CALABASAS, Calif., Nov. 09, 2017 (GLOBE NEWSWIRE) -- NETSOL Technologies, Inc. (NASDAQ:NTWK), a global business services and enterprise application solutions provider, reported results for the fiscal first quarter ended September 30, 2017.

Recent Operational Highlights

  • Reported quarterly cost savings of $2.3 million directly tied to recent cost rationalization initiatives with an anticipated reduction of more than $6.0 million through fiscal 2018.
  • Amended the 12 country NFS Ascent™ contract for approximately $9.1 million in future revenues in addition to what was previously projected from the customer. The revenue will be recognized over the contract term as the support services are performed.
  • Implemented the Loan Origination System and the Whole Sale Financial System in Thailand and Korea, in connection with the 12 country NFS Ascent™ contract.
  • Delivered the first major release of NFS Ascent™ to China as part of the 12 country NFS Ascent™ contract.
  • Signed a proof of concept agreement with one of the oldest and largest banks in Australia. 
  • Mizhou Balimore, a Japanese bank in Indonesia, went live with the first phase of its NFS Ascent digital solution.  

Fiscal First Quarter 2018 Financial Results
Total net revenues for the first quarter of fiscal 2018 were $12.8 million, compared with $17.1 million in the prior year period. The decrease in total net revenues was primarily due to a decrease in license fees of $5.3 million which was offset by an increase in services revenue of $1.2 million.

  • Total license fees were $370,000, compared with $5.7 million in the prior year period.
  • Total maintenance fees were $3.6 million, compared with $3.7 million in the prior year period.
  • Total services revenues were $8.9 million, compared with $7.7 million in the prior year period.

Gross profit for the first quarter of fiscal 2018 was $4.8 million (or 37.5% of net revenues), which was down from $8.2 million (or 47.8% of net revenues) in the first quarter of fiscal 2017. The decrease in gross profit was primarily due to a $4.3 million decrease in total net revenues offset by a $901,000 decrease in cost of revenues for the quarter. The decrease in cost of revenues was primarily due to a decrease in salaries and consultant costs of $429,000 related to the right sizing of technical employees at key locations including Pakistan, Thailand, China, UK and North America.

Operating expenses for the first quarter of fiscal 2018 decreased 19.1% to $5.9 million (or 46.3% of net revenues) from $7.3 million (or 42.9% of net revenues) for the first quarter of fiscal 2017. The decrease in operating expenses was primarily due to cost reduction in selling and marketing expenses, salaries and wages, depreciation, and professional services.

GAAP net loss attributable to NETSOL for the first quarter of fiscal 2018 totaled $369,000 or $(0.03) per diluted share, compared with net loss of $386,000 or $(0.04) per diluted share in the first quarter of fiscal 2017.

Non-GAAP adjusted EBITDA for the first quarter of fiscal 2018 totaled $970,000 or $0.09 per diluted share, compared with $1.3 million or $0.12 per diluted share in the first quarter of fiscal 2017 (see note regarding “Use of Non-GAAP Financial Measures,” below for further discussion of this non-GAAP measure).

At September 30, 2017, cash and cash equivalents were $8.6 million, compared with $14.2 million at the end of the prior quarter.

Stock Repurchase Program
On July 18, 2017, NETSOL’s board of directors approved a stock repurchase program that authorizes repurchases of up to one million shares of its common stock through December 16, 2017. 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. To date, the company has repurchased 139,275 shares of its common stock at an aggregate value of $601,000.

Management Commentary
“The fiscal first quarter, while historically our slowest due to traditional seasonality, was another productive period in our development, giving us increased optimism about the future for NETSOL and our core product NFS Ascent,” said company founder, chairman and Chief Executive Officer Najeeb Ghauri. “Despite continued elongated sales cycles, we remain encouraged with Ascent’s robust pipeline, making additional progress and receiving continued demand from many existing and new partners during the quarter. In the meantime, we are realizing significant cost reductions related to our operational efficiency initiatives, which we began last December. In fact, during the first quarter we achieved $2.3 million in cost savings directly tied to these measures.

“Moving forward, our focus remains on positioning NETSOL to be able to effectively capitalize on the significant long-term opportunity in the massive global asset finance and leasing industry while also profitably scaling our business.”

Conference Call
NETSOL Technologies management will hold a conference call today (November 9, 2017) 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: 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 Liolios Group 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 12:00 p.m. Eastern time on the same day through November 23, 2017.

Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 13672631

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 1000 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 the benefit of certain cost savings undertaken in the past fiscal year, 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. 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.

Investor Relations Contact:

Matt Glover and Najim Mostamand, CFA
Liolios Group, Inc.
949-574-3860
investors@netsoltech.com

          
NETSOL Technologies, Inc. and Subsidiaries
Schedule 1: Consolidated Balance Sheets
 
    As of September 30,  As of June 30,  
 ASSETS2017  2017  
Current assets:      
 Cash and cash equivalents $8,554,815   $14,172,954  
 Accounts receivable, net of allowance of $361,416  and $571,5117,469,888  6,583,199  
 Accounts receivable, net - related party2,611,562  1,644,942  
 Revenues in excess of billings22,104,283  19,126,389  
 Revenues in excess of billings - related party80,057  80,705  
 Convertible note receivable - related party700,000  200,000  
 Other current assets2,940,599  2,463,886  
   Total current assets44,461,204  44,272,075  
Restricted cash90,000  90,000  
Revenues in excess of billings, net - long term5,225,260  5,173,538  
Property and equipment, net19,646,592  20,370,703  
Other assets3,400,418  3,211,295  
Intangible assets, net16,139,921  17,043,151  
Goodwill9,516,568  9,516,568  
   Total assets $98,479,963   $99,677,330  
          
 LIABILITIES AND STOCKHOLDERS' EQUITY  
  
Current liabilities:      
 Accounts payable and accrued expenses $7,123,148   $6,880,194  
 Current portion of loans and obligations under capitalized leases10,016,697  10,222,795  
 Unearned revenues3,656,591  3,925,702  
 Common stock to be issued88,324  88,324  
   Total current liabilities20,884,760  21,117,015  
Loans and obligations under capitalized leases; less current maturities307,629  366,762  
   Total liabilities21,192,389  21,483,777  
Commitments and contingencies      
Stockholders' equity:      
 Preferred stock, $.01 par value; 500,000 shares authorized;-  -  
 Common stock, $.01 par value; 14,500,000 shares authorized;      
   11,333,129  shares issued and 11,186,570  outstanding as of September 30, 2017  and     
   11,225,385  shares issued and 11,190,606  outstanding as of June 30, 2017113,331  112,254  
 Additional paid-in-capital124,987,029  124,409,998  
 Treasury stock (At cost, 146,559 shares and 34,779 shares      
 as of September 30, 2017 and June 30, 2017, respectively)(954,973) (454,310) 
 Accumulated deficit(42,670,888) (42,301,390) 
 Stock subscription receivable(273,926) (297,511) 
 Other comprehensive loss(18,663,149) (18,074,570) 
   Total NetSol stockholders' equity62,537,424  63,394,471  
 Non-controlling interest14,750,150  14,799,082  
   Total stockholders' equity77,287,574  78,193,553  
   Total liabilities and stockholders' equity $98,479,963   $99,677,330  
          


      
NETSOL Technologies, Inc. and Subsidiaries
Schedule 2: Consolidated Statement of Operations
      
   For the Three Months  
   Ended September 30,  
    2017   2016   
     Restated  
Net Revenues:     
 License fees$326,066  $5,453,795   
 Maintenance fees 3,473,725   3,523,797   
 Services 7,017,737   5,556,135   
 License fees - related party 44,408   246,957   
 Maintenance fees - related party 102,963   130,631   
 Services - related party 1,853,877   2,165,154   
  Total net revenues 12,818,776   17,076,469   
        
Cost of revenues:     
 Salaries and consultants 5,464,160   5,893,349   
 Travel 513,112   711,895   
 Depreciation and amortization 1,173,113   1,330,872   
 Other 856,582   972,338   
  Total cost of revenues 8,006,967   8,908,454   
        
Gross profit 4,811,809   8,168,015   
        
Operating expenses:     
 Selling and marketing 1,711,296   2,344,038   
 Depreciation and amortization 245,873   269,097   
 General and administrative 3,787,558   4,619,196   
 Research and development cost 185,085   92,932   
  Total operating expenses 5,929,812   7,325,263   
        
Income from operations (1,118,003)  842,752   
        
Other income and (expenses)     
 Gain (loss) on sale of assets (7,130)  (2,403)  
 Interest expense (118,071)  (54,475)  
 Interest income 136,911   30,440   
 Gain (loss) on foreign currency exchange transactions 1,016,362   (414,896)  
 Share of net loss from equity investment (67,562)  -   
 Other income (expense) 1,099   21,560   
  Total other income (expenses) 961,609   (419,774)  
        
