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  • Sequential Revenue Growth Throughout the Entire Fiscal Year, Combined with Improved Cost Structures and Expense Management, Lead to 154% Increase in Operating Income and 90% Increase in Net Income for Fiscal 2021
  • Subscription and Support Revenue Eclipses $20 Million Annual Run Rate, Providing Predictable, Recurring Base to Support Anticipated New Sales Growth in Fiscal 2022
  • Company Introduces Fiscal 2022 Total Revenues and Subscription and Support Revenues Guidance of at Least 10% and 20%, Respectively

CALABASAS, Calif., Sept. 28, 2021 (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, 2021.

Fiscal Fourth Quarter 2021 and Recent Operational Highlights

  • Subscription (SaaS and Cloud) and support revenues reached $22.2 million, a nearly 10% increase over the prior year and a $23+ million run rate projected over the coming twelve months with opportunities for upside.
  • Generated over $2.5 million by successfully implementing change requests from various customers across multiple regions during the fiscal fourth quarter. Throughout fiscal 2021, the Company generated over $7.7 million in change requests.
  • NETSOL’s U.S. based mobility startup Otoz launched its digital automotive retail platform for BMW Group Financial Services in the U.S. for its key brand MINI Anywhere. MINI Anywhere is now live with five MINI dealerships; Otoz is also scheduled to onboard additional California-based dealers before an expansion into Florida. Long term, the solution has the potential to be rolled out to over 100 MINI dealerships across all 50 states.
  • Signed an agreement with Motorcycle Group to deploy the cloud-based version of NETSOL’s flagship NFS Ascent® platform across the customer’s entire operations. This agreement marks the first official sale for NFS Ascent in the U.S. market.
  • Joined the Russell Microcap® Index at the conclusion of the 2021 Russell indexes annual reconstitution, effective June 28.
  • Became an associate member of the Consumer Bankers Association (“CBA”). CBA is the only member-driven trade association focused exclusively on retail banking, representing the nation’s largest financial institutions and the top providers of goods and services to banks.

Fiscal Fourth Quarter 2021 Financial Results
Total net revenues for the fourth quarter of fiscal 2021 were $15.4 million, compared with $13.6 million in the prior year period. The increase in total net revenues was primarily driven by an increase in total license fees of $1.0 million, an increase in subscription and support revenues of $212,000, and an increase in total services revenues of $564,000.

  • Total license fees were $1.5 million, compared with $530,000 in the prior year period.
  • Total subscription (SaaS and Cloud) and support revenues were $5.6 million, compared with $5.4 million in the prior year period.
  • Total services revenues were $8.2 million, compared with $7.7 million in the prior year period.

Gross profit for the fourth quarter of fiscal 2021 increased 6.8% to $7.5 million (or 48.8% of net revenues), compared to $7.0 million (or 51.8% of net revenues) in the fourth quarter of fiscal 2020. The increase in gross profit was primarily due to increases in revenue, offset by increases in cost of sales of $1.3 million. The increases in cost of sales were primarily due to increases in salaries and consultant fees of $885,000, depreciation of $104,000 and other costs of $289,000.

Operating expenses for the fourth quarter of fiscal 2021 increased 8.7% to $6.4 million (or 41.4% of sales) from $5.9 million (or 43.2% of sales) for the fourth quarter of fiscal 2020. The increase in operating expenses was primarily due to increases in selling and marketing and research and development, slightly offset by a decrease in general administrative expenses.

GAAP net income attributable to NETSOL for the fourth quarter of fiscal 2021 totaled $1.9 million or $0.17 per diluted share, compared with GAAP net income of $1.2 million or $0.10 per diluted share in the fourth quarter of fiscal 2020. GAAP net income attributable to NETSOL included a $918,000 gain on foreign currency exchange transactions in the fourth quarter of fiscal 2021, which was an increase from a gain of $327,000 in the prior year period.

Non-GAAP adjusted EBITDA for the fourth quarter of fiscal 2021 totaled $2.9 million or $0.26 per diluted share, compared with non-GAAP adjusted EBITDA of $2.0 million or $0.17 per diluted share in the fourth quarter of fiscal 2020 (see note regarding “Use of Non-GAAP Financial Measures,” below for further discussion of this non-GAAP measure).

At June 30, 2021, cash and cash equivalents were $33.7 million, an increase from $20.2 million at June 30, 2020.

