NetSol Technologies Reports Fiscal 2014 Second Quarter Results

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-- Company Generates More Than $12 Million in Cash From Operations for First Six Months --

-- Continues Training and Hiring Push to Support Growing New Business Pipeline for NFS AscentTM and Increased Joint Venture Technical Support Requirements --

-- Conference Call Scheduled Today at 9 a.m. ET (6 a.m. PT) --

CALABASAS, Calif., Feb. 13, 2014 (GLOBE NEWSWIRE) -- NetSol Technologies, Inc. (Nasdaq:NTWK), a worldwide provider of global IT and enterprise application solutions, today reported financial results for its fiscal 2014 second quarter ended December 31, 2013.

Fiscal 2014 Second Quarter Financial Results

Total second quarter revenue amounted to $8.7 million, compared with $11.8 million in the same period last fiscal year, reflecting, as expected, lower license sales during the transition to NetSol's next-generation financing and leasing solution, NFS AscentTM.

License revenue for the fiscal 2014 second quarter was $456,000, versus $3.5 million in the same period last year. Maintenance revenue for the fiscal 2014 second quarter increased to $2.9 million from $2.7 million last year, reflecting the completion of certain projects. Service revenue remained consistent at $5.4 million, principally attributable to the first-generation NFS platform and additional service and change requests from customers. Service revenue in the second quarter of fiscal 2013 was $5.6 million.

"As we discussed in our outlook last quarter, results for the second fiscal quarter reflected the anticipated contraction in license revenue during the transition from our first-generation NFS product to the next-generation NFS Ascent platform, which we officially launched in the quarter," said Najeeb Ghauri, CEO. "The launch of NFS Ascent is progressing, particularly in North America and Europe where we have developed a strong new business pipeline with potential new customers and with current customers that we support in other regions throughout the world.

"As these negotiations progress, we are actively increasing our bench of talented employees, with more than 100 new employees going through various stages of training, so that we are ready to move quickly on additional new deals as they arise," added Ghauri.

Total operating expenses for the fiscal 2014 second quarter amounted to $4.3 million, versus $3.8 million in the fiscal 2013 second quarter. Operating expenses decreased from $4.9 million in the first quarter of fiscal 2014.

Operating loss for the second quarter of fiscal 2014 was $1.6 million, compared with operating income of $2.9 million last year.

Net loss was $1.6 million for the fiscal second quarter, equal to $0.18 per share, based on 9.1 million weighted average number of diluted shares outstanding. Net income for the same period last year was $2.2 million, or $0.28 per diluted share, based on 8.0 million weighted average number of diluted shares outstanding.

For the first half of fiscal 2014, total revenue was $17.8 million, versus $22.9 million for the first six months of fiscal 2013. Net loss for the fiscal 2014 year-to-date period was $2.7 million, or $0.30 per share, compared with net income of $3.2 million, or $0.40 per diluted share, last year.

At December 31, 2013, cash and cash equivalents increased to $11.6 million from $6.8 million at September 30, 2013, reflecting improved collections in the quarter. At June 30, 2013, cash and cash equivalents were $7.9 million. Cash provided by operations for the first six months of fiscal 2014 was $12.7 million, compared with $9.4 million for the first six months of fiscal 2013.

"We are well capitalized to manage our milestone product transition and further build the organization," concluded Ghauri. "With a robust backlog of services and maintenance revenue, and a growing new business pipeline for NFS Ascent, as well as expected additional contributions from our joint-ventures, we are optimistic about our long-term business prospects moving forward."

Fiscal 2014 Second Quarter Conference Call
When: Thursday, February 13
Time: 9:00 a.m. Eastern
Phone: 1- 888-549-7880 (domestic)
1- 480-629-9643 (international)
Conference ID: 4667450
Webcast: http://www.netsoltech.com/us/investors/event-presentation
Archived: 90 days

About NetSol Technologies

NetSol Technologies, Inc. (www.netsoltech.com) is a worldwide provider of global IT and enterprise application solutions that include credit and finance portfolio management systems, SAP consulting and services, custom development, systems integration and technical services for asset finance and leasing in the automotive, insurance, energy and technology markets. Headquartered in Calabasas, Calif., NetSol's product and services offerings have achieved ISO 9001, ISO 20000, ISO 27001, and SEI (Software Engineering Institute) CMMI (Capability Maturity Model) Maturity Level 5 assessments, a distinction shared by only 178 companies worldwide. The company's clients include Fortune 500 manufacturers, global automakers, financial institutions, utilities, technology providers and government agencies. NetSol has delivery and support locations in San Francisco, London, Beijing, Bangkok, Lahore, Sydney and Riyadh.

