Second Quarter Total Net Revenues of $17.6 million
Second Quarter GAAP Diluted EPS of $(0.09)
Second Quarter Adjusted EBITDA of $1.0 million

             - Conference Call Scheduled for Today at 9 a.m. ET (6 a.m. PT) -

CALABASAS, Calif., Feb. 14, 2017 (GLOBE NEWSWIRE) -- NetSol Technologies, Inc. (Nasdaq:NTWK), a leading global provider of business services and enterprise application solutions to the finance and leasing industry for 20 years, today announced financial results for the fiscal 2017 second quarter ended December 31, 2016. 

Fiscal 2017 Second Quarter Financial Results & Operational Highlights

Total net revenues for the second quarter of fiscal 2017 were $17.6 million, an increase of 9% from the prior year period. 

  • Total license fees were $5.4 million, up significantly from $0.7 million in the prior year period.
  • Total maintenance fees were $3.8 million, an increase of 17% from $3.3 million in the prior year period.
  • Total services revenues were $8.4 million, a decrease of 31% from $12.2 million in the prior year period.

Gross profit for the second quarter of fiscal 2017 was $8.4 million, or 47.8% of net revenues, an increase of 7% from $7.9 million, or 48.6% of net revenues, in the second quarter of fiscal 2016.

GAAP net loss attributable to NETSOL for the second quarter of fiscal 2017 was $0.99 million, or $(0.09) per diluted share, compared with net income of $0.88 million, or $0.08 per diluted share, in the second quarter of fiscal 2016. GAAP net loss attributable to NETSOL for the second quarter of fiscal 2017 includes $1.4 million of income attributable to non-controlling interest, compared to $0.88 million in the prior year period. The year-over-year increase in non-controlling interest was primarily driven by mix of profits between NETSOL’s wholly owned subsidiaries and joint ventures. GAAP net loss for the second quarter of fiscal 2017 was also impacted by approximately $0.6 million of loss from foreign currency exchange transactions.

Adjusted EBITDA1 for the second quarter of fiscal 2017 was $1.0 million, representing Adjusted EBITDA per diluted share of $0.09, compared with Adjusted EBITDA of $2.6 million, or Adjusted EBITDA per diluted share of $0.24, in the second quarter of fiscal 2016.

At December 31, 2016, cash and cash equivalents were $9.5 million, compared with $11.2 million at September 30, 2016 and $14.0 million at December 31, 2015.

In February 2017, NETSOL completed the implementation of NFS AscentTM for the Australian finance & leasing arm of a multinational German Auto Manufacturing corporation. This was the second implementation under an existing 10-year contract with this customer for the implementation, support and maintenance of NFS AscentTM in 12 countries.

At the end of the fiscal second quarter, NETSOL’s global pipeline exceeded $150 million. Pipeline highlights for the Americas included a leading software company based in the U.S., a global equipment manufacturer that is an existing NETSOL client in Asia Pacific, and several other smaller targets currently in discussions for NFS AscentTM, NFSTM, and LeasePakTM.  Pipeline highlights for Asia Pacific and EMEA included a few large multi-national clients in discussions for platform upgrades to NFS AscentTM, multiple potential new logos for NFSTM, and strong pipeline growth in the emerging Indonesia market.

Management Commentary
“Our fiscal second quarter results are highlighted by strong year-over-year growth in our license and maintenance revenues driven by new client implementations and cross-sales into our existing customer base,” said Najeeb Ghauri, CEO of NETSOL. “Demand remains solid across our solutions and geographies, our pipeline is growing, and our large twelve-country NFS Ascent implementation remains on track."

Ghauri continued, “In the past three months, we have initiated new productivity and cost reduction initiatives that we expect will drive additional margin expansion and earnings accretion beginning in the second half of fiscal 2017 and align our business with our strategy for long-term profitable growth. We currently expect these initiatives to result in approximately $1.5 million of cost savings in the second half of fiscal 2017, and approximately $4 million on an annualized basis beginning in fiscal 2018.”

Fiscal 2017 Financial Outlook
The Company’s financial outlook for the fiscal year ending June 30, 2017 is as follows:

  • Total net revenues of $73 to $75 million for fiscal 2017. 
  • Non-GAAP Adjusted EBITDA, net, of $9 to $10 million for fiscal 2017.
        
