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Total net revenues up 7.4% to $14.8 million in Q3 FY 2022

Annual recurring revenue (SaaS and Support) increased to a $26.2 million run rate

CALABASAS, Calif., May 12, 2022 (GLOBE NEWSWIRE) — NETSOL Technologies, Inc. (Nasdaq: NTWK), a global business services and enterprise application solutions provider, reported results for the fiscal third quarter ended March 31, 2022.

Fiscal Third Quarter 2022 and Recent Operational Highlights

  • Subscription (SaaS and Cloud) and support quarterly revenues increased 16% to $6.6 million.
  • NETSOL’s U.S. based mobility startup Otoz expanded its digital automotive retail platform MINI Anywhere® for BMW® Group Financial Services in the U.S. for its key brand MINI®. MINI Anywhere is now live with 17 MINI dealerships, including 70%+ of the California MINI dealerships and 75% of all Pennsylvania dealerships. The Company now has dealerships enrolled in California, Florida, Texas, New York, New Jersey, and Pennsylvania. Long term, the solution has the potential to be rolled out to over 100 MINI dealerships across all 50 states.
  • Successfully completed key activities related to GAC China contract with deliveries expected in May and July 2022.
  • Completed required workshops for Ascent 2.0 implementation for Motorcycle Group US with development of enhancements underway for three major modules: POS, CTA, and CMS.

Fiscal Third Quarter 2022 Financial Results

Total net revenues for the third quarter of fiscal 2022 were $14.8 million, compared with $13.8 million in the prior year period. The increase in total net revenues was primarily driven by increases in subscription and support revenues of $0.9 million and services revenue of $0.6 million, slightly offset by a decrease in license fees of $0.5 million.

  • Total license fees were $1.6 million, compared with $2.1 million in the prior year period.
  • Total subscription (SaaS and Cloud) and support revenues were $6.6 million, compared with $5.7 million in the prior year period.
  • Total services revenues were $6.6 million, compared with $6.0 million in the prior year period.

Gross profit for the third quarter of fiscal 2022 was $5.8 million (or 39% of net revenues), compared to $6.4 million (or 47% of net revenues) in the third quarter of fiscal 2021. The decrease in gross profit was primarily due to an increase in cost of sales of $1.6 million driven by increases in salaries and consulting costs of $1.4 million.

Operating expenses for the third quarter of fiscal 2022 were $6.4 million (or 43% of sales), compared to $6.0 million (or 43% of sales) for the third quarter of fiscal 2021. The increase in operating expenses was primarily due to increases in selling and marketing expenses, offset by a decrease in general and administrative expenses.

GAAP net loss attributable to NETSOL for the third quarter of fiscal 2022 totaled $0.3 million or $0.02 per diluted share, compared with GAAP net loss of $0.6 million or $0.05 per diluted share in the third quarter of fiscal 2021.

Non-GAAP adjusted EBITDA for the third quarter of fiscal 2022 totaled $0.4 million or $0.03 per diluted share, compared with non-GAAP adjusted EBITDA of $0.2 or $0.02 per diluted share in the third quarter of fiscal 2021 (see note regarding “Use of Non-GAAP Financial Measures,” below for further discussion of this non-GAAP measure).

At March 31, 2022, cash and cash equivalents were $30.6 million, a decrease from $33.7 million at June 30, 2021.

Management Commentary

“We remain on-track to deliver on our fiscal 2022 guidance,” said NETSOL Co-Founder, Chairman and Chief Executive Officer Najeeb Ghauri. “We previously forecasted 10% top-line growth and 20% growth in our recurring revenues. I am pleased to report that for the nine months ended March 31, 2022, our team has delivered top-line growth of 10.5% and increased our annual recurring revenues by nearly 34%. Our pipeline and mix of opportunities remain robust, particularly in our European and North American growth markets, giving us confidence in our ability to drive additional contract signings over the coming months. Additionally, we are now seeing accelerated adoption of our Otoz Digital Retail Platform, one of our more venture-focused operations, as it continues to expand through its MINI Anywhere partnership. We were just entering our second state at the end of the last quarter, and now we are serving customers in six states with the platform. Our vision of pushing the boundaries for new ownership and payment models is quickly becoming a reality as we continue to support our customers where they are today and where they want to go in the future, building value for our shareholders in the process.”

