Bay Street News

NETSOL Technologies Reports 23% Revenue Growth and EPS of $0.04 in Fiscal Second Quarter 2024

Bay Street

ENCINO, Calif., Feb. 13, 2024 (GLOBE NEWSWIRE) — NETSOL Technologies, Inc. (Nasdaq: NTWK), a global business services and enterprise application solutions provider, reported results for the fiscal second quarter of 2024 ended December 31, 2023.

Fiscal Second Quarter 2024 Financial Results

Total net revenues for the second quarter of fiscal 2024 increased 23% to $15.2 million, compared with $12.4 million in the prior year period. On a constant currency basis, total net revenues were $15.3 million.

Gross profit for the second quarter of fiscal 2024 was $7.2 million (or 47% of net revenues), compared to $3.1 million (or 25% of net revenues) in the second quarter of fiscal 2023. On a constant currency basis, gross profit for the second quarter of fiscal 2024 was $5.9 million (or 39% of net revenues as measured on a constant currency basis).

Operating expenses for the second quarter of fiscal 2024 were $6.1 million (or 40% of sales) compared to $6.2 million (or 50% of sales) for the second quarter of fiscal 2023. On a constant currency basis, operating expenses for the second quarter of fiscal 2024 increased to $6.7 million (or 44% of sales on a constant currency basis).

GAAP net income attributable to NETSOL for the second quarter of fiscal 2024 totaled $408,000 or $0.04 per diluted share, compared with a GAAP net loss of $(2.1 million) or a loss of $(0.19) per diluted share in the second quarter of fiscal 2023. Included in GAAP net income attributable to NETSOL was a loss of $(14,617) on foreign currency exchange transactions in the second quarter of fiscal 2024, compared to a gain of $657,000 in the prior year period. On a constant currency basis, GAAP net loss attributable to NETSOL for the second quarter of fiscal 2024 totaled $(902,000) or $(0.08) per diluted share.

Non-GAAP adjusted EBITDA for the second quarter of fiscal 2024 was $725,000 or $0.06 per diluted share, compared with a non-GAAP adjusted EBITDA loss of $(1.3 million) or $(0.12) per diluted share in the second quarter of fiscal 2023 (see note regarding “Use of Non-GAAP Financial Measures,” below for further discussion of this non-GAAP measure).

Six Months Ended December 31, 2023, Financial Results

Total net revenues for the six months ended December 31, 2023, were $29.5 million, compared to $25.1 million in the prior year period. On a constant currency basis, total net revenues were $29.6 million.

Gross profit for the six months ended December 31, 2023, was $13.3 million (or 45% of net revenues), compared with $7.4 million (or 29% of net revenues) in the prior year period. On a constant currency basis, gross profit for the six months ended December 31, 2023, was $10.6 million (or 36% of net revenues as measured on a constant currency basis).

Operating expenses for the six months ended December 31, 2023, were $12.0 million (or 41% of sales) compared with $12.3 million (or 49% of sales) in the prior year period. On a constant currency basis, operating expenses for the six months ended December 31, 2023, were $13.1 million (or 44% of sales on a constant currency basis).

GAAP net income attributable to NETSOL for the six months ended December 31, 2023, totaled $439,000 or $0.04 per diluted share, compared with a GAAP net loss of $(2.7 million) or $(0.24) per diluted share in the prior year period. Included in GAAP net income attributable to NETSOL was a loss of $(149,000) on foreign currency exchange transactions for the six months ended December 31, 2023, compared to a gain of $2.0 million in the prior year period. On a constant currency basis, GAAP net loss attributable to NETSOL for the first six months of fiscal 2024 totaled $(2.4 million) or $(0.21) per diluted share.

Non-GAAP adjusted EBITDA for the six months ended December 31, 2023, was $1.2 million or $0.10 per diluted share, compared with a non-GAAP adjusted EBITDA loss of $1.4 million or $(0.12) per diluted share in the prior year period (see note regarding “Use of Non-GAAP Financial Measures,” below for further discussion of this non-GAAP measure).

At December 31, 2023, cash and cash equivalents were $15.7 million. Total NETSOL stockholders’ equity at December 31, 2023, was $34.5 million, or $3.03 per share.

Management Commentary

NETSOL Co-Founder, Chairman and Chief Executive Officer Najeeb Ghauri stated, “Similar to our first quarter, the second quarter of fiscal 2024 was characterized by increases in total net revenue, improved gross margins, and profitability, demonstrating the strength of our business model and our ability to execute on our growth strategy.

“While we continue to scale our SaaS business, our hybrid license and SaaS model has become a major catalyst for our growth. We recognized substantial license fees in this quarter as part of a large new contract in Asia with a major automotive company, which reinforces our visibility and reputation in the market, as well as the performance and reliability of our products. We expect license fees will continue to represent a key part of our revenue for the foreseeable future, and we have a robust pipeline of both SaaS and licensing opportunities to support this anticipated growth. We recognized increases in our subscription and support revenues this quarter as well, further reflecting the strength of our SaaS offerings. With the launch of our Otoz 2.0 digital retail platform, which has doubled enrollment over the last 12 months, and increased traction with key automotive clients like AutoNation and MINI USA, we’re confident that this part of our business is positioned for continued growth.

