NETSOL Technologies Reports Fiscal Fourth Quarter and Full Year 2020 Financial Results

Nachrichtenquelle: globenewswire
28.09.2020, 14:00  |  105   |   |   
  • Company Drives Another Year of Profitability Amidst Challenging Market Conditions
  • Introduction of Global Subscription Pricing Model, Key Hires and Strong Initial Traction within Otoz Innovation Lab Provide Near-Term Catalysts
  • COVID-19 Driven Purchasing Delays Lead to Significant Pipeline of Opportunities in Fiscal 2021

CALABASAS, Calif., Sept. 28, 2020 (GLOBE NEWSWIRE) -- NETSOL Technologies, Inc. (NASDAQ: NTWK), a global business services and enterprise application solutions provider, reported results for the fiscal fourth quarter and full year ended June 30, 2020.

Fiscal Fourth Quarter 2020 and Recent Operational Highlights

  • Introduced Software-as-a-Service (SaaS) subscription-based pricing for new and existing customers as an alternative to the traditional license model, which is now available for all cloud-based NETSOL products and services globally, including NETSOL’s flagship offering NFS Ascent.
  • Announced the successful implementation of the Company’s first North American cloud-based NFS Ascent Contract Management System (CMS) for SCI Lease Corp, a Canadian-based national automotive leasing company.
  • Generated $800,000 in SaaS subscription revenues within the Company’s NETSOL Technologies Americas (NTA) region from contracts with new and existing customers.
  • Appointed Peter Minshall as Executive Vice President (EVP) of NTA. The EVP role will report directly to the Company CEO and is responsible for the entire NTA portion of NETSOL’s business operations.
  • Appointed industry veteran Chris Mobley as the new Head of NFS Ascent Wholesale operations in Europe with the goal of leading the rollout of NETSOL’s new, subscription-based pricing strategy, orchestrating the company’s European-focused growth plans and leading pre-sales of the company’s Wholesale operations globally.
  • In response to the economic slowdown caused by the current global pandemic, implemented a series of cost reduction initiatives and temporary salary reductions.
  • Made further advancements in certain Otoz Innovation Lab initiatives, leading to multiple discussions, demonstrations, and potential engagements with a several tier one customers in the U.S. and Asia Pacific (APAC) regions.
  • Acquired the remaining 49% stake of Virtual Lease Services (VLS), a UK-based portfolio and risk management servicing partner for business and consumer finance providers, after initially acquiring a 51% majority stake in VLS through a joint venture partnership with Investec in 2011.
  • Successfully implemented NFS Ascent Retail Platform, including Omni-Point of Sale (Omni-POS) and CMS, for a major American auto captive in China, as part of a previously announced multi-million-dollar contract.
  • Successfully implemented and launched NFS Ascent Wholesale platform with a tier-one German auto captive finance company in China as part of $30 million contract signed in September 2018.

Fiscal Fourth Quarter 2020 Financial Results
Total net revenues for the fourth quarter of fiscal 2020 were $13.6 million, compared to $17.3 million in the prior year period. The decrease in total net revenues was primarily due to a decrease in total license fees of $2.3 million and a decrease in total services revenues of $1.8 million, which was offset by an increase in total maintenance fees of $312,000.

  • Total license fees were $1.2 million, compared with $3.5 million in the prior year period.
  • Total maintenance fees were $4.7 million, compared with $4.4 million in the prior year period.
  • Total services revenues were $7.7 million, compared with $9.4 million in the prior year period.

Gross profit for the fourth quarter of fiscal 2020 was $7.0 million (or 51.8% of net revenues), compared to $8.9 million (or 51.5% of net revenues) in the fourth quarter of fiscal 2019. The increase in gross profit as a percentage of net revenues was primarily due to a decrease in cost of revenues of $1.8 million compared to the prior year period. The decrease in cost of revenues was predominantly driven by decreases in salaries and consultants, travel, and depreciation and amortization.

Operating expenses for the fourth quarter of fiscal 2020 decreased 26.4% to $5.9 million (or 43.2% of net revenues) from $8.0 million (or 46.0% of net revenues) for the fourth quarter of fiscal 2019. The decrease in operating expenses was primarily due to a decrease in selling and marketing as well as general and administrative expenses.

GAAP net income attributable to NETSOL for the fourth quarter of fiscal 2020 totaled $1.2 million or $0.10 per diluted share, compared with a net income of $3.5 million or $0.30 per diluted share in the fourth quarter of fiscal 2019.

