NETSOL Technologies Reports Fiscal Third Quarter 2022 Financial Results


Total net revenues up 7.4% to $14.8 million in Q3 FY 2022

Annual recurring revenue (SaaS and Support) increased to a $26.2 million run rate

CALABASAS, Calif., May 12, 2022 (GLOBE NEWSWIRE) -- NETSOL Technologies, Inc. (Nasdaq: NTWK), a global business services and enterprise application solutions provider, reported results for the fiscal third quarter ended March 31, 2022.

Fiscal Third Quarter 2022 and Recent Operational Highlights

  • Subscription (SaaS and Cloud) and support quarterly revenues increased 16% to $6.6 million.
  • NETSOL’s U.S. based mobility startup Otoz expanded its digital automotive retail platform MINI Anywhere® for BMW® Group Financial Services in the U.S. for its key brand MINI®. MINI Anywhere is now live with 17 MINI dealerships, including 70%+ of the California MINI dealerships and 75% of all Pennsylvania dealerships. The Company now has dealerships enrolled in California, Florida, Texas, New York, New Jersey, and Pennsylvania. Long term, the solution has the potential to be rolled out to over 100 MINI dealerships across all 50 states.
  • Successfully completed key activities related to GAC China contract with deliveries expected in May and July 2022.
  • Completed required workshops for Ascent 2.0 implementation for Motorcycle Group US with development of enhancements underway for three major modules: POS, CTA, and CMS.

Fiscal Third Quarter 2022 Financial Results

Total net revenues for the third quarter of fiscal 2022 were $14.8 million, compared with $13.8 million in the prior year period. The increase in total net revenues was primarily driven by increases in subscription and support revenues of $0.9 million and services revenue of $0.6 million, slightly offset by a decrease in license fees of $0.5 million.

  • Total license fees were $1.6 million, compared with $2.1 million in the prior year period.
  • Total subscription (SaaS and Cloud) and support revenues were $6.6 million, compared with $5.7 million in the prior year period.
  • Total services revenues were $6.6 million, compared with $6.0 million in the prior year period.

Gross profit for the third quarter of fiscal 2022 was $5.8 million (or 39% of net revenues), compared to $6.4 million (or 47% of net revenues) in the third quarter of fiscal 2021. The decrease in gross profit was primarily due to an increase in cost of sales of $1.6 million driven by increases in salaries and consulting costs of $1.4 million.

Operating expenses for the third quarter of fiscal 2022 were $6.4 million (or 43% of sales), compared to $6.0 million (or 43% of sales) for the third quarter of fiscal 2021. The increase in operating expenses was primarily due to increases in selling and marketing expenses, offset by a decrease in general and administrative expenses.

GAAP net loss attributable to NETSOL for the third quarter of fiscal 2022 totaled $0.3 million or $0.02 per diluted share, compared with GAAP net loss of $0.6 million or $0.05 per diluted share in the third quarter of fiscal 2021.

Non-GAAP adjusted EBITDA for the third quarter of fiscal 2022 totaled $0.4 million or $0.03 per diluted share, compared with non-GAAP adjusted EBITDA of $0.2 or $0.02 per diluted share in the third quarter of fiscal 2021 (see note regarding “Use of Non-GAAP Financial Measures,” below for further discussion of this non-GAAP measure).

At March 31, 2022, cash and cash equivalents were $30.6 million, a decrease from $33.7 million at June 30, 2021.

Management Commentary

“We remain on-track to deliver on our fiscal 2022 guidance,” said NETSOL Co-Founder, Chairman and Chief Executive Officer Najeeb Ghauri. “We previously forecasted 10% top-line growth and 20% growth in our recurring revenues. I am pleased to report that for the nine months ended March 31, 2022, our team has delivered top-line growth of 10.5% and increased our annual recurring revenues by nearly 34%. Our pipeline and mix of opportunities remain 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. Additionally, we are now seeing accelerated adoption of our Otoz Digital Retail Platform, one of our more venture-focused operations, as it continues to expand through its MINI Anywhere partnership. We were just entering our second state at the end of the last quarter, and now we are serving customers in six states with the platform. Our vision of pushing the boundaries for new ownership and payment models is quickly becoming a reality as we continue to support our customers where they are today and where they want to go in the future, building value for our shareholders in the process.”

Company CFO Roger Almond added: “Our subscription and support segment were a key growth driver during the quarter. As our workforce continues to return 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 near record levels, 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. 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 (May 12, 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 May 26, 2022 and can be accessed by dialing +1-844-512-2921 (U.S. Toll Free) or +1-412-317-6671 (International) and entering replay pin number: 13729917.