Full Year Fiscal 2021 Financial Results
Total net revenues for fiscal 2021 were $54.9 million, compared to $56.4 million in fiscal 2020. The decrease in total net revenues was primarily due to a decrease in services revenues of $6.4 million, which was offset by increases in subscription and support revenues of $1.9 million and license fees of $3.0 million.

  • Total license fees were $6.2 million, compared with $3.3 million in the prior fiscal year.
  • Total subscription and support revenues were $22.2 million, compared with $20.3 million in the prior fiscal year.
  • Total services revenues were $26.5 million, compared with $32.9 million in the prior fiscal year.

Gross profit for fiscal 2021 decreased to $26.4 million (or 48.0% of net revenues) from $27.0 million (or 47.8% of net revenues) for fiscal 2020. The decrease in gross profit was primarily due to a decrease in revenue, offset by a decrease in cost of sales of $841,000. The decreases in cost of sales were primarily due to decrease in travel expenses of $3.5 million, offset by increases in salaries and consultant fees of $2.1 million.

Operating expenses for fiscal 2021 decreased to $23.6 million (or 43.0% of net revenues) from $25.9 million (or 45.9% of net revenues) for fiscal 2020. The decrease in operating expenses was primarily due to decreases in general and administrative expenses and research and development costs, offset by a slight increase in selling and marketing expenses.

GAAP net income attributable to NETSOL for fiscal 2021 totaled $1.8 million or $0.15 per diluted share, compared with a net income of $937,000 or $0.08 per diluted share for fiscal 2020. GAAP net income attributable to NETSOL included a $597,000 loss on foreign currency exchange transactions in fiscal 2021, which was a decrease from a gain of $399,000 in the prior year period.

Non-GAAP adjusted EBITDA for fiscal 2021 totaled $5.4 million or $0.47 per diluted share, compared with $4.3 million or $0.37 per diluted share in fiscal 2020 (see note regarding “Use of Non-GAAP Financial Measures,” below for further discussion of this non-GAAP measure).

Stock Repurchase Program
On July 30, 2020, NETSOL’s Board of Directors approved a stock repurchase program that authorized potential repurchases of up to $2 million of its common stock over a six-month period. All shares permitted to be purchased under this July 2020 plan were purchased during the plan’s original date and prior to the conclusion of the extension of the plan. On May 21, 2021, the Board of Directors authorized an additional repurchase plan of up to $2 million worth of shares of common stock through November 20, 2021. 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.

As of June 30, 2021, the Company had repurchased 669,018 shares of its common stock at an aggregate value of $2,364,781.

Fiscal 2022 Financial Outlook
For the fiscal year ending June 30, 2022, the Company expects total revenues to increase by at least 10% and subscription and support revenues to increase by at least 20%. The Company’s guidance is based on existing contracts and recurring revenue from its current customer base, performance results tracked through August of this calendar year and other information available as of the date of this report.

Management Commentary
“In a challenging year, we emerged stronger than before, and we’re entering fiscal 2022 focused on a return to growth,” said NETSOL Co-Founder, Chairman and Chief Executive Officer Najeeb Ghauri. “As the world slowly begins to reopen and with a leaner cost structure to support increased sales and marketing activities, we are making investments to build for long term success in our key growth markets. As a result of several key hires made earlier in the year, we’ve been able to improve our lead generation processes. Our North American and European pipelines have shown continued outsized promise, and we’re now starting to see some of these pending deals come to fruition, most notably shown by our first NFS Ascent contract in the U.S. While we are continuing to pursue high-value, larger deals with incumbent OEMs, our ability to grow a healthy recurring revenue base with subscription contracts in these regions will allow us to more predictably grow our business over time while still maintaining the opportunity for upside.”

Company CFO Roger Almond added: “We improved our topline performance in each quarter of the year, all while making significant adjustments to our spending in the face of a travel-restricted sales environment. Our owner-centric emphasis on managing the business has yielded positive results in several key areas, highlighted by a 154% increase in operating income and a record cash position of nearly $34 million. Additionally, subscription and support revenues have now eclipsed a $20 million annual run rate, further validating our investment in a recurring revenue model and providing us stronger visibility into future performance as well.”

Conference Call
NETSOL Technologies management will hold a conference call today (September 28, 2021) at 4:30 p.m. Eastern time (1:30 p.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. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Gateway Investor Relations at 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 7:30 p.m. Eastern time through October 12, 2021.

