CALABASAS, Calif., Sept. 23, 2019 (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, 2019.

Fiscal 2019 and Recent Operational Highlights

  • Updates related to previously announced 12-country, $110 million contract with German auto manufacturing giant:
    • Successfully implemented the full suite of NFS Ascent™ modules in China.
    • Successfully implemented NFS Ascent Wholesale Finance System (WFS) in Japan.
    • Successfully implemented NFS Ascent Contract Management System (CMS) in South Africa, a new market.
    • Made continued progress with respect to additional NFS Ascent implementations in Singapore, Malaysia, Hong Kong, India and Thailand.
  • Continued to make 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.
  • Successfully implemented NFS Ascent Retail Platform, including Omni-Point of Sale (Omni-POS) and CMS, for a major American auto captive in China, as part of a previously announced multi-million-dollar contract.
  • Secured a multi-million-dollar contract with a large independent used vehicle finance company in the UK for the implementation of the NFS Ascent Wholesale Finance Platform.
  • Acquired the remaining 49% stake of Virtual Lease Services (VLS), a UK-based portfolio and risk management servicing partner for business and consumer finance providers, after initially acquiring a 51% majority stake in VLS through a joint venture partnership with Investec in 2011.
  • Officially launched OTOZ Mobility Innovation Lab, which has been designed to enhance reach of NETSOL Ascent platform into car-sharing opportunities with new and existing auto captive finance customers.
  • Announced strategic investment and partnership with Drivemate, the top car-sharing, peer-to-peer car rental service in Thailand, to implement new technology in exchange for future minority interest in the company, providing for a low-risk testing environment for OTOZ with a built-in customer.

Fiscal Fourth Quarter 2019 Financial Results
Total net revenues for the fourth quarter of fiscal 2019 were $17.3 million, compared with $16.6 million in the prior year period. The increase in total net revenues was primarily due to an increase in total license fees of $71,000 and an increase in total maintenance fees of $626,000, which was offset by a decrease in total services revenues of $26,000.

  • Total license fees were $3.5 million, compared with $3.4 million in the prior year period.
  • Total maintenance fees were $4.4 million, compared with $3.8 million in the prior year period.
  • Total services revenues were $9.4 million, compared with $9.4 million in the prior year period.

Gross profit for the fourth quarter of fiscal 2019 was $8.8 million (or 50.8% of net revenues), compared to $8.5 million (or 51.2% of net revenues) in the fourth quarter of fiscal 2018. The decrease in gross profit as a percentage of net revenues was primarily due to an increase in cost of revenues of $394,000. The increase in cost of revenue was predominantly driven by increases in travel and other expenses associated with increased implementation needs for the significant new wins recorded in previous quarters.  The increase in cost of revenues was offset by decreases in salaries and consultants’ costs, decreases in depreciation and amortization costs as well as an increase in total net revenues of $672,000.

Operating expenses for the fourth quarter of fiscal 2019 increased 5.9% to $7.8 million (or 45.4% of net revenues) from $7.4 million (or 44.6% of net revenues) for the fourth quarter of fiscal 2018. The increase in operating expenses was primarily due to an increase in research and development costs.

GAAP net income attributable to NETSOL for the fourth quarter of fiscal 2019 totaled $3.5 million or $0.30 per diluted share, an improvement from net income of $1.2 million or $0.10 per diluted share in the fourth quarter of fiscal 2018.

Non-GAAP adjusted EBITDA for the fourth quarter of fiscal 2019 totaled $4.4 million or $0.38 per diluted share, an improvement from $2.9 million or $0.26 per diluted share in the fourth quarter of fiscal 2018 (see note regarding “Use of Non-GAAP Financial Measures,” below for further discussion of this non-GAAP measure).

At June 30, 2019, cash and cash equivalents were $17.4 million, a decrease from $22.1 million at June 30, 2018.

Full Year Fiscal 2019 Financial Results
Total net revenues for fiscal 2019 were $67.8 million, compared to $60.9 million in fiscal 2018. The increase in total net revenues was primarily due to an increase in total license fees of $9.9 million and an increase in total maintenance revenues of $721,000, which was offset by a decrease in total service fees of $3.7 million.