Company CFO Roger Almond added: “Our subscription and support segment were a key growth driver during the quarter. As our workforce continues to return across our global footprint, we expect growth will accelerate in the quarters ahead, which will require a related increase in expenses to support our increased business activity moving forward. Our cash position remains near record levels, providing the resources to support our core business growth as well as strategic investments in high-return, long-term opportunities, such as the promising work of the Otoz Innovation Lab. With these factors in consideration, we are reiterating our full year revenue outlook of 10% topline growth and 20% subscription revenue growth throughout the balance of the year.”

Conference Call

NETSOL Technologies management will hold a conference call today (May 12, 2022) 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 10 minutes prior to the start time. An operator will register your name and organization.

The conference call will be webcast live and available for replay here and via the Investor Relations section of NETSOL’s website.

For interested individuals unable to join the conference call, a dial-in replay of the call will be available until May 26, 2022 and can be accessed by dialing +1-844-512-2921 (U.S. Toll Free) or +1-412-317-6671 (International) and entering replay pin number: 13729917.

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, a division of NETSOL Technologies Inc. (Nasdaq: NTWK), provides business-to-business, white-label technology solutions for new mobility. The Otoz 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 digital retailing and 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. Otoz 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 disparate stay at home orders and social distancing requirements imposed internationally 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:

Dave Gentry
RedChip Companies
407-491-4498
[email protected]

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

      As of   As of
  ASSETS
March 31, 2022   June 30, 2021
Current assets:      
  Cash and cash equivalents $ 30,573,312     $ 33,705,154  
  Accounts receivable, net of allowance of $208,547 and $166,231   7,054,468       4,184,096  
  Accounts receivable – related party, net of allowance of $1,373,099 and $1,373,099          
  Revenues in excess of billings, net of allowance of $84,209 and $136,976   14,610,725       14,680,131  
  Revenues in excess of billings – related party, net of allowance of $8,163 and $8,163          
  Other current assets, net of allowance of $1,243,633 and $1,243,633   2,864,742       3,009,393  
    Total current assets   55,103,247       55,578,774  
Revenues in excess of billings, net – long term   993,862       957,603  
Convertible note receivable – related party, net of allowance of $4,250,000 and $4,250,000          
Property and equipment, net   10,114,458       12,091,812  
Right of use of assets – operating leases   1,238,713       1,345,869  
Long term investment   2,893,700       3,155,852  
Other assets   37,583       55,127  
Intangible assets, net   2,178,128       3,904,656  
Goodwill     9,516,568       9,516,568  
    Total assets $ 82,076,259     $ 86,606,261  
                   
  LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:
             
  Accounts payable and accrued expenses $ 6,317,127     $ 6,696,035  
  Current portion of loans and obligations under finance leases   9,622,669       11,366,171  
  Current portion of operating lease obligations   706,684       857,729  
  Unearned revenue   6,948,669       4,556,626  
    Total current liabilities   23,595,149       23,476,561  
Loans and obligations under finance leases; less current maturities   127,899       699,841  
Operating lease obligations; less current maturities   570,871       564,257  
    Total liabilities   24,293,919       24,740,659  
Commitments and contingencies
             
Stockholders’ equity:      
  Preferred stock, $.01 par value; 500,000 shares authorized;          
  Common stock, $.01 par value; 14,500,000 shares authorized;              
    12,191,570 shares issued and 11,252,539 outstanding as of March 31, 2022 and              
    12,181,585 shares issued and 11,265,064 outstanding as of June 30, 2021   121,916       121,816  
  Additional paid-in-capital   129,084,786       129,018,826  
  Treasury stock (at cost, 939,031 shares and 916,521 shares              
  as of March 31, 2022 and June 30, 2021, respectively)   (3,920,856 )     (3,820,750 )
  Accumulated deficit   (37,484,998 )     (38,801,282 )
  Other comprehensive loss   (36,740,406 )     (31,868,481 )
    Total NetSol stockholders’ equity   51,060,442       54,650,129  
  Non-controlling interest   6,721,898       7,215,473  
    Total stockholders’ equity   57,782,340       61,865,602  
    Total liabilities and stockholders’ equity $ 82,076,259     $ 86,606,261  
                   