Toll-free replay number: 844-512-2921
International replay number: 412-317-6671
Replay ID: 13722946

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:

Matt Glover and Tom Colton
Gateway Investor Relations
949-574-3860
[email protected]

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

      As of   As of
ASSETS
June 30, 2021   June 30, 2020
Current assets:      
Cash and cash equivalents $ 33,705,154     $ 20,166,830  
Accounts receivable, net of allowance of $166,231 and $435,611   4,184,096       10,131,752  
Accounts receivable – related party, net of allowance of $1,373,099 and $90,594         1,282,505  
Revenues in excess of billings, net of allowance of $136,976 and $188,914   14,680,131       17,198,281  
Revenues in excess of billings – related party, net of allowance of $8,163 and $0         8,163  
Other current assets, net of allowance of $1,243,633 and $0   3,009,393       3,108,180  
Total current assets   55,578,774       51,895,711  
Revenues in excess of billings, net – long term   957,603       1,300,289  
Convertible note receivable – related party, net of allowance of $4,250,000 and $0         4,250,000  
Property and equipment, net   12,091,812       11,329,631  
Right of use of assets – operating leases   1,345,869       2,360,129  
Long term investment   3,155,852       2,387,692  
Other assets   55,127       41,992  
Intangible assets, net   3,904,656       5,391,077  
Goodwill   9,516,568       9,516,568  
Total assets $ 86,606,261     $ 88,473,089  
           
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:      
Accounts payable and accrued expenses $ 6,696,035     $ 5,769,161  
Current portion of loans and obligations under finance leases   11,366,171       9,139,561  
Current portion of operating lease obligations   857,729       1,111,912  
Unearned revenue   4,556,626       4,095,472  
Total current liabilities   23,476,561       20,116,106  
Loans and obligations under finance leases; less current maturities   699,841       1,539,975  
Operating lease obligations; less current maturities   564,257       1,339,965  
Total liabilities   24,740,659       22,996,046  
Commitments and contingencies      
Stockholders’ equity:      
Preferred stock, $.01 par value; 500,000 shares authorized;          
Common stock, $.01 par value; 14,500,000 shares authorized;      
12,181,585 shares issued and 11,265,064 outstanding as of June 30, 2021 and      
12,122,149 shares issued and 11,874,646 outstanding as of June 30, 2020   121,816       121,222  
Additional paid-in-capital   129,018,826       128,677,754  
Treasury stock (at cost, 916,521 shares and 247,503 shares
  as of June 30, 2021 and June 30, 2020, respectively)
  (3,820,750 )     (1,455,969 )
Accumulated deficit   (38,801,282 )     (34,269,817 )
Other comprehensive loss   (31,868,481 )     (34,085,047 )
Total NetSol stockholders’ equity   54,650,129       58,988,143  
Non-controlling interest   7,215,473       6,488,900  
Total stockholders’ equity   61,865,602       65,477,043  
Total liabilities and stockholders’ equity $ 86,606,261     $ 88,473,089  
           

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

      For the Years
      Ended June 30,
        2021       2020  
Net Revenues:      
  License fees $ 6,249,924     $ 3,260,891  
  Subscription and support   22,173,745       20,254,917  
  Services   26,448,171       32,555,690  
  Services – related party   48,775       300,821  
    Total net revenues   54,920,615       56,372,319  
           
Cost of revenues:      
  Salaries and consultants   20,969,298       18,821,738  
  Travel   663,403       4,181,742  
  Depreciation and amortization   2,990,689       2,897,371  
  Other   3,944,197       3,508,098  
    Total cost of revenues   28,567,587       29,408,949  
           
Gross profit   26,353,028       26,963,370  
           
Operating expenses:      
  Selling and marketing   6,555,004       6,450,663  
  Depreciation and amortization   965,625       834,583  
  General and administrative   15,437,382       17,138,832  
  Research and development cost   674,168       1,468,954  
    Total operating expenses   23,632,179       25,893,032  
           
Income from operations   2,720,849       1,070,338  
           
Other income and (expenses)      
  Gain (loss) on sale of assets   (191,935 )     23,103  
  Interest expense   (394,289 )     (346,856 )
  Interest income   1,017,432       1,569,536  
  Gain (loss) on foreign currency exchange transactions   (597,433 )     398,610  
  Share of net loss from equity investment   (253,819 )     (605,864 )
  Other income   987,444       224,224  
    Total other income (expenses)   567,400       1,262,753  
           