  • Total license fees were $16.8 million, compared with $6.9 million in the prior fiscal year.
  • Total maintenance fees were $15.5 million, compared with $14.8 million in the prior fiscal year.
  • Total services revenues were $35.5 million, compared with $39.3 million in the prior fiscal year.

Gross profit for fiscal 2019 increased to $34.4 million (or 50.8% of net revenues) from $29.2 million (or 47.9% of net revenues) for fiscal 2018. The increase in gross profit as a percentage of net revenues was primarily due to a greater rate of increase in total net revenues when compared to the increase in costs to support those revenues.

Operating expenses for fiscal 2019 increased to $27.6 million (or 40.7% of net revenues) from $26.2 million (or 42.9% of net revenues) for fiscal 2018. The increase in operating expenses was primarily due to increases in selling and marketing expenses, salaries and wages and research and development cost.

GAAP net income attributable to NETSOL for fiscal 2019 totaled $8.6 million or $0.74 per diluted share, an improvement from net income of $4.3 million or $0.38 per diluted share for fiscal 2018.

Non-GAAP adjusted EBITDA for fiscal 2019 totaled $12.9 million or $1.11 per diluted share, compared with $10.3 million or $0.92 per diluted share in fiscal 2018 (see note regarding “Use of Non-GAAP Financial Measures,” below for further discussion of this non-GAAP measure).

Stock Repurchase Program
On May 29, 2019, NETSOL’s board of directors approved a stock repurchase program that authorized potential repurchases of up to $5 million of its common stock over a subsequent twelve-month period. The planned repurchase program will occur in two six-month phases. The first phase allows for execution of up to $2.5 million in share repurchases during an initial six-month period beginning on May 30, 2019 and expiring on November 30, 2019. After the date of initial expiration, management will have the option to approve a secondary phase, which will cover up to $2.5 million in additional share repurchases for another six-month period. During the quarter, the company has repurchased 41,650 shares of its common stock at an aggregate value of $250,945.

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.

Management Commentary
"Fiscal 2019 was characterized by the same, consistent financial and operational execution we’ve been generating for some time now," said NETSOL Co-Founder, Chairman and Chief Executive Officer Najeeb Ghauri. "More specifically, we achieved our goal of double-digit topline growth, which led to record annual revenues.  Even more encouraging has been our ability to retain a meaningful amount of the year-over-year improvement. Our annual operating income of $6.8 million was another record for NETSOL and an increase of 124% compared to last year. Additionally, we nearly doubled our earnings on a per share basis to $0.74, which was also our seventh consecutive quarter of profitability.

“Operationally, throughout the year we continued to win new contracts with businesses of all sizes and also announced a number of Go-Live implementations with some of our major international customers. While we continue to believe in the long-term growth opportunity provided by our next generation solution NFS Ascent, we are continuing to look for ways to augment that growth with additional, more consistent revenue streams. Going forward, our growth strategy in fiscal 2020 and beyond will take a three-pronged approach: continued focus on our core business and flagship offering with planned expansion into additional growth markets such as the US and Europe; additional energy and resources devoted to strategic partnerships and innovation-centric efforts outside our core operations, such as our OTOZ Mobility Lab; pursuing highly synergistic inorganic growth opportunities where it makes absolute sense in aiding our existing operations. We believe this new, diversified strategy will allow us to enhance our existing business while also future-proofing NETSOL in the rapidly changing auto leasing and asset financing landscape.”

Sales Outlook
“We are engaged in a number of exciting new opportunities to implement Ascent with both existing clients as well as new prospects,” added President, Head of Sales and CEO OTOZ Naeem Ghauri. “Ascent remains the first in its class platform for auto finance and leasing companies as demand for cutting-edge solutions continues to be robust.”

Conference Call
NETSOL Technologies management will hold a conference call today (September 23, 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 Gateway Investor Relations at 1-949-574-3860.

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 2:00 p.m. Eastern time on the same day through October 7, 2019.

Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 13694239

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 1,300 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.