Non-GAAP adjusted EBITDA for the fourth quarter of fiscal 2020 totaled $2.0 million or $0.17 per diluted share, compared with $4.4 million or $0.38 per diluted share in the fourth quarter of fiscal 2019 (see note regarding “Use of Non-GAAP Financial Measures,” below for further discussion of this non-GAAP measure).

At June 30, 2020, cash and cash equivalents were $20.2 million, an increase from $17.4 million at June 30, 2019.

Full Year Fiscal 2020 Financial Results
Total net revenues for fiscal 2020 were $56.4 million, compared to $67.8 million in fiscal 2019. The decrease in total net revenues was primarily due to a decrease in total license fees of $12.2 million and a decrease in total service fees of $2.7 million, which was offset by an increase in total maintenance fees of $3.4 million.

  • Total license fees were $4.6 million, compared with $16.8 million in the prior fiscal year.
  • Total maintenance fees were $19.0 million, compared with $15.5 million in the prior fiscal year.
  • Total services revenues were $32.9 million, compared with $35.5 million in the prior fiscal year.

Gross profit for fiscal 2020 decreased to $27.0 million (or 47.8% of net revenues) from $34.9 million (or 51.4% of net revenues) for fiscal 2019. The decrease in gross profit as a percentage of net revenues was primarily due to a greater rate of decrease in total net revenues compared to the related total cost of revenues.

Operating expenses for fiscal 2020 decreased to $25.9 million (or 45.9% of net revenues) from $28.1 million (or 41.4% of net revenues) for fiscal 2019. The decrease in operating expenses was primarily due to decreases in selling and marketing expenses, salaries and wages and research and development cost, offset by an increase in general and administrative expenses.

GAAP net income attributable to NETSOL for fiscal 2020 totaled $937,000 or $0.08 per diluted share, compared with a net income of $8.6 million or $0.74 per diluted share for fiscal 2019.

Non-GAAP adjusted EBITDA for fiscal 2020 totaled $4.3 million or $0.37 per diluted share, compared with $12.9 million or $1.11 per diluted share in fiscal 2019 (see note regarding “Use of Non-GAAP Financial Measures,” below for further discussion of this non-GAAP measure).

Management Commentary
“While we are still working through a challenging market environment, during the fiscal fourth quarter we recorded meaningful sales milestones, drove incrementally improved results and were able to generate another year of profitability,” said NETSOL Co-Founder, Chairman and Chief Executive Officer Najeeb Ghauri. “We entered fiscal 2020 coming off a record top and bottom line performance and in the strongest position in our history. At that same time, we introduced a multi-pronged growth strategy designed, during regular economic conditions, to diversify and expand our total and recurring revenue streams, ultimately propelling NETSOL to its next phase of commercial prosperity. Over the past few months, we, like most businesses, were forced to adapt to a radically different working environment than we had planned. Despite these unfavorable conditions, we have continued to forge a path ahead and, in the meantime, have taken decisive actions to reduce costs, which will support our long-term sustainability.

“Looking ahead to fiscal 2021, we have many reasons for cautious optimism. We’ve made encouraging progress in expanding our sales footprint in North America and Europe, driving year-over-year growth, respectively, and have also made key leadership additions to head up both regions. Last month, we went live with the first North American customer for our subscription, cloud-based NFS Ascent offering, which we expect to leverage toward additional agreements in the future. With several COVID-19 driven purchasing delays beginning to move ahead, we also have a significant pipeline of opportunities in the coming year. As our global operations conservatively pick back up, we will look to regain the prior year’s momentum and resume our plans for a diversified, progressive growth strategy. NETSOL remains a digital-first and SaaS-focused organization, and we will continue to lead with our technology to deliver innovative ways to help our customers improve their operations today and prepare for the many, disruptive challenges of the new mobility economy.”

Sales Outlook
Ghauri continued: “While we continue to see strong traction and engagement globally for Ascent, our SaaS offering has been particularly well received in Europe and North America. Our platform is being validated with initial sales in both regions and a number of deals that are currently in our pipeline. The overall sales environment remains challenging due to the travel restrictions in place and uncertainty around the global economy, which has, in some cases, delayed our ability to close deals over the last quarters, but we are continuing to move forward.”

Conference Call
NETSOL Technologies management will hold a conference call today (September 28, 2020) 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 Gateway Investor Relations 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 October 12, 2020.

Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 13710936

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 provides business-to-business, white-label technology solutions for new mobility. Our 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 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. Our 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 stay at home orders and social distancing imposed 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:

Matt Glover and Tom Colton
Gateway Investor Relations
1-949-574-3860
investors@netsoltech.com


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

      As of   As of
  ASSETS June 30, 2020   June 30, 2019
Current assets:      
  Cash and cash equivalents $ 20,166,830     $ 17,366,364  
  Accounts receivable, net of allowance of $435,611 and $192,786     10,131,752       12,332,714  
  Accounts receivable, net of allowance of $90,594 and $166,075 - related party     1,282,505       3,266,600  
  Revenues in excess of billings, net of allowance of $188,914 and $194,684     17,198,281       14,719,047  
  Revenues in excess of billings - related party   8,163       110,827  
  Other current assets   3,108,180       3,146,264  
      Total current assets      51,895,711       50,941,816  
Revenues in excess of billings, net - long term   1,300,289       1,281,492  
Convertible note receivable - related party   4,250,000       3,650,000  
Property and equipment, net   11,329,631       12,096,855  
Right of use of assets - operating leases   2,360,129       -  
Long term investment   2,387,692       2,653,769  
Other assets   41,992       23,569  
Intangible assets, net   5,391,077       7,332,950  
Goodwill   9,516,568       9,516,568  
      Total assets    $ 88,473,089     $ 87,497,019  
           
                                                                                                    LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:      
  Accounts payable and accrued expenses $ 5,680,837     $ 7,476,560  
  Current portion of loans and obligations under finance leases   9,139,561       6,905,597  
  Current portion of operating lease obligations   1,111,912       -  
  Unearned revenues   4,095,472       5,977,736  
  Common stock to be issued   88,324       88,324  
      Total current liabilities      20,116,106       20,448,217  
Loans and obligations under finance leases; less current maturities   1,539,975       564,572  
Operating lease obligations; less current maturities   1,339,965       -  
      Total liabilities      22,996,046       21,012,789  
Commitments and contingencies      
Stockholders' equity:      
  Preferred stock, $.01 par value; 500,000 shares authorized;   -       -  
  Common stock, $.01 par value; 14,500,000 shares authorized;      
   12,122,149 shares issued and 11,874,646 outstanding as of June 30, 2020 and      
   11,911,742 shares issued and 11,664,239 outstanding as of June 30, 2019   121,222       119,117  
  Additional paid-in-capital   128,677,754       127,737,999  
  Unexpected eval class (org.apache.poi.ss.formula.eval.MissingArgEval)        
  as of June 30, 2020 and June 30, 2019, respectively)     (1,455,969 )     (1,455,969 )
  Accumulated deficit   (34,269,817 )     (35,206,898 )
  Other comprehensive loss   (34,085,047 )     (33,125,006 )
     Total NetSol stockholders' equity   58,988,143       58,069,243  
  Non-controlling interest   6,488,900       8,414,987  
     Total stockholders' equity   65,477,043       66,484,230  
     Total liabilities and stockholders' equity $ 88,473,089     $ 87,497,019  
           

 

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

      For the Years    
      Ended June 30,    
        2020       2019      
Net Revenues:          
  License fees $ 4,564,560     $ 16,768,749      
  Maintenance fees   18,951,248       15,521,413      
  Services   32,555,690       34,892,290      
  Services - related party   300,821       636,731      
    Total net revenues   56,372,319       67,819,183      
               
Cost of revenues:          
  Salaries and consultants   18,821,738       19,253,364      
  Travel   4,181,742       6,527,868      
  Depreciation and amortization   2,897,371       3,525,857      
  Other   3,508,098       3,625,478      
    Total cost of revenues   29,408,949       32,932,567      
               
Gross profit   26,963,370       34,886,616      
               
Operating expenses:          
  Selling and marketing   6,450,663       7,831,758      
  Depreciation and amortization   834,583       897,800      
  General and administrative   17,138,832       17,357,918      
  Research and development cost   1,468,954       1,971,228      
    Total operating expenses   25,893,032       28,058,704      
               
Income from operations   1,070,338       6,827,912      
               
Other income and (expenses)          
  Gain on sale of assets   23,103       81,455      
  Interest expense   (346,856 )     (311,798 )    
  Interest income   1,569,536       955,061      
  Gain on foreign currency exchange transactions   398,610       6,345,859      
  Share of net loss from equity investment   (605,864 )     (841,845 )    
  Other income   224,224       18,680      
    Total other income (expenses)   1,262,753       6,247,412      
               
Net income before income taxes   2,333,091       13,075,324      
Income tax provision   (1,141,068 )     (1,057,784 )    
Net income   1,192,023       12,017,540      
  Non-controlling interest   (254,942 )     (3,434,141 )    
Net income attributable to NetSol $ 937,081     $ 8,583,399   -  
               
               
               
Net income per share:          
  Net income per common share          
    Basic $ 0.08     $ 0.74      
    Diluted $ 0.08     $ 0.74      
               