Net income before income taxes   3,288,249       2,333,091  
Income tax provision   (1,026,617 )     (1,141,068 )
Net income   2,261,632       1,192,023  
  Non-controlling interest   (483,375 )     (254,942 )
Net income attributable to NetSol $ 1,778,257     $ 937,081  
           
           
           
Net income per share:      
  Net income per common share      
    Basic $ 0.15     $ 0.08  
    Diluted $ 0.15     $ 0.08  
           
Weighted average number of shares outstanding      
  Basic   11,499,983       11,734,648  
  Diluted   11,499,983       11,784,414  
           

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

             
        For the Years
        Ended June 30,
          2021       2020  
Cash flows from operating activities:      
  Net income $ 2,261,632     $ 1,192,023  
  Adjustments to reconcile net income      
    to net cash provided by operating activities:      
  Depreciation and amortization   3,956,314       3,731,954  
  Provision for bad debts   (332,325 )     184,944  
  Share of net loss from investment under equity method   253,819       605,864  
  (Gain) loss on sale of assets   191,935       (23,103 )
  Gain on forgiveness of loan   (469,721 )      
  Stock based compensation   342,153       808,616  
  Changes in operating assets and liabilities:      
    Accounts receivable   6,861,454       2,035,843  
    Accounts receivable – related party         1,957,864  
    Revenues in excess of billing   2,839,709       (3,252,704 )
    Revenues in excess of billing – related party         105,441  
    Other current assets   (857,708 )     (132,175 )
    Accounts payable and accrued expenses   474,098       (1,399,828 )
    Unearned revenue   204,563       (1,842,313 )
  Net cash provided by operating activities   15,725,923       3,972,426  
             
Cash flows from investing activities:      
  Purchases of property and equipment   (2,551,283 )     (1,377,145 )
  Sales of property and equipment   188,233       106,180  
  Convertible note receivable – related party         (600,000 )
  Investment in associates   (155,500 )     (94,500 )
  Purchase of subsidiary shares         (89,425 )
  Net cash used in investing activities   (2,518,550 )     (2,054,890 )
             
Cash flows from financing activities:      
  Proceeds from exercise of subsidiary options         11,621  
  Purchase of treasury stock   (2,364,781 )      
  Dividend paid by subsidiary to non-controlling interest         (1,920,618 )
  Proceeds from bank loans   1,898,013       4,221,203  
  Payments on finance lease obligations and loans – net   (698,797 )     (611,913 )
  Net cash provided by (used in) financing activities   (1,165,565 )     1,700,293  
Effect of exchange rate changes   1,496,516       (817,363 )
Net increase in cash and cash equivalents   13,538,324       2,800,466  
Cash and cash equivalents at beginning of the period   20,166,830       17,366,364  
Cash and cash equivalents at end of period $ 33,705,154     $ 20,166,830  
             

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

  For the Year Ended   For the Year Ended
  June 30, 2021   June 30, 2020
       
Net Income (loss) attributable to NetSol $ 1,778,257     $ 937,081  
Non-controlling interest   483,375       254,942  
Income taxes   1,026,617       1,141,068  
Depreciation and amortization   3,956,314       3,731,954  
Interest expense   394,289       346,856  
Interest (income)   (1,017,432 )     (1,569,536 )
EBITDA $ 6,621,420     $ 4,842,365  
Add back:      
Non-cash stock-based compensation   342,153       808,616  
Adjusted EBITDA, gross $ 6,963,573     $ 5,650,981  
Less non-controlling interest (a)   (1,588,701 )     (1,330,352 )
Adjusted EBITDA, net $ 5,374,872     $ 4,320,629  
       
       
Weighted Average number of shares outstanding      
Basic   11,499,983       11,734,648  
Diluted   11,499,983       11,784,414  
       
Basic adjusted EBITDA $ 0.47     $ 0.37  
Diluted adjusted EBITDA $ 0.47     $ 0.37  
       
       
(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 $ 483,375     $ 254,942  
Income Taxes   147,688       223,675  
Depreciation and amortization   1,115,734       1,060,605  
Interest expense   121,740       100,373  
Interest (income)   (319,674 )     (391,644 )
EBITDA $ 1,548,863     $ 1,247,951  
Add back:      
Non-cash stock-based compensation   39,838       82,401  
Adjusted EBITDA of non-controlling interest $ 1,588,701     $ 1,330,352  
       

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