NTWK NetSol Technologies Inc

NETSOL Technologies, Inc. (Nasdaq: NTWK), a global business services and enterprise application solutions provider, reported results for the fiscal first quarter ended September 30, 2023.

Fiscal First Quarter 2024 Financial Results

Total net revenues for the first quarter of fiscal 2024 increased 12% to $14.2 million, compared with $12.7 million in the prior year period. On a constant currency basis, total net revenues were $14.3 million.

• License fees were $1.3 million compared with $250,000 in the prior year period. License fees on a constant currency basis were $1.3 million.
• Total subscription (SaaS and Cloud) and support revenues were $6.5 million compared with $6.0 million in the prior year period. Total subscription and support revenues on a constant currency basis were $6.5 million.
• Total services revenues were $6.4 million, consistent with $6.4 million in the prior year period. Total services revenues on a constant currency basis were $6.5 million.

Gross profit for the first quarter of fiscal 2024 was $6.2 million (or 43% of net revenues), compared to $4.3 million (or 33% of net revenues) in the first quarter of fiscal 2023. On a constant currency basis, gross profit for the first quarter of fiscal 2024 was $4.7 million (or 33% of net revenues as measured on a constant currency basis).

Operating expenses for the first quarter of fiscal 2024 were $5.8 million (or 41% of sales) compared to $6.1 million (or 48% of sales) for the first quarter of fiscal 2023. On a constant currency basis, operating expenses for the first quarter of fiscal 2023 increased to $6.4 million (or 45% of sales on a constant currency basis).

GAAP net income attributable to NETSOL for the first quarter of fiscal 2024 totaled $31,000 or $0.003 per diluted share, compared with GAAP net loss of $(621,000) or a loss of $(0.06) per diluted share in the first quarter of fiscal 2023. Included in GAAP net income attributable to NETSOL was a loss of $(134,000) on foreign exchange currency in the first quarter of fiscal 2024, compared to a gain of approximately $1.3 million in the prior year period. On a constant currency basis, NETSOL realized a loss of $(174,000) on foreign currency transactions.

Non-GAAP adjusted EBITDA for the first quarter of fiscal 2024 was $466,000 or $0.04 per diluted share, compared with non-GAAP adjusted EBITDA loss of $28,000 or $(0.002) per diluted share in the first quarter of fiscal 2023 (see note regarding “Use of Non-GAAP Financial Measures,” below for further discussion of this non-GAAP measure).

Management Commentary

NETSOL Co-Founder, Chairman and Chief Executive Officer Najeeb Ghauri stated, “Our first quarter of 2024 was highlighted by increases in total net revenue, improved gross margins, and profitability. This quarter highlights the strength of our business model particularly when we recognize licensing fees, subscription and support revenues, and services revenues. One goal is to drive more consistent license revenue alongside our more predictable subscription and support and services revenues.

“We also continue to drive our cost containment initiative so we can reallocate capital to growing our SaaS business and expansion into the United States market. On that front, our focus continues to be staffing our new office in Austin, Texas with the best talent available to address this largely untapped market. Moreover, our white label SaaS-based solution Otoz is now live in 60 MiniAnywhere dealerships across 37 U.S. states, demonstrating the growing demand for SaaS-based solutions in this market. Finally, we continue to evaluate strategic acquisition opportunities throughout North America.

“We’re very pleased with our results this quarter, and we believe that our performance reflects the long-term earnings potential for NETSOL as we continue to scale our revenue. We are working diligently to build our pipeline of licensing deals, and along with our expanding SaaS offerings, we believe this will drive improved results and more consistent profitability and cash generation.”

Conference Call

NETSOL Technologies management will hold a conference call today (November 7, 2023) 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: 877-407-0789International 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, November 21, 2023.

Toll-free replay number: 844-512-2921International replay number: 412-317-6671Replay ID: 13742018

About NETSOL TechnologiesNETSOL 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 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.

Forward-Looking StatementsThis 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 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 MeasuresThe 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 Relationsnetsol@imsinvestorrelations.com+1 203-972-9200

NETSOL Technologies, Inc. and SubsidiariesSchedule 1: Consolidated Balance Sheets
			As of				As of
	ASSETS		September 30, 2023				June 30, 2023
Current assets:
	Cash and cash equivalents		$	16,551,677			$	15,533,254
	Accounts receivable, net of allowance of $416,435 and $420,354			6,870,956				11,714,422
	Revenues in excess of billings, net of allowance of $116,425 and $1,380,141			13,008,285				12,377,677
	Other current assets			2,244,490				1,978,514
		Total current assets		38,675,408				41,603,867
Revenues in excess of billings, net - long term				724,875				-
Property and equipment, net				5,770,794				6,161,186
Right of use assets - operating leases				1,359,106				1,151,575
Other assets				32,326				32,327
Intangible assets, net				-				127,931
Goodwill				9,302,524				9,302,524
		Total assets	$	55,865,033			$	58,379,410
	LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable and accrued expenses		$	6,802,879			$	6,552,181
	Current portion of loans and obligations under finance leases			5,756,553				5,779,510
	Current portion of operating lease obligations			538,363				505,237
	Unearned revenue			5,170,335				7,932,306
		Total current liabilities		18,268,130				20,769,234
Loans and obligations under finance leases; less current maturities				137,847				176,229
Operating lease obligations; less current maturities				795,935				652,194
		Total liabilities		19,201,912				21,597,657
Stockholders' equity:
	Preferred stock, $.01 par value; 500,000 shares authorized;			-				-
	Common stock, $.01 par value; 14,500,000 shares authorized;
		12,311,850 shares issued and 11,372,819 outstanding as of September 30, 2023
		12,284,887 shares issued and 11,345,856 outstanding as of June 30, 2023		123,120				122,850
	Additional paid-in-capital			128,536,132				128,476,048
	Treasury stock (at cost, 939,031 shares
	as of September 30, 2023 and June 30, 2023)			(3,920,856	)			(3,920,856	)
	Accumulated deficit			(44,865,296	)			(44,896,186	)
	Other comprehensive loss			(46,411,702	)			(45,975,156	)
		Total NetSol stockholders' equity		33,461,398				33,806,700
	Non-controlling interest			3,201,723				2,975,053
		Total stockholders' equity		36,663,121				36,781,753
		Total liabilities and stockholders' equity	$	55,865,033			$	58,379,410