Follow NetSol Technologies on Twitter at https://twitter.com/NetSolTech

NetSol Technologies Google+ page at https://plus.google.com/+netsoltechnologies

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.

(Tables Follow)

NetSol Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets
As of December 31, As of June 30,
ASSETS 2013 2013
Current assets:
Cash and cash equivalents $ 11,581,042 $ 7,874,318
Restricted cash 2,535,909 1,875,237
Accounts receivable, net 16,684,683 14,684,212
Revenues in excess of billings 6,271,254 15,367,198
Other current assets 2,210,215 2,273,314
Total current assets 39,283,103 42,074,279
Investment under equity method 378,835 545,483
Property and equipment, net 23,577,098 20,978,369
Intangible assets, net 29,176,897 29,452,654
Goodwill 9,653,330 9,653,330
Total assets $ 102,069,263 $ 102,704,115
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 5,411,478 $ 4,027,147
Current portion of loans and obligations under capitalized leases 5,535,157 5,308,626
Unearned revenues 4,779,494 2,446,018
Common stock to be issued 320,338 88,325
Total current liabilities 16,046,467 11,870,116
Long term loans and obligations under capitalized leases; less current maturities 1,602,148 1,412,212
Total liabilities 17,648,615 13,282,328
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value; 15,000,000 shares authorized; 9,063,575 and 8,929,523 issued and outstanding as of December 31, 2013 and June 30, 2013 90,636 89,295
Additional paid-in-capital 115,551,344 114,292,510
Treasury stock (415,425) (415,425)
Accumulated deficit (26,545,279) (23,821,256)
Stock subscription receivable (2,280,488) (2,280,488)
Other comprehensive loss (18,295,623) (15,714,112)
Total NetSol stockholders' equity 68,105,165 72,150,524
Non-controlling interest 16,315,483 17,271,263
Total stockholders' equity 84,420,648 89,421,787
Total liabilities and stockholders' equity $ 102,069,263 $ 102,704,115
NetSol Technologies, Inc. and Subsidiaries
Consolidated Statement of Operations
For the Three Months For the Six Months
Ended December 31, Ended December 31,
2013 2012 2013 2012
Net Revenues:
License fees 455,616 3,505,847 2,708,183 6,747,348
Maintenance fees 2,867,195 2,664,813 5,247,604 4,710,519
Services 5,385,191 5,637,009 9,809,351 11,421,702
Total net revenues 8,708,002 11,807,669 17,765,138 22,879,569
Cost of revenues:
Salaries and consultants 3,247,811 2,916,378 6,647,642 6,276,243
Travel 349,318 386,194 746,102 711,488
Repairs and maintenance 147,464 123,722 323,285 251,719
Insurance 40,642 41,007 80,196 78,726
Depreciation and amortization 1,240,715 1,024,007 2,287,384 1,982,158
Other 886,799 557,693 1,429,041 1,478,671
Research and development cost 55,114 33,239 113,802 59,922
Total cost of revenues 5,967,863 5,082,240 11,627,452 10,838,927
Gross profit 2,740,139 6,725,429 6,137,686 12,040,642
Operating expenses:
Selling and marketing 908,125 931,210 1,979,537 1,694,173
Depreciation and amortization 430,947 333,435 857,564 675,436
Salaries and wages 1,458,343 1,192,787 2,899,475 2,346,660
General and administrative 1,546,266 1,348,349 3,527,604 2,902,779
Total operating expenses 4,343,681 3,805,781 9,264,180 7,619,048
Income (loss) from operations (1,603,542) 2,919,648 (3,126,494) 4,421,594
Other income and (expenses)
Gain (loss) on sale of assets (175,237) (275) (189,032) 14,021
Interest expense (45,036) (179,932) (114,253) (472,321)
Interest income 39,931 31,617 72,785 55,784
Gain on foreign currency exchange transactions 96,039 504,738 1,207,462 899,894
Share of net income (loss) from equity investment (175,840) 484,487 (166,648) 484,487
Amortization of financing costs -- (74,384) -- (442,128)
Other income (expense) (47,858) 36 (47,180) 4
Total other income (expenses) (308,001) 766,287 763,134 539,741
Net income (loss) before income taxes (1,911,543) 3,685,935 (2,363,360) 4,961,335
Income tax benefit (provision) (29,270) 2,548 (40,401) (11,448)
Net income (loss) after tax (1,940,813) 3,688,483 (2,403,761) 4,949,887
Non-controlling interest 313,905 (1,465,500) (320,262) (1,797,779)
Net income (loss) attributable to NetSol (1,626,908) 2,222,983 (2,724,023) 3,152,108
Other comprehensive income (loss):
Translation adjustment (420,309) (1,394,216) (3,843,025) (2,163,011)