Forward-Looking Statements
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
Gateway Investor Relations
1-949-574-3860
investors@netsoltech.com



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

  As of June 30, As of June 30,
ASSETS 2019   2018 
Current assets:   
Cash and cash equivalents$17,366,364  $22,088,853 
Accounts receivable, net of allowance of $192,786 and $610,061  12,332,714   12,775,461 
Accounts receivable, net of allowance of $166,075 and $0 - related party  3,266,600   3,374,272 
Revenues in excess of billings, net of allowance of $194,684 and $0  14,719,047   14,285,778 
Revenues in excess of billings - related party 110,827   - 
Convertible note receivable - related party 3,650,000   2,123,500 
Other current assets 3,146,264   2,703,032 
Total current assets 54,591,816   57,350,896 
Revenues in excess of billings, net - long term 1,281,492   1,206,669 
Property and equipment, net 12,096,855   16,165,491 
Long term investment 2,653,769   3,217,162 
Other assets 23,569   70,299 
Intangible assets, net 7,332,950   12,247,196 
Goodwill 9,516,568   9,516,568 
Total assets$87,497,019  $99,774,281 
     
LIABILITIES AND STOCKHOLDERS' EQUITY 
Current liabilities:   
Accounts payable and accrued expenses$7,476,560  $7,873,809 
Current portion of loans and obligations under capitalized leases 6,905,597   8,595,919 
Unearned revenues 5,977,736   5,949,581 
Common stock to be issued 88,324   88,324 
Total current liabilities 20,448,217   22,507,633 
Loans and obligations under capitalized leases; less current maturities 564,572   330,596 
Total liabilities 21,012,789   22,838,229 
Commitments and contingencies   
Stockholders' equity:   
Preferred stock, $.01 par value; 500,000 shares authorized; -   - 
Common stock, $.01 par value; 14,500,000 shares authorized;   
11,911,742 shares issued and 11,664,239 outstanding as of June 30, 2019 and 11,708,469 shares issued and 11,502,616 outstanding as of June 30, 2018 119,117   117,085 
Additional paid-in-capital 127,737,999   126,479,147 
Treasury stock (At cost, 247,503 shares and 205,853 shares as of June 30, 2019 and June 30, 2018, respectively)  (1,455,969)  (1,205,024)
Accumulated deficit (35,206,898)  (37,994,502)
Stock subscription receivable -   (221,000)
Other comprehensive loss (33,125,006)  (24,386,071)
Total NetSol stockholders' equity 58,069,243   62,789,635 
Non-controlling interest 8,414,987   14,146,417 
Total stockholders' equity 66,484,230   76,936,052 
Total liabilities and stockholders' equity$87,497,019  $99,774,281 
     

 


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

  For the Years
  Ended June 30,
   2019   2018 
Net Revenues:   
 License fees$16,768,749  $6,598,254 
 Maintenance fees 15,010,171   14,382,309 
 Services 34,185,992   33,611,982 
 License fees - related party -   261,513 
 Maintenance fees - related party 511,242   418,444 
 Services - related party 1,343,029   5,657,756 
  Total net revenues 67,819,183   60,930,258 
      
Cost of revenues:   
 Salaries and consultants 19,253,364   21,856,162 
 Travel 6,527,868   1,775,327 
 Depreciation and amortization 3,525,857   4,610,737 
 Other 4,066,443   3,481,115 
  Total cost of revenues 33,373,532   31,723,341 
      
Gross profit 34,445,651   29,206,917 
      
Operating expenses:   
 Selling and marketing 7,831,758   7,620,476 
 Depreciation and amortization 897,800   962,737 
 General and administrative 16,916,953   16,714,797 
 Research and development cost 1,971,228   853,996 
  Total operating expenses 27,617,739   26,152,006 
      
Income (loss) from operations 6,827,912   3,054,911 
      
Other income and (expenses)   
 Gain (loss) on sale of assets 81,455   7,594 
 Interest expense (311,798)  (422,327)
 Interest income 955,061   592,153 
 Gain on foreign currency exchange transactions 6,345,859   5,010,383 
 Share of net loss from equity investment (841,845)  (262,556)
 Other income 18,680   42,847 
  Total other income (expenses) 6,247,412   4,968,094 
      
Net income before income taxes 13,075,324   8,023,005 
Income tax provision (1,057,784)  (873,027)
Net income  12,017,540   7,149,978 
 Non-controlling interest (3,434,141)  (2,843,090)
Net income attributable to NetSol$8,583,399  $4,306,888 
      