Fiscal 2017 Second Quarter Conference Call
 When:     Tuesday, February 14, 2017
 Time:      9:00 a.m. Eastern Time 
 Phone:     1-844-868-9327 (domestic)
       1-412-317-6595 (international)
 Note:     Once connected, please ask to be joined into the NETSOL Technologies call.
        

A replay will be available one hour after the end of the conference call and can be accessed by dialing 1-877-344-7529 (domestic) or 1-412-317-0088 (international); the replay access code is 10099519. The replay will be available through Tuesday, February 21, 2017.

A live webcast will be available online within the investor relations section of NETSOL’s website at http://www.netsoltech.com. A replay of the webcast will be available one hour following conclusion of the live call, and will be archived for one year.

1 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. Beginning with the fourth quarter of fiscal 2016, NetSol has revised its calculation of Adjusted EBITDA to exclude the portion of Adjusted EBITDA that is attributable to its subsidiaries that have a minority interest.

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 are backed by 40 years of domain expertise and supported by a committed team of 1,500+ professionals placed in eight strategically located support and delivery centers throughout the world. NFSTM, LeasePakTM, LeaseSoft or NFS AscentTM – help companies transform their Finance and Leasing operations, providing a fully automated asset-based finance solution covering the complete leasing and finance lifecycle.

Investors can receive news releases and invitations to special events by accessing our online signup form at http://ir.netsoltech.com/email-alerts.

Forward-Looking Statements

Certain statements in this press release are forward-looking in nature, including, but not limited to, expected net revenue and adjusted EPS amounts for the full fiscal year and the growing market need for 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.

Investor Contact

ICR
William Maina
(646) 277-1236
investors@netsoltech.com

NETSOL Technologies, Inc. and Subsidiaries
Schedule 1: Consolidated Balance Sheets
 
   As of December 31, As of June 30,
 ASSETS 2016   2016 
Current assets:   
 Cash and cash equivalents$9,505,383  $11,557,527 
 Accounts receivable, net of allowance of $495,760  and $492,498 5,840,490   9,691,229 
 Accounts receivable, net - related party 4,303,380   5,691,178 
 Revenues in excess of billings 17,646,488   10,493,096 
 Revenues in excess of billings - related party 469,030   804,168 
 Other current assets 2,904,650   2,214,628 
  Total current assets 40,669,421   40,451,826 
Restricted cash 90,000   90,000 
Property and equipment, net 21,873,277   22,774,435 
Other assets 2,054,938   842,553 
Intangible assets, net 18,423,439   19,674,033 
Goodwill 9,516,568   9,516,568 
  Total assets$92,627,643  $93,349,415 
      
 LIABILITIES AND STOCKHOLDERS' EQUITY   
Current liabilities:   
 Accounts payable and accrued expenses$7,373,097  $5,962,770 
 Current portion of loans and obligations under capitalized leases 4,368,930   4,440,084 
 Unearned revenues 2,806,804   4,739,214 
 Common stock to be issued 88,324   88,324 
  Total current liabilities 14,637,155   15,230,392 
Long term loans and obligations under capitalized leases; less current maturities 501,554   477,692 
  Total liabilities 15,138,709   15,708,084 
Commitments and contingencies   
Stockholders' equity:   
 Preferred stock, $.01 par value; 500,000 shares authorized; -   - 
 Common stock, $.01 par value; 14,500,000 shares authorized;   
  10,993,054  shares issued and 10,958,275  outstanding as of December 31, 2016  and  
  10,713,372  shares issued and 10,686,093  outstanding as of June 30, 2016 109,931   107,134 
 Additional paid-in-capital 123,019,215   121,448,946 
 Treasury stock (34,779 shares and 27,279 shares) (454,310)  (415,425)
 Accumulated deficit (40,074,755)  (37,323,360)
 Stock subscription receivable (450,220)  (783,172)
 Other comprehensive loss (18,628,395)  (18,730,494)
  Total NetSol stockholders' equity 63,521,466   64,303,629 
 Non-controlling interest 13,967,468   13,337,702 
  Total stockholders' equity 77,488,934   77,641,331 
  Total liabilities and stockholders' equity$92,627,643  $93,349,415 
      

 


NETSOL Technologies, Inc. and Subsidiaries
Schedule 2: Consolidated Statement of Operations
 