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:

Dave Gentry
RedChip Companies
407-491-4498
investors@netsoltech.com

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

   As of As of
 ASSETS
March 31, 2022 June 30, 2021
Current assets:   
 Cash and cash equivalents$30,573,312  $33,705,154 
 Accounts receivable, net of allowance of $208,547 and $166,231 7,054,468   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 $84,209 and $136,976 14,610,725   14,680,131 
 Revenues in excess of billings - related party, net of allowance of $8,163 and $8,163 -   - 
 Other current assets, net of allowance of $1,243,633 and $1,243,633 2,864,742   3,009,393 
  Total current assets 55,103,247   55,578,774 
Revenues in excess of billings, net - long term 993,862   957,603 
Convertible note receivable - related party, net of allowance of $4,250,000 and $4,250,000 -   - 
Property and equipment, net 10,114,458   12,091,812 
Right of use of assets - operating leases 1,238,713   1,345,869 
Long term investment 2,893,700   3,155,852 
Other assets 37,583   55,127 
Intangible assets, net 2,178,128   3,904,656 
Goodwill  9,516,568   9,516,568 
  Total assets$82,076,259  $86,606,261 
          
 LIABILITIES AND STOCKHOLDERS' EQUITY   
Current liabilities:
       
 Accounts payable and accrued expenses$6,317,127  $6,696,035 
 Current portion of loans and obligations under finance leases 9,622,669   11,366,171 
 Current portion of operating lease obligations 706,684   857,729 
 Unearned revenue 6,948,669   4,556,626 
  Total current liabilities 23,595,149   23,476,561 
Loans and obligations under finance leases; less current maturities 127,899   699,841 
Operating lease obligations; less current maturities 570,871   564,257 
  Total liabilities 24,293,919   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;       
  12,191,570 shares issued and 11,252,539 outstanding as of March 31, 2022 and       
  12,181,585 shares issued and 11,265,064 outstanding as of June 30, 2021 121,916   121,816 
 Additional paid-in-capital 129,084,786   129,018,826 
 Treasury stock (at cost, 939,031 shares and 916,521 shares       
 as of March 31, 2022 and June 30, 2021, respectively) (3,920,856)  (3,820,750)
 Accumulated deficit (37,484,998)  (38,801,282)
 Other comprehensive loss (36,740,406)  (31,868,481)
  Total NetSol stockholders' equity 51,060,442   54,650,129 
 Non-controlling interest 6,721,898   7,215,473 
  Total stockholders' equity 57,782,340   61,865,602 
  Total liabilities and stockholders' equity$82,076,259  $86,606,261 
          

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

   For the Three Months For the Nine Months
   Ended March 31, Ended March 31,
    2022   2021   2022   2021 
Net Revenues:       
 License fees$1,620,827  $2,120,963  $3,586,874  $4,710,942 
 Subscription and support 6,554,540   5,674,776   22,159,798   16,571,441 
 Services 6,634,459   5,988,257   17,956,877   18,270,451 
  Total net revenues 14,809,826   13,783,996   43,703,549   39,552,834 
          
Cost of revenues:       
 Salaries and consultants 6,756,898   5,372,302   18,081,225   15,193,613 
 Travel 256,730   151,075   753,698   414,001 
 Depreciation and amortization 741,587   759,768   2,236,190   2,180,766 
 Other 1,220,041   1,075,403   3,712,256   2,915,122 
  Total cost of revenues 8,975,256   7,358,548   24,783,369   20,703,502 
          
Gross profit 5,834,570   6,425,448   18,920,180   18,849,332 
          
Operating expenses:       
 Selling and marketing 2,074,873   1,595,967   5,502,028   4,763,598 
 Depreciation and amortization 206,346   272,075   633,481   715,437 
 General and administrative 3,841,655   3,860,509   11,548,097   11,353,933 
 Research and development cost 251,001   234,678   761,621   431,086 
  Total operating expenses 6,373,875   5,963,229   18,445,227   17,264,054 
          
Income (loss) from operations (539,305)  462,219   474,953   1,585,278 
          
Other income and (expenses)       
 Gain (loss) on sale of assets 8,770   (53,012)  (181,955)  (127,285)
 Interest expense (85,916)  (98,656)  (277,737)  (296,224)
 Interest income 364,161   231,979   1,123,547   643,654 
 Gain (loss) on foreign currency exchange transactions 499,516   (1,825,349)  2,684,680   (1,515,327)
 Share of net loss from equity investment (76,798)  (80,953)  (317,581)  (232,488)
 Other income (30,296)  521,758   (7,599)  654,395 
  Total other income (expenses) 679,437   (1,304,233)  3,023,355   (873,275)
          