Net income per share:   
 Net income per common share   
  Basic$0.74  $0.38 
  Diluted$0.74  $0.38 
      
Weighted average number of shares outstanding   
 Basic 11,599,290   11,197,319 
 Diluted 11,621,990   11,197,319 
      

 


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

      
   For the Years
   Ended June 30,
    2019   2018 
Cash flows from operating activities:   
 Net income$12,017,540  $7,149,978 
 Adjustments to reconcile net income   
  to net cash provided by operating activities:   
 Depreciation and amortization 4,423,657   5,573,474 
 Provision for bad debts 474,516   460,730 
 Impairment of assets -   172,505 
 Share of net loss from investment under equity method 841,845   262,556 
 Gain on sale of assets (80,470)  (7,594)
 Stock based compensation 1,131,013   1,861,445 
 Fair market value of stock options 43,612   - 
 Changes in operating assets and liabilities:   
  Accounts receivable (1,836,962)  (7,735,582)
  Accounts receivable - related party (977,445)  (2,735,846)
  Revenues in excess of billing (10,764,428)  6,788,580 
  Revenues in excess of billing - related party (122,810)  77,128 
  Other current assets (861,128)  (195,529)
  Accounts payable and accrued expenses (47,819)  1,653,778 
  Unearned revenue 692,089   2,388,699 
 Net cash provided by operating activities 4,933,210   15,714,322 
      
Cash flows from investing activities:   
 Purchases of property and equipment (2,726,558)  (2,449,449)
 Sales of property and equipment 1,170,878   943,252 
 Convertible note receivable - related party (1,526,500)  (1,923,500)
 Investment in associates (250,000)  (230,000)
 Purchase of subsidiary shares (317,500)  (33,987)
 Net cash used in investing activities (3,649,680)  (3,693,684)
      
Cash flows from financing activities:   
 Proceeds from the exercise of stock options and warrants 85,000   312,311 
 Proceeds from exercise of subsidiary options 2,650   10,349 
 Purchase of treasury stock (250,945)  (750,714)
 Dividend paid by subsidiary to non-controlling interest (566,465)  (417,853)
 Proceeds from bank loans 1,227,158   1,455,250 
 Payments on capital lease obligations and loans - net (480,231)  (1,626,109)
 Net cash provided by (used in) financing activities 17,167   (1,016,766)
Effect of exchange rate changes (6,023,186)  (3,087,973)
Net increase (decrease) in cash and cash equivalents (4,722,489)  7,915,899 
Cash and cash equivalents at beginning of the period 22,088,853   14,172,954 
Cash and cash equivalents at end of period$17,366,364  $22,088,853 
      

 


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

  Year Year
  Ended Ended
  June 30, 2019 June 30, 2018
     
Net Income (loss) before preferred dividend, per GAAP $8,583,399  $4,306,888 
Non-controlling interest  3,434,141   2,843,090 
Income taxes  1,057,784   873,027 
Depreciation and amortization  4,423,657   5,573,474 
Interest expense  311,798   422,327 
Interest (income)  (955,061)  (592,153)
EBITDA $16,855,718  $13,426,653 
Add back:    
Non-cash stock-based compensation  1,174,625   1,861,445 
Adjusted EBITDA, gross $18,030,343  $15,288,098 
Less non-controlling interest (a)  (5,140,004)  (4,947,498)
Adjusted EBITDA, net $12,890,339  $10,340,600 
     
Weighted Average number of shares outstanding    
Basic  11,599,290   11,197,319 
Diluted  11,621,990   11,197,319 
     
Basic adjusted EBITDA $1.11  $0.92 
Diluted adjusted EBITDA $1.11  $0.92 
     
     
(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 $3,434,141  $2,843,090 
Income Taxes  351,778   162,419 
Depreciation and amortization  1,397,613   1,817,367 
Interest expense  99,696   136,445 
Interest (income)  (229,802)  (180,061)
EBITDA $5,053,426  $4,779,260 
Add back:    
Non-cash stock-based compensation  86,578   168,238 
Adjusted EBITDA of non-controlling interest $5,140,004  $4,947,498