   For the Three Months For the Six Months  
   Ended December 31, Ended December 31,  
    2016   2015   2016   2015   
Net Revenues:         
 License fees$5,350,086  $709,691  $8,849,946  $1,903,045   
 Maintenance fees 3,787,696   3,240,472   7,190,517   6,252,710   
 Services 6,984,084   9,574,104   12,790,801   16,327,977   
 License fees - related party -   -   246,957   -   
 Maintenance fees - related party 51,345   31,755   181,976   189,986   
 Services - related party 1,464,901   2,635,675   3,379,473   4,823,083   
  Total net revenues 17,638,112   16,191,697   32,639,670   29,496,801   
            
Cost of revenues:         
 Salaries and consultants 5,979,804   5,083,412   11,873,153   10,244,661   
 Travel 836,240   754,009   1,548,135   1,235,462   
 Depreciation and amortization 1,318,764   1,461,466   2,649,636   2,935,701   
 Other 1,065,727   1,022,682   2,038,065   1,961,479   
  Total cost of revenues 9,200,535   8,321,569   18,108,989   16,377,303   
            
Gross profit 8,437,577   7,870,128   14,530,681   13,119,498   
            
Operating expenses:         
 Selling and marketing 2,713,478   2,002,990   5,057,516   3,701,394   
 Depreciation and amortization 271,485   285,616   540,582   576,788   
 General and administrative 3,933,413   3,378,829   8,552,609   6,583,517   
 Research and development cost 91,607   117,924   184,539   229,994   
  Total operating expenses 7,009,983   5,785,359   14,335,246   11,091,693   
            
Income (loss) from operations 1,427,594   2,084,769   195,435   2,027,805   
            
Other income and (expenses)         
 Loss on sale of assets (32,339)  (2,333)  (34,742)  (14,206)  
 Interest expense (62,127)  (72,156)  (116,602)  (140,329)  
 Interest income 23,416   35,299   53,856   87,411   
 Loss on foreign currency exchange transactions (621,887)  (134,527)  (1,036,783)  (248,246)  
 Other income 6,823   120,684   28,383   174,998   
  Total other income (expenses) (686,114)  (53,033)  (1,105,888)  (140,372)  
            
Net income (loss) before  income taxes 741,480   2,031,736   (910,453)  1,887,433   
Income tax provision (338,884)  (273,275)  (378,759)  (348,498)  
Net income (loss) 402,596   1,758,461   (1,289,212)  1,538,935   
 Non-controlling interest (1,388,272)  (883,396)  (1,462,183)  (1,074,898)  
Net income (loss) attributable to NetSol$(985,676) $875,065  $(2,751,395) $464,037   
            
            
            
Net income (loss) per share:         
 Net income (loss) per common share         
  Basic$(0.09) $0.08  $(0.26) $0.05   
  Diluted$(0.09) $0.08  $(0.26) $0.04   
            
Weighted average number of shares outstanding         
 Basic 10,877,446   10,308,186   10,783,685   10,294,760   
 Diluted 10,877,446   10,548,922   10,783,685   10,535,497   
            


 

NETSOL Technologies, Inc. and Subsidiaries
Schedule 3: Consolidated Statement of Cash Flows
 
    For the Six Months 
    Ended December 31, 
     2016   2015  
Cash flows from operating activities:     
 Net income (loss)$(1,289,212) $1,538,935  
 Adjustments to reconcile net income (loss)    
 to net cash provided by operating activities:    
 Depreciation and amortization 3,190,218   3,512,489  
 Provision for bad debts 1,026   37,043  
 Loss on sale of assets 34,742   14,206  
 Stock issued for services 1,525,775   326,019  
 Fair market value of warrants and stock options granted 21,804   145,716  
 Changes in operating assets and liabilities:     
 Accounts receivable 3,678,110   111,967  
 Accounts receivable - related party 829,285   (2,383,828) 
 Revenues in excess of billing (7,219,089)  520,071  
 Revenues in excess of billing - related party 285,791   15,866  
 Other current assets 585,147   (758,802) 
 Accounts payable and accrued expenses 334,241   142,008  
 Unearned revenue (1,908,440)  (1,190,072) 
 Net cash provided by operating activities  69,398   2,031,618  
        
Cash flows from investing activities:     
 Purchases of property and equipment (1,074,316)  (1,177,443) 
 Sales of property and equipment 181,087   357,933  
 Purchase of treasury stock (38,885)  -  
 Purchase of non-controlling interest in subsidiary -   (347,623) 
 Investment (705,555)  -  
 Net cash used in investing activities  (1,637,669)  (1,167,133) 
        