Comprehensive income (loss) (2,047,217) 828,767 (6,567,048) 989,097
Comprehensive loss attributable to non-controlling interest (40,980) (399,096) (1,261,514) (631,652)
Comprehensive income (loss) attributable to NetSol (2,006,237) 1,227,863 (5,305,534) 1,620,749
Net income (loss) per share:
Basic $ (0.18) $ 0.28 $ (0.30) $ 0.41
Diluted $ (0.18) $ 0.28 $ (0.30) $ 0.40
Weighted average number of shares outstanding
Basic 9,056,024 7,957,521 9,006,015 7,774,719
Diluted 9,056,024 7,968,598 9,006,015 7,785,796
NetSol Technologies, Inc. and Subsidiaries
Consolidated Statement of Cash Flows
For the Six Months
Ended December 31,
2013 2012
Cash flows from operating activities:
Net income (loss) $ (2,403,761) $ 4,949,887
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization 3,144,948 2,657,594
Provision for bad debts 259,306 54,889
Share of net loss (income) from investment under equity method 166,648 (484,487)
(Gain) loss on sale of assets 189,032 (14,021)
Stock issued for interest on notes payable -- 211,111
Stock issued for services 640,247 29,670
Fair market value of warrants and stock options granted 158,783 320,021
Amortization of financing costs -- 442,128
Changes in operating assets and liabilities:
Increase in accounts receivable (2,089,498) (2,378,873)
Decrease in revenue in excess of billing 8,612,283 514,720
Decrease in other current assets 367,741 1,217,728
Increase in accounts payable and accrued expenses 3,617,465 1,908,178
Net cash provided by operating activities 12,663,194 9,428,545
Cash flows from investing activities:
Purchases of property and equipment (6,059,596) (3,537,918)
Sales of property and equipment 78,678 59,350
Purchase of non-controlling interest in subsidiaries (17,853) (621,563)
Increase in intangible assets (2,312,919) (2,132,595)
Net cash used in investing activities (8,311,690) (6,232,726)
Cash flows from financing activities:
Proceeds from the exercise of stock options and warrants 560,500 612,650
Payment to common shareholders against fractional shares -- (194)
Proceeds from exercise of subsidiary options 311,709 3,031
Restricted cash (660,672) (2,257,428)
Dividend paid by subsidiary to Non controlling interest (266,343) --
Proceeds from bank loans 1,276,505 2,049,698
Payments on capital lease obligations and loans - net (781,756) (723,936)
Net cash provided by (used in) financing activities 439,943 (316,179)
Effect of exchange rate changes in cash (1,084,723) (899,554)
Net increase in cash and cash equivalents 3,706,724 1,980,086
Cash and cash equivalents, beginning of the period 7,874,318 7,599,607
Cash and cash equivalents, end of period $ 11,581,042 $ 9,579,693
NetSol Technologies, Inc. and Subsidiaries
Reconciliation to GAAP
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
December 31, 2013 December 31, 2012 December 31, 2013 December 31, 2012
Net Income (loss) before preferred dividend, per GAAP $ (1,626,908) $ 2,222,983 $ (2,724,023) $ 3,152,108
Income Taxes 29,270 (2,548) 40,401 11,448
Depreciation and amortization 1,671,662 1,357,442 3,144,948 2,657,594
Interest expense 45,036 179,932 114,253 472,321
Interest (income) (39,931) (31,617) (72,785) (55,784)
EBITDA $ 79,129 $ 3,726,192 $ 502,794 $ 6,237,687
Weighted Average number of shares outstanding
Basic 9,056,024 7,957,521 9,006,015 7,774,719
Diluted 9,089,846 7,968,598 9,039,838 7,785,796
Basic EBITDA $ 0.01 $ 0.47 $ 0.06 $ 0.80
Diluted EBITDA $ 0.01 $ 0.47 $ 0.06 $ 0.80

Although the net EBITDA income is a non-GAAP measure of performance, we are providing it because we believe it to be an important supplemental measure of our performance that is commonly used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry. It should not be considered as an alternative to net income, operating income or any other financial measures calculated and presented, nor as an alternative to cash flow from operating activities as a measure of our liquidity. It may not be indicative of the Company's historical operating results nor is it intended to be predictive of potential future results.

Investor Contacts:
PondelWilkinson
Roger Pondel | Matt Sheldon
investors@netsoltech.com
(310) 279-5980
Media Contacts:
PondelWilkinson
George Medici | gmedici@pondel.com
(310) 279-5968

Source:NetSol Technologies, Inc.