NETSOL Technologies, Inc. and SubsidiariesSchedule 2: Consolidated Statement of Operations
			For the Three Months
			Ended September 30,
				2023				2022
Net Revenues:
	License fees		$	1,280,449			$	249,960
	Subscription and support			6,512,243				6,016,834
	Services			6,449,489				6,439,325
		Total net revenues		14,242,181				12,706,119
Cost of revenues				8,080,164				8,454,122
Gross profit				6,162,017				4,251,997
Operating expenses:
	Selling, general and administrative			5,432,969				5,678,561
	Research and development cost			378,419				469,627
		Total operating expenses		5,811,388				6,148,188
Income (loss) from operations				350,629				(1,896,191	)
Other income and (expenses)
	Interest expense			(276,017	)			(121,610	)
	Interest income			414,718				431,857
	Gain (loss) on foreign currency exchange transactions			(134,253	)			1,315,705
	Other income (expense)			57,881				25,616
		Total other income (expenses)		62,329				1,651,568
Net income (loss) before income taxes				412,958				(244,623	)
Income tax provision				(121,895	)			(193,348	)
Net income (loss)				291,063				(437,971	)
	Non-controlling interest			(260,173	)			(182,758	)
Net income (loss) attributable to NetSol			$	30,890			$	(620,729	)
Net income (loss) per share:
	Net income (loss) per common share
		Basic	$	0.003			$	(0.06	)
		Diluted	$	0.003			$	(0.06	)
Weighted average number of shares outstanding
	Basic			11,345,856				11,257,539
	Diluted			11,345,856				11,257,539

NETSOL Technologies, Inc. and SubsidiariesSchedule 3: Consolidated Statement of Cash Flows
				Ended September 30,
					2023				2022
Cash flows from operating activities:
	Net income (loss)			$	291,063			$	(437,971	)
	Adjustments to reconcile net income (loss) to net cash
		provided by operating activities:
	Depreciation and amortization				530,786				845,003
	Amortization of right of use of assets				-				-
	Provision for bad debts				7,880				(47,479	)
	Gain on sale of assets				(98	)			(23,296	)
	Stock based compensation				60,354				81,834
	Changes in operating assets and liabilities:
		Accounts receivable			4,608,881				815,132
		Revenues in excess of billing			(1,478,386	)			337,996
		Other current assets			92,686				(340,390	)
		Accounts payable and accrued expenses			341,722				687,453
		Unearned revenue			(2,791,269	)			(619,425	)
	Net cash provided by operating activities				1,663,619				1,298,857
Cash flows from investing activities:
	Purchases of property and equipment				(371,630	)			(1,347,601	)
	Sales of property and equipment				1,230				453,607
	Net cash used in investing activities				(370,400	)			(893,994	)
Cash flows from financing activities:
	Payments on finance lease obligations and loans - net				(44,474	)			(445,737	)
	Net cash used in financing activities				(44,474	)			(445,737	)
Effect of exchange rate changes					(230,322	)			(2,999,975	)
Net decrease in cash and cash equivalents					1,018,423				(3,040,849	)
Cash and cash equivalents at beginning of the period					15,533,254				23,963,797
Cash and cash equivalents at end of period				$	16,551,677			$	20,922,948

NETSOL Technologies, Inc. and SubsidiariesSchedule 4: Reconciliation to GAAP
	For the Three Months
	Ended September 30,
		2023				2022
Net Income (loss) attributable to NetSol	$	30,890			$	(620,729	)
Non-controlling interest		260,173				182,758
Income taxes		121,895				193,348
Depreciation and amortization		530,786				845,003
Interest expense		276,017				121,610
Interest (income)		(414,718	)			(431,857	)
EBITDA	$	805,043			$	290,133
Add back:
Non-cash stock-based compensation		60,354				81,834
Adjusted EBITDA, gross	$	865,397			$	371,967
Less non-controlling interest (a)		(399,423	)			(399,535	)
Adjusted EBITDA, net	$	465,974			$	(27,568	)
Weighted Average number of shares outstanding
Basic		11,345,856				11,257,539
Diluted		11,345,856				11,257,539
Basic adjusted EBITDA	$	0.04			$	(0.002	)
Diluted adjusted EBITDA	$	0.04			$	(0.002	)
(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	$	260,173			$	182,758
Income Taxes		36,377				59,910
Depreciation and amortization		141,334				238,333
Interest expense		85,889				37,396
Interest (income)		(128,091	)			(132,489	)
EBITDA	$	395,682			$	385,908
Add back:
Non-cash stock-based compensation		3,741				13,627
Adjusted EBITDA of non-controlling interest	$	399,423			$	399,535