Net income (loss) before  income taxes (156,394)  422,978   
Income tax provision (24,871)  (39,875)  
Net income (loss) (181,265)  383,103   
 Non-controlling interest (188,233)  (769,214)  
Net income (loss) attributable to NetSol$(369,498) $(386,111)# 
        
        
Net income (loss) per share:     
 Net income (loss) per common share     
  Basic$(0.03) $(0.04)  
  Diluted$(0.03) $(0.04)  
        
Weighted average number of shares outstanding     
 Basic 11,099,113   10,697,425   
 Diluted 11,099,113   10,697,425   
        

 

       
  NETSOL Technologies, Inc. and Subsidiaries
  Schedule 3: Consolidated Statement of Cash Flows
       
      Ended September 30,  
     2017  2016 
        Restated 
 Cash flows from operating activities:      
   Net income (loss)  $  (181,265)   $  383,103 
   Adjustments to reconcile net income (loss)      
   to net cash used in operating activities:      
   Depreciation and amortization   1,418,986    1,599,969 
   Share of net loss from investment under equity method   67,562    - 
   Loss on sale of assets   7,130    2,403 
   Stock issued for services   439,308    865,456 
   Fair market value of warrants and stock options granted   -    21,804 
   Changes in operating assets and liabilities:      
   Accounts receivable   (903,730)    2,336,894 
   Accounts receivable - related party   (1,251,994)    121,800 
   Revenues in excess of billing   (3,230,619)    (4,821,828)
   Revenues in excess of billing - related party   (130)    93,208 
   Other current assets   (478,390)    306,339 
   Accounts payable and accrued expenses   231,645    (780,569)
   Unearned revenue   (270,743)    (346,108)
   Net cash used in operating activities   (4,152,240)    (217,529)
          
 Cash flows from investing activities:      
   Purchases of property and equipment   (328,163)    (554,873)
   Sales of property and equipment   116,023    151,818 
   Convertible note receivable - related party   (500,000)    - 
   Investment in WRLD3D   -    (555,555)
   Net cash used in investing activities   (712,140)    (958,610)
          
 Cash flows from financing activities:      
   Proceeds from the exercise of stock options and warrants   162,385    276,861 
   Proceeds from exercise of subsidiary options     -    14,013 
   Purchase of treasury stock   (500,663)    - 
   Payments on capital lease obligations and loans - net   (148,707)    (49,117)
   Net cash provided by financing activities   (486,985)    241,757 
 Effect of exchange rate changes   (266,774)    533,292 
 Net decrease in cash and cash equivalents   (5,618,139)    (401,090)
 Cash and cash equivalents, beginning of the period   14,172,954    11,557,527 
 Cash and cash equivalents, end of period  $  8,554,815   $  11,156,437 
          

 

      
NETSOL Technologies, Inc. and Subsidiaries
Schedule 4: Reconciliation to GAAP
      
 Three Months  Three Months 
 Ended  Ended 
 September 30, 2017  September 30, 2016 
    Restated 
      
 Net Income (loss) before preferred dividend, per GAAP $  (369,498)  $  (386,111) 
 Non-controlling interest   188,233    769,214 
 Income taxes   24,871    39,875 
 Depreciation and amortization   1,418,986    1,599,969 
 Interest expense   118,071    54,475 
 Interest (income)   (136,911)    (30,440)
 EBITDA $  1,243,752  $  2,046,982 
 Add back:      
 Non-cash stock-based compensation   427,809    865,456 
 Adjusted EBITDA, gross $  1,671,561  $  2,912,438 
 Less non-controlling interest (a)   (701,864)    (1,633,243) 
 Adjusted EBITDA, net $  969,697  $  1,279,195 
      
      
 Weighted Average number of shares outstanding      
 Basic   11,099,113    10,697,425 
 Diluted   11,130,824    10,861,290 
      
 Basic adjusted EBITDA $  0.09  $  0.12 
 Diluted adjusted EBITDA $  0.09  $  0.12 
      
      
(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$  188,233  $  769,214 
 Income Taxes   10,478    13,874 
 Depreciation and amortization   467,182    825,866 
 Interest expense   39,072    18,342 
 Interest (income)   (45,157)    (16,450)
 EBITDA $  659,808  $  1,610,846 
 Add back:      
 Non-cash stock-based compensation   42,056    22,397 
 Adjusted EBITDA of non-controlling interest $  701,864  $  1,633,243