“We are very pleased with our second quarter results and continue to strategically invest and allocate capital to further expand our presence across key, high growth markets like North America. Given our recent results and trajectory, we expect to see strong double digit organic revenue growth and improved margins throughout the second half of fiscal 2024 as we move into a period of more sustainable profitability.”

Conference Call

NETSOL Technologies management will hold a conference call today (February 13, 2024) 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 5-10 minutes prior to the start time or use this link for telephone access to the call via your web browser. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Investor Relations at 818-222-9195.

The conference call will also be broadcast live and available for replay here, along with additional replay access being provided through the company information section of NETSOL’s website.

A telephone replay of the conference call will be available approximately three hours after the call concludes through Tuesday, February 27, 2024.

Toll-free replay number: 844-512-2921
International replay number: 412-317-6671
Replay ID: 13743948

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 professionals placed in ten strategically located support and delivery centers throughout the world. NETSOL’s products 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
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.

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:

IMS Investor Relations
netsol@imsinvestorrelations.com
+1 203-972-9200

NETSOL Technologies, Inc. and Subsidiaries
Schedule 1: Consolidated Balance Sheets
 
      As of   As of
  ASSETS December 31, 2023   June 30, 2023
Current assets:      
  Cash and cash equivalents $ 15,659,516     $ 15,533,254  
  Accounts receivable, net of allowance of $421,288 and $420,354   5,975,716       11,714,422  
  Revenues in excess of billings, net of allowance of $137,406 and $1,380,141   16,299,287       12,377,677  
  Other current assets   2,142,487       1,978,514  
    Total current assets   40,077,006       41,603,867  
Revenues in excess of billings, net – long term   734,397       –  
Property and equipment, net   5,665,699       6,161,186  
Right of use assets – operating leases   1,659,622       1,151,575  
Other assets   32,338       32,327  
Intangible assets, net   –       127,931  
Goodwill   9,302,524       9,302,524  
    Total assets $ 57,471,586     $ 58,379,410  
           
  LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
  Accounts payable and accrued expenses $ 6,713,920     $ 6,552,181  
  Current portion of loans and obligations under finance leases   5,982,466       5,779,510  
  Current portion of operating lease obligations   689,770       505,237  
  Unearned revenue   4,426,008       7,932,306  
    Total current liabilities   17,812,164       20,769,234  
Loans and obligations under finance leases; less current maturities   99,527       176,229  
Operating lease obligations; less current maturities   1,022,361       652,194  
    Total liabilities   18,934,052       21,597,657  
           
Stockholders’ equity:      
  Preferred stock, $.01 par value; 500,000 shares authorized;   –       –  
  Common stock, $.01 par value; 14,500,000 shares authorized;      
    12,329,919 shares issued and 11,390,888 outstanding as of December 31, 2023      
    12,284,887 shares issued and 11,345,856 outstanding as of June 30, 2023   123,301       122,850  
  Additional paid-in-capital   128,587,384       128,476,048  
  Treasury stock (at cost, 939,031 shares      
  as of December 31, 2023 and June 30, 2023)   (3,920,856 )     (3,920,856 )
  Accumulated deficit   (44,456,980 )     (44,896,186 )
  Other comprehensive loss   (45,870,309 )     (45,975,156 )
    Total NetSol stockholders’ equity   34,462,540       33,806,700  
  Non-controlling interest   4,074,994       2,975,053  
    Total stockholders’ equity   38,537,534       36,781,753  
    Total liabilities and stockholders’ equity $ 57,471,586     $ 58,379,410  
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,
      2023   2022   2023   2022
Net Revenues:              
  License fees $ 2,990,453     $ 15,884     $ 4,270,902     $ 265,844  
  Subscription and support   6,827,781       6,502,669       13,340,024       12,519,503  
  Services   5,419,707       5,871,805       11,869,196       12,311,130  
    Total net revenues   15,237,941       12,390,358       29,480,122       25,096,477  
                   
Cost of revenues   8,062,204       9,247,895       16,142,368       17,702,017  
Gross profit   7,175,737       3,142,463       13,337,754       7,394,460  
                   
Operating expenses:              
  Selling, general and administrative   5,807,494       5,716,073       11,240,463       11,394,634  
  Research and development cost   341,411       472,904       719,830       942,531  
    Total operating expenses   6,148,905       6,188,977       11,960,293       12,337,165  
                   
Income (loss) from operations   1,026,832       (3,046,514 )     1,377,461       (4,942,705 )
                   
Other income and (expenses)              
  Interest expense   (290,322 )     (202,363 )     (566,339 )     (323,973 )
  Interest income   468,280       309,906       882,998       741,763  
  Gain (loss) on foreign currency exchange transactions   (14,617 )     657,223       (148,870 )     1,972,928  
  Share of net loss from equity investment   –       5,133       –       5,133  
  Other income (expense)   (57,305 )     94,708       576       120,324  
    Total other income (expenses)   106,036       864,607       168,365       2,516,175  
                   