Cash flows from financing activities:     
 Proceeds from sale of common stock -   64,931  
 Proceeds from the exercise of stock options and warrants 429,452   194,680  
 Proceeds from exercise of subsidiary options   18,089   -  
 Dividend paid by subsidiary to Non controlling interest (968,657)  -  
 Proceeds from bank loans -   306,750  
 Payments on capital lease obligations and loans - net (69,998)  (530,733) 
 Net cash provided by (used in) financing activities  (591,114)  35,628  
Effect of exchange rate changes  107,241   (1,082,297) 
Net decrease in cash and cash equivalents  (2,052,144)  (182,184) 
Cash and cash equivalents, beginning of the period 11,557,527   14,168,957  
Cash and cash equivalents, end of period $9,505,383  $13,986,773  
        


 

NETSOL Technologies, Inc. and Subsidiaries
Schedule 4: Reconciliation to GAAP
 
 Three Months Three Months Six Months Six Months 
 Ended Ended Ended Ended 
 December 31, 2016 December 31, 2015 December 31, 2016 December 31, 2015 
         
Net Income (loss) before preferred dividend, per GAAP$(985,676) $875,065  $(2,751,395) $464,037  
Non-controlling interest 1,388,272   883,396   1,462,183   1,074,898  
Income taxes 338,884   273,275   378,759   348,498  
Depreciation and amortization 1,590,249   1,747,082   3,190,218   3,512,489  
Interest expense 62,127   72,156   116,602   140,329  
Interest (income) (23,416)  (35,299)  (53,856)  (87,411) 
EBITDA$2,370,440  $3,815,675  $2,342,511  $5,452,840  
Add back:        
Non-cash stock-based compensation 682,123   393,985 - 1,547,579   471,735  
Adjusted EBITDA, gross$3,052,563  $4,209,660  $3,890,090  $5,924,575  
Less non-controlling interest (a) (2,037,286)  (1,642,461)  (2,717,103)  (2,697,992) 
Adjusted EBITDA, net$1,015,277  $2,567,199  $1,172,987  $3,226,583  
         
         
Weighted Average number of shares outstanding        
Basic 10,877,446   10,308,186   10,783,685   10,294,760  
Diluted 11,032,938   10,548,922   10,939,177   10,535,497  
         
Basic adjusted EBITDA$0.09  $0.25  $0.11  $0.31  
Diluted adjusted EBITDA$0.09  $0.24  $0.11  $0.31  
         
         
(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$1,388,272  $883,396  $1,462,183  $1,074,898  
Income Taxes 53,397   23,907   61,045   37,781  
Depreciation and amortization 523,368   730,672   1,049,294   1,556,538  
Interest expense 18,725   12,991   36,416   31,333  
Interest (income) (7,535)  (34,947)  (17,092)  (51,397) 
EBITDA$1,976,227  $1,616,019  $2,591,846  $2,649,153  
Add back:        
Non-cash stock-based compensation 61,059   26,442   125,257   48,839  
Adjusted EBITDA of non-controlling interest$2,037,286  $1,642,461  $2,717,103  $2,697,992  
         

From time to time, NETSOL may refer to Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, Amortization and Stock-based Compensation) and “non-GAAP adjusted EBITDA per diluted share or Adjusted EBITDA per diluted share” in its conference calls and discussions with investors and analysts in connection with the company’s reported historical financial results.  Adjusted EBITDA does not represent cash flows from operations as defined by generally accepted accounting principles (“GAAP”), is not derived in accordance with GAAP and should not be considered by the reader as an alternative to net income (the most comparable GAAP financial measure to Adjusted EBITDA).  Non-GAAP adjusted EBITDA per diluted share or Adjusted EBITDA per diluted share is not derived in accordance with GAAP and should not be considered by the reader as an alternative to reported GAAP diluted EPS.  The reconciliation of GAAP and non-GAAP financial measures for the three and six month periods ended December 31, 2016 and 2015 are included in the above table.  NETSOL’s management believes that Adjusted EBITDA and Adjusted EBITDA per diluted share are helpful as an indicator of the current financial performance of the company. NETSOL also adjusts for non-cash items, such as stock-based compensation as we believe excluding these costs provide a useful metric by which to compare performance from period to period. Management strongly encourages investors to review the company’s consolidated financial statements in their entirety and to not rely on any single financial measure in evaluating the company.

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