Net income (loss) before income taxes 140,132   (842,014)  3,498,308   712,003 
Income tax provision (157,604)  (133,156)  (526,737)  (642,884)
Net income (loss) (17,472)  (975,170)  2,971,571   69,119 
 Non-controlling interest (260,998)  351,939   (1,655,287)  (216,900)
Net income (loss) attributable to NetSol$(278,470) $(623,231) $1,316,284  $(147,781)
          
          
          
Net income (loss) per share:       
 Net income (loss) per common share       
  Basic$(0.02) $(0.05) $0.12  $(0.01)
  Diluted$(0.02) $(0.05) $0.12  $(0.01)
          
Weighted average number of shares outstanding       
  Basic 11,249,606   11,343,406   11,249,449   11,571,878 
  Diluted 11,249,606   11,343,406   11,249,449   11,571,878 
                  


NETSOL Technologies, Inc. and Subsidiaries

Schedule 3: Consolidated Statement of Cash Flows

    For the Nine Months
    Ended March 31,
     2022   2021 
Cash flows from operating activities:    
 Net income$2,971,571  $69,119 
 Adjustments to reconcile net income to net cash   
  provided by (used in) operating activities:   
 Depreciation and amortization 2,869,671   2,896,203 
 Provision for bad debts 6,897   (280,363)
 Share of net loss from investment under equity method 317,581   232,488 
 Loss on sale of assets 181,955   127,285 
 Stock based compensation 78,225   239,333 
  Changes in operating assets and liabilities:    
  Accounts receivable (3,404,247)  (777,953)
  Revenues in excess of billing (385,971)  7,485,646 
  Other current assets 53,173   (791,849)
  Accounts payable and accrued expenses 14,918   (69,021)
  Unearned revenue 2,822,178   1,256,456 
  Net cash provided by operating activities  5,525,951   10,387,344 
       
Cash flows from investing activities:    
 Purchases of property and equipment (1,680,856)  (2,109,058)
 Sales of property and equipment 321,251   131,293 
 Investment in associates -   (155,500)
  Net cash used in investing activities  (1,359,605)  (2,133,265)
       
Cash flows from financing activities:    
 Purchase of treasury stock (100,106)  (2,064,800)
 Proceeds from bank loans 312,467   2,109,572 
 Payments on finance lease obligations and loans - net (1,045,464)  (533,344)
  Net cash used in financing activities  (833,103)  (488,572)
Effect of exchange rate changes  (6,465,085)  2,666,800 
Net increase (decrease) in cash and cash equivalents  (3,131,842)  10,432,307 
Cash and cash equivalents at beginning of the period 33,705,154   20,166,830 
Cash and cash equivalents at end of period $30,573,312  $30,599,137 
        

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

 For the Three
Months Ended
 For the Three
Months Ended
 For the Nine
Months Ended
 For the Nine
Months Ended
 March 31, 2022 March 31, 2021 March 31, 2022 March 31, 2021
        
Net Income (loss) attributable to NetSol$(278,470) $(623,231) $1,316,284  $(147,781)
Non-controlling interest 260,998   (351,939)  1,655,287   216,900 
Income taxes 157,604   133,156   526,737   642,884 
Depreciation and amortization 947,933   1,031,843   2,869,671   2,896,203 
Interest expense 85,916   98,656   277,737   296,224 
Interest (income) (364,161)  (231,979)  (1,123,547)  (643,654)
EBITDA$809,820  $56,506  $5,522,169  $3,260,776 
Add back:       
Non-cash stock-based compensation 49,933   74,169   78,225   239,333 
Adjusted EBITDA, gross$859,753  $130,675  $5,600,394  $3,500,109 
Less non-controlling interest (a) (500,805)  66,659   (2,382,721)  (1,074,038)
Adjusted EBITDA, net$358,948  $197,334  $3,217,673  $2,426,071 
        
        
Weighted Average number of shares outstanding               
Basic 11,249,606   11,343,406   11,249,449   11,571,878 
Diluted 11,249,606   11,343,406   11,249,449   11,571,878 
                
Basic adjusted EBITDA$0.03  $0.02  $0.29  $0.21 
Diluted adjusted EBITDA$0.03  $0.02  $0.29  $0.21 
                
                
(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$260,998  $(351,939) $1,655,287  $216,900 
Income Taxes 45,427   34,867   159,854   127,749 
Depreciation and amortization 279,055   283,716   840,508   812,816 
Interest expense 25,764   29,585   81,846   89,929 
Interest (income) (117,417)  (71,440)  (362,146)  (204,604)
EBITDA$493,827  $(75,211) $2,375,349  $1,042,790 
Add back:               
Non-cash stock-based compensation 6,978   8,552   7,372   31,248 
Adjusted EBITDA of non-controlling interest$500,805  $(66,659) $2,382,721  $1,074,038