Net income (loss) before income taxes   1,132,868       (2,181,907 )     1,545,826       (2,426,530 )
Income tax provision   (150,053 )     (220,056 )     (271,948 )     (413,404 )
Net income (loss)   982,815       (2,401,963 )     1,273,878       (2,839,934 )
  Non-controlling interest   (574,499 )     309,037       (834,672 )     126,279  
Net income (loss) attributable to NetSol $ 408,316     $ (2,092,926 )   $ 439,206     $ (2,713,655 )
                   
                   
Net income (loss) per share:              
  Net income (loss) per common share              
    Basic $ 0.04     $ (0.19 )   $ 0.04     $ (0.24 )
    Diluted $ 0.04     $ (0.19 )   $ 0.04     $ (0.24 )
                   
Weighted average number of shares outstanding              
  Basic   11,372,819       11,270,199       11,359,338       11,263,869  
  Diluted   11,372,819       11,270,199       11,359,338       11,263,869  
NETSOL Technologies, Inc. and Subsidiaries
Schedule 3: Consolidated Statement of Cash Flows
 
      For the Six Months
      Ended December 31,
      2023   2022
Cash flows from operating activities:      
  Net income (loss) $ 1,273,878     $ (2,839,934 )
  Adjustments to reconcile net income (loss) to net cash      
  provided by operating activities:      
  Depreciation and amortization   959,949       1,736,503  
  Provision for bad debts     29,191       (67,176 )
  Share of net (gain) loss from investment under equity method   –       (5,133 )
  Gain on sale of assets   (98 )     (28,344 )
  Stock based compensation   111,787       146,167  
  Changes in operating assets and liabilities:      
  Accounts receivable   5,722,791       3,772,091  
  Revenues in excess of billing   (4,239,762 )     (702,812 )
  Other current assets   329,171       (529,579 )
  Accounts payable and accrued expenses   72,501       904,731  
  Unearned revenue   (3,654,724 )     (696,971 )
  Net cash provided by operating activities   604,684       1,689,543  
           
Cash flows from investing activities:      
  Purchases of property and equipment   (570,584 )     (1,252,325 )
  Sales of property and equipment   1,248       70,283  
  Net cash used in investing activities   (569,336 )     (1,182,042 )
           
Cash flows from financing activities:      
  Proceeds from bank loans   135,123      
  Payments on finance lease obligations and loans – net   (162,482 )     (537,180 )
  Net cash used in financing activities   (27,359 )     (537,180 )
Effect of exchange rate changes           118,273       (2,987,396 )
Net increase (decrease) in cash and cash equivalents            126,262       (3,017,075 )
Cash and cash equivalents at beginning of the period   15,533,254       23,963,797  
Cash and cash equivalents at end of period $ 15,659,516     $ 20,946,722  
NETSOL Technologies, Inc. and Subsidiaries
Schedule 4: Reconciliation to GAAP
 
  For the Three Months   For the Six Months
  Ended December 31,   Ended December 31,
  2023   2022   2023   2022
               
Net Income (loss) attributable to NetSol $ 408,316     $ (2,092,926 )   $ 439,206     $ (2,713,655 )
Non-controlling interest   574,499       (309,037 )     834,672       (126,279 )
Income taxes   150,053       220,056       271,948       413,404  
Depreciation and amortization   429,163       891,500       959,949       1,736,503  
Interest expense   290,322       202,363       566,339       323,973  
Interest (income)   (468,280 )     (309,906 )     (882,998 )     (741,763 )
EBITDA $ 1,384,073     $ (1,397,950 )   $ 2,189,116     $ (1,107,817 )
Add back:              
Non-cash stock-based compensation   51,433       64,333       111,787       146,167  
Adjusted EBITDA, gross $ 1,435,506     $ (1,333,617 )   $ 2,300,903     $ (961,650 )
Less non-controlling interest (a)   (710,154 )     7,363       (1,109,577 )     (392,172 )
Adjusted EBITDA, net $ 725,352     $ (1,326,254 )   $ 1,191,326     $ (1,353,822 )
               
Weighted Average number of shares outstanding              
Basic   11,372,819       11,270,199       11,359,338       11,263,869  
Diluted   11,372,819       11,270,199       11,359,338       11,263,869  
               
Basic adjusted EBITDA $ 0.06     $ (0.12 )   $ 0.10     $ (0.12 )
Diluted adjusted EBITDA $ 0.06     $ (0.12 )   $ 0.10     $ (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 (loss) attributable to non-controlling interest $ 574,499     $ (309,037 )   $ 834,672     $ (126,279 )
Income Taxes   75,407       68,406       111,784       128,316  
Depreciation and amortization   109,748       255,584       251,082       493,917  
Interest expense   91,295       62,736       177,184       100,132  
Interest (income)   (144,578 )     (93,012 )     (272,669 )     (225,501 )
EBITDA $ 706,371     $ (15,323 )   $ 1,102,053     $ 370,585  
Add back:              
Non-cash stock-based compensation   3,783       7,960       7,524       21,587  
Adjusted EBITDA of non-controlling interest $ 710,154     $ (7,363 )   $ 1,109,577     $ 392,172  


Bay Street News