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

      For the Three Months   For the Nine Months
      Ended March 31,   Ended March 31,
       2022     2021     2022     2021 
Net Revenues:              
  License fees $ 1,620,827     $ 2,120,963     $ 3,586,874     $ 4,710,942  
  Subscription and support   6,554,540       5,674,776       22,159,798       16,571,441  
  Services   6,634,459       5,988,257       17,956,877       18,270,451  
    Total net revenues   14,809,826       13,783,996       43,703,549       39,552,834  
                   
Cost of revenues:              
  Salaries and consultants   6,756,898       5,372,302       18,081,225       15,193,613  
  Travel   256,730       151,075       753,698       414,001  
  Depreciation and amortization   741,587       759,768       2,236,190       2,180,766  
  Other   1,220,041       1,075,403       3,712,256       2,915,122  
    Total cost of revenues   8,975,256       7,358,548       24,783,369       20,703,502  
                   
Gross profit   5,834,570       6,425,448       18,920,180       18,849,332  
                   
Operating expenses:              
  Selling and marketing   2,074,873       1,595,967       5,502,028       4,763,598  
  Depreciation and amortization   206,346       272,075       633,481       715,437  
  General and administrative   3,841,655       3,860,509       11,548,097       11,353,933  
  Research and development cost   251,001       234,678       761,621       431,086  
    Total operating expenses   6,373,875       5,963,229       18,445,227       17,264,054  
                   
Income (loss) from operations   (539,305 )     462,219       474,953       1,585,278  
                   
Other income and (expenses)              
  Gain (loss) on sale of assets   8,770       (53,012 )     (181,955 )     (127,285 )
  Interest expense   (85,916 )     (98,656 )     (277,737 )     (296,224 )
  Interest income   364,161       231,979       1,123,547       643,654  
  Gain (loss) on foreign currency exchange transactions   499,516       (1,825,349 )     2,684,680       (1,515,327 )
  Share of net loss from equity investment   (76,798 )     (80,953 )     (317,581 )     (232,488 )
  Other income   (30,296 )     521,758       (7,599 )     654,395  
    Total other income (expenses)   679,437       (1,304,233 )     3,023,355       (873,275 )
                   
Net income (loss) before income taxes   140,132       (842,014 )     3,498,308       712,003  
Income tax provision   (157,604 )     (133,156 )     (526,737 )     (642,884 )
Net income (loss)   (17,472 )     (975,170 )     2,971,571       69,119  
  Non-controlling interest   (260,998 )     351,939       (1,655,287 )     (216,900 )
Net income (loss) attributable to NetSol $ (278,470 )   $ (623,231 )   $ 1,316,284     $ (147,781 )
                   
                   
                   
Net income (loss) per share:              
  Net income (loss) per common share              
    Basic $ (0.02 )   $ (0.05 )   $ 0.12     $ (0.01 )
    Diluted $ (0.02 )   $ (0.05 )   $ 0.12     $ (0.01 )
                   
Weighted average number of shares outstanding              
    Basic   11,249,606       11,343,406       11,249,449       11,571,878  
    Diluted   11,249,606       11,343,406       11,249,449       11,571,878  
                                   


