,549  4,731,857  2,180,969  10,291,875
Non-controlling interest  (672,322)  (1,413,427)  (1,635,883)  (3,470,728)
Net income attibutable to NetSol  1,684,227  3,318,430  545,086  6,821,147
         
Other comprehensive income (loss):        
Translation adjustment  (369,782)  20,361  (2,383,324)  460,524
Comprehensive income (loss)  1,314,445  3,338,791  (1,838,238)  7,281,671
Comprehensive (loss) /income attributable to non controlling interest  (146,667)  98,756  (1,001,560)  23,780
Comprehensive income (loss) attributable to NetSol  1,461,112  3,240,035  (836,678)  7,257,891
         
Net income per share:        
Basic  $ 0.03  $ 0.06  $ 0.01  $ 0.15
Diluted  $ 0.03  $ 0.06  $ 0.01  $ 0.14
Weighted average number of shares outstanding        
Basic  61,359,747  51,263,639  57,953,872  46,355,789
Diluted  61,765,073  52,480,900  58,359,198  47,573,050
         
Amounts attributable to NetSol common shareholders        
Net income / (loss)  $ 1,684,227  $ 3,318,430  $ 545,086  $ 6,821,147
 
 
NetSol Technologies, Inc. and Subsidiaries
Condensed Consolidated Statement of Cash Flows
     
   For the Nine Months 
   Ended March 31, 
  2012 2011
 Cash flows from operating activities:    
 Net income   $ 2,180,969  $ 10,291,875
 Adjustments to reconcile net income to net cash provided by operating activities:     
 Depreciation and amortization   3,316,142  2,998,443
 Provision for bad debts   192,250  254,996
 Share of net loss from investment under equity method   240,554  220,506
 Loss on sale of assets   3,940  13,302
 Stock issued for interest on notes payable   --  155,808
 Stock issued for services   190,076  698,843
 Fair market value of warrants and stock options granted   303,807  335,918
 Beneficial conversion feature   126,912  401,019
 Changes in operating assets and liabilities:     
 Increase/ decrease in accounts receivable   877,725  (5,350,512)
 Increase/ decrease in other current assets   (2,286,804)  (2,099,813)
 Increase/ decrease in accounts payable and accrued expenses   112,422  (581,418)
 Net cash provided by operating activities   5,257,993  7,338,965
 Cash flows from investing activities:     
 Purchases of property and equipment   (3,729,571)  (6,242,399)
 Sales of property and equipment   72,516  18,358
 Purchase of treasury stock   (19,417)  --
 Purchase of non-controlling interest in subsidiary   --  (671,460)
 Short-term investments held for sale   --  (258,271)
 Investment under equity method   (100,000)  --
 Acquisition, net of cash acquired   (253,192)  --
 Increase in intangible assets   (5,280,833)  (4,752,261)
 Net cash used in investing activities   (9,310,497)  (11,906,033)
 Cash flows from financing activities:     
 Proceeds from sale of common stock   5,743,300  2,899,250
 Proceeds from the exercise of stock options and warrants   715,500  1,116,175
 Proceeds from convertible notes payable   4,000,000  --
 Payments on convertible notes payable   (2,758,330)  --
 Restricted cash   5,610,000  --
 Dividend Paid   (341,657)  --
 Proceeds from bank loans   4,371,555  2,969,146
 Payments on capital lease obligations & loans - net   (7,981,217)  (2,948,489)
 Net cash provided by financing activities   9,359,151  4,036,082
 Effect of exchange rate changes in cash   (361,243)  (169,951)
 Net increase in cash and cash equivalents   4,945,403  (700,938)
 Cash and cash equivalents, beginning of year   4,172,803  4,075,546
 Cash and cash equivalents, end of year   $ 9,118,206  $ 3,374,608
 
 
NetSol Technologies, Inc. and Subsidiaries
Reconciliation to GAAP
         
  Three Months Three Months Year Year
  Ended Ended To date To date
  March 31, 2012 March 31, 2011 March 31, 2012 March 31, 2011
         
 Net Income (loss) before preferred dividend, per GAAP   $ 1,684,227  $ 3,318,429  $ 545,086  $ 6,821,147
 Income Taxes   32,921  13,735  64,460  25,459
 Depreciation and amortization   1,233,823  1,153,915  3,316,142  2,998,443
 Interest expense   167,972  148,661  587,136  755,781
 Interest (income)   (26,672)  (48,851)  (66,741)  (143,270)
 EBITDA   $ 3,092,271  $ 4,585,889  $ 4,446,083  $ 10,457,559
         
 Weighted Average number of shares outstanding         
 Basic   61,359,747  51,263,639  57,953,872  46,355,789
 Diluted   61,765,073  52,480,900  58,359,198  47,573,050
         
 Basic EBITDA   $ 0.05  $ 0.09  $ 0.08  $ 0.23
 Diluted EBITDA   $ 0.05  $ 0.09  $ 0.08  $ 0.22
   
 
Contacts:   PondelWilkinson Inc.
  Matt Sheldon/Rob Whetstone
  (310) 279-5980
  [email protected]

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Source: NetSol Technologies Inc.

Released May 7, 2012