Weighted average number of shares outstanding          
  Basic   11,734,648       11,599,290      
  Diluted   11,784,414       11,621,990      
               


NETSOL Technologies, Inc. and Subsidiaries
Schedule 3: Consolidated Statement of Cash Flows

               
        For the Years  
        Ended June 30,  
          2020       2019    
Cash flows from operating activities:        
  Net income $ 1,192,023     $ 12,017,540    
  Adjustments to reconcile net income        
    to net cash provided by operating activities:        
  Depreciation and amortization   3,731,954       4,423,657    
  Provision for bad debts   184,944       474,516    
  Share of net loss from investment under equity method   605,864       841,845    
  Gain on sale of assets   (23,103 )     (80,470 )  
  Stock based compensation   808,616       1,131,013    
  Fair market value of stock options   -       43,612    
  Changes in operating assets and liabilities:        
    Accounts receivable   2,035,843       (1,836,962 )  
    Accounts receivable - related party   1,957,864       (977,445 )  
    Revenues in excess of billing   (3,252,704 )     (10,764,428 )  
    Revenues in excess of billing - related party   105,441       (122,810 )  
    Other current assets   (132,175 )     (861,128 )  
    Accounts payable and accrued expenses   (1,399,828 )     (47,819 )  
    Unearned revenue   (1,842,313 )     692,089    
  Net cash provided by operating activities   3,972,426       4,933,210    
               
Cash flows from investing activities:        
  Purchases of property and equipment   (1,377,145 )     (2,726,558 )  
  Sales of property and equipment   106,180       1,170,878    
  Convertible note receivable - related party   (600,000 )     (1,526,500 )  
  Investment in associates   (94,500 )     (250,000 )  
  Purchase of subsidiary shares   (89,425 )     (317,500 )  
  Net cash used in investing activities   (2,054,890 )     (3,649,680 )  
               
Cash flows from financing activities:        
  Proceeds from the exercise of stock options and warrants   -       85,000    
  Proceeds from exercise of subsidiary options   11,621       2,650    
  Purchase of treasury stock   -       (250,945 )  
  Dividend paid by subsidiary to non-controlling interest   (1,920,618 )     (566,465 )  
  Proceeds from bank loans   4,221,203       1,227,158    
  Payments on finance lease obligations and loans - net   (611,913 )     (480,231 )  
  Net cash provided by financing activities   1,700,293       17,167    
Effect of exchange rate changes   (817,363 )     (6,023,186 )  
Net decrease in cash and cash equivalents   2,800,466       (4,722,489 )  
Cash and cash equivalents at beginning of the period   17,366,364       22,088,853    
Cash and cash equivalents at end of period $ 20,166,830     $ 17,366,364    


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

  For the Year Ended   For the Year Ended  
  June 30, 2020   June 30, 2019  
         
Net Income (loss) attributable to NetSol $ 937,081     $ 8,583,399    
Non-controlling interest   254,942       3,434,141    
Income taxes   1,141,068       1,057,784    
Depreciation and amortization   3,731,954       4,423,657    
Interest expense   346,856       311,798    
Interest (income)   (1,569,536 )     (955,061 )  
EBITDA $ 4,842,365     $ 16,855,718    
Add back:        
Non-cash stock-based compensation   808,616       1,174,625    
Adjusted EBITDA, gross $ 5,650,981     $ 18,030,343    
Less non-controlling interest (a)   (1,330,352 )     (5,140,004 )  
Adjusted EBITDA, net $ 4,320,629     $ 12,890,339    
         
         
Weighted Average number of shares outstanding        
Basic   11,734,648       11,599,290    
Diluted   11,784,414       11,621,990    
         
Basic adjusted EBITDA $ 0.37     $ 1.11    
Diluted adjusted EBITDA $ 0.37     $ 1.11    
         
         
(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 $ 254,942     $ 3,434,141    
Income Taxes   223,675       351,778    
Depreciation and amortization   1,060,605       1,397,613    
Interest expense   100,373       99,696    
Interest (income)   (391,644 )     (229,802 )  
EBITDA $ 1,247,951     $ 5,053,426    
Add back:        
Non-cash stock-based compensation   82,401       86,578    
Adjusted EBITDA of non-controlling interest $ 1,330,352     $ 5,140,004    
         

 


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NETSOL Technologies Reports Fiscal Fourth Quarter and Full Year 2020 Financial Results Company Drives Another Year of Profitability Amidst Challenging Market ConditionsIntroduction of Global Subscription Pricing Model, Key Hires and Strong Initial Traction within Otoz Innovation Lab Provide Near-Term CatalystsCOVID-19 Driven …

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