NETSOL Technologies, Inc. and Subsidiaries

Schedule 3: Consolidated Statement of Cash Flows

        For the Nine Months
        Ended March 31,
         2022     2021 
Cash flows from operating activities:      
  Net income $ 2,971,571     $ 69,119  
  Adjustments to reconcile net income to net cash      
    provided by (used in) operating activities:      
  Depreciation and amortization   2,869,671       2,896,203  
  Provision for bad debts   6,897       (280,363 )
  Share of net loss from investment under equity method   317,581       232,488  
  Loss on sale of assets   181,955       127,285  
  Stock based compensation   78,225       239,333  
  Changes in operating assets and liabilities:      
    Accounts receivable   (3,404,247 )     (777,953 )
    Revenues in excess of billing   (385,971 )     7,485,646  
    Other current assets   53,173       (791,849 )
    Accounts payable and accrued expenses   14,918       (69,021 )
    Unearned revenue   2,822,178       1,256,456  
  Net cash provided by operating activities   5,525,951       10,387,344  
             
Cash flows from investing activities:      
  Purchases of property and equipment   (1,680,856 )     (2,109,058 )
  Sales of property and equipment   321,251       131,293  
  Investment in associates         (155,500 )
  Net cash used in investing activities   (1,359,605 )     (2,133,265 )
             
Cash flows from financing activities:      
  Purchase of treasury stock   (100,106 )     (2,064,800 )
  Proceeds from bank loans   312,467       2,109,572  
  Payments on finance lease obligations and loans – net   (1,045,464 )     (533,344 )
  Net cash used in financing activities   (833,103 )     (488,572 )
Effect of exchange rate changes   (6,465,085 )     2,666,800  
Net increase (decrease) in cash and cash equivalents   (3,131,842 )     10,432,307  
Cash and cash equivalents at beginning of the period   33,705,154       20,166,830  
Cash and cash equivalents at end of period $ 30,573,312     $ 30,599,137  
               

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

  For the Three
Months Ended
  For the Three
Months Ended
  For the Nine
Months Ended
  For the Nine
Months Ended
  March 31, 2022   March 31, 2021   March 31, 2022   March 31, 2021
               
Net Income (loss) attributable to NetSol $ (278,470 )   $ (623,231 )   $ 1,316,284     $ (147,781 )
Non-controlling interest   260,998       (351,939 )     1,655,287       216,900  
Income taxes   157,604       133,156       526,737       642,884  
Depreciation and amortization   947,933       1,031,843       2,869,671       2,896,203  
Interest expense   85,916       98,656       277,737       296,224  
Interest (income)   (364,161 )     (231,979 )     (1,123,547 )     (643,654 )
EBITDA $ 809,820     $ 56,506     $ 5,522,169     $ 3,260,776  
Add back:              
Non-cash stock-based compensation   49,933       74,169       78,225       239,333  
Adjusted EBITDA, gross $ 859,753     $ 130,675     $ 5,600,394     $ 3,500,109  
Less non-controlling interest (a)   (500,805 )     66,659       (2,382,721 )     (1,074,038 )
Adjusted EBITDA, net $ 358,948     $ 197,334     $ 3,217,673     $ 2,426,071  
               
               
Weighted Average number of shares outstanding                              
Basic   11,249,606       11,343,406       11,249,449       11,571,878  
Diluted   11,249,606       11,343,406       11,249,449       11,571,878  
                               
Basic adjusted EBITDA $ 0.03     $ 0.02     $ 0.29     $ 0.21  
Diluted adjusted EBITDA $ 0.03     $ 0.02     $ 0.29     $ 0.21  
                               
                               
(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 $ 260,998     $ (351,939 )   $ 1,655,287     $ 216,900  
Income Taxes   45,427       34,867       159,854       127,749  
Depreciation and amortization   279,055       283,716       840,508       812,816  
Interest expense   25,764       29,585       81,846       89,929  
Interest (income)   (117,417 )     (71,440 )     (362,146 )     (204,604 )
EBITDA $ 493,827     $ (75,211 )   $ 2,375,349     $ 1,042,790  
Add back:                              
Non-cash stock-based compensation   6,978       8,552       7,372       31,248  
Adjusted EBITDA of non-controlling interest $ 500,805     $ (66,659 )   $ 2,382,721     $ 1,074,038  

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