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NetSol Technologies Reports Fiscal 2016 Third-Quarter Results

  • Performance Reflects Continued Momentum throughout the Business
  • 2016 Third Quarter Revenue Up 22% to $16M from Third Quarter Last Year
  • Second Straight Quarter of Positive EPS; Headed Toward Full Year of Positive Earnings
  • Company Reiterates Expectation of Minimum Total Net Revenues of $62 Million for Full Fiscal 2016 Year with Adjusted EPS Anticipated to Exceed $1.00 per Diluted Share

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

CALABASAS, Calif., May 10, 2016 (GLOBE NEWSWIRE) -- NetSol Technologies, Inc. (Nasdaq:NTWK), a global business services and enterprise application solutions provider, today announced results for its fiscal 2016 third quarter ended March 31, 2016.

Fiscal 2016 Third-Quarter Financial Results

Total net revenues for the 2016 third quarter rose 22% to $16.0 million from $13.1 million in the same period last year.

  • Total license fees were $1.8 million, compared with $1.2 million last year
  • Total maintenance fees were $3.4 million, compared with $3.0 million last year; and
  • Total services revenues advanced to $10.7 million from $8.8 million last year.

On a GAAP basis, net income for the third quarter improved to $849,000, or $0.08 per diluted share, as compared with a net loss of $1.6 million, or $(0.17) per share, in the third quarter of 2015.

Non-GAAP Adjusted EBITDA (which primarily removes depreciation and amortization and stock-based compensation) for the third quarter of 2016 was $3.2 million, or adjusted EPS of $0.30 per diluted share, as compared with adjusted EBITDA of $1.6 million, or adjusted EPS of $0.16 per diluted share, in the third quarter of 2015.

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 at the end of this press release.

Management Commentary
“The performance for the quarter came in as expected, reflecting multiple contracts underway for our entire portfolio of finance and leasing solutions,” said Najeeb Ghauri, CEO of NetSol. “We remain on track to achieve our guidance for the year and are excited about the progress being made on implementing our $100 million-plus multi-country deal.”

Naeem Ghauri, President and Head of Global Sales, said, “The 12-country NFS AscentTM implementation began ramping up in the 2016 fourth quarter in South Korea, South Africa, Australia and China, providing excellent reference points for our marketing efforts in Europe and North America. As a result, we are witnessing a marked improvement in our sales pipeline, which is a strong indicator of a growing market need for NFS Ascent, as companies look to improve their businesses processes and productivity, consolidate IT systems and create new, efficient ways of conducting business.”

Following is additional detail for the quarter:

  • Gross profit rose to $7.5 million from $4.7 million last year;
  • Operating expenses were nearly flat year-over-year; and
  • The company purchased 705,000 shares of NetSol PK common stock during the third quarter and a total of 1.4 million shares for the first nine months of 2016 for $767,000, resulting in a decrease in non-controlling interest to 33.4%.

Fiscal 2016 First Nine Months Financial Results

For the first nine months of fiscal 2016, total net revenues advanced to $45.5 million, with services income comprising $31.9 million. This compares with total net revenues of $35.7 million for the same period one year ago, with services revenues comprising $21.6 million for first nine months of fiscal 2015. The company reported GAAP net income of $1.3 million, or $0.12 per diluted share, for the first nine months of fiscal 2016, versus a net loss of $4.9 million, or $(0.51) per share, for the same period last year.

Non-GAAP adjusted EBITDA for the fiscal 2016 year-to-date period doubled to $8.0 million, or adjusted EPS of $0.76 per diluted share, from $4.0 million, or adjusted EPS of $0.41 per diluted share, for the same period in fiscal 2015.

Fiscal 2016 Business Outlook
The company continues to expect minimum revenues of $62 million for fiscal 2016. Adjusted EPS is expected to exceed $1.00 per diluted share for fiscal 2016.

Fiscal 2016 Third Quarter Conference Call

When:Tuesday, May 10, 2016
Time:9:00 a.m. Eastern Time
Phone:1-844-868-9327 (domestic)
1-412-317-6595 (international)
Note:Once connected, please ask to be joined into the NetSol Technologies call.

A live webcast will be available online within the investor relations section of NetSol’s website at http://www.netsoltech.com. A replay of the webcast will be available one hour following conclusion of the live call, and will be archived for one year.

About NetSol Technologies
NetSol Technologies, Inc. (Nasdaq:NTWK) is a worldwide provider of IT and enterprise software solutions primarily serving the global leasing and financing industry. The Company’s suite of applications are backed by 40 years of domain expertise and supported by a committed team of more than 1,500 professionals placed in eight strategically located support and delivery centers throughout the world.

Forward-Looking Statements

Certain statements in this press release are forward-looking in nature, including, but not limited to, expected net revenue and adjusted EPS amounts for the full fiscal year and the growing market need for NFS Ascent, and accordingly, 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 March 31, As of June 30,
ASSETS2016 2015
Current assets:
Cash and cash equivalents$ 11,881,159 $ 14,168,957
Restricted cash 90,000 90,000
Accounts receivable, net of allowance of $501,496 and $524,565 6,072,413 6,480,344
Accounts receivable, net - related party 6,467,551 3,491,899
Revenues in excess of billings 8,860,248 5,267,275
Other current assets 2,756,621 2,012,190
Total current assets 36,127,992 31,510,665
Investment 555,556 -
Property and equipment, net 23,178,350 25,119,634
Intangible assets, net 20,276,715 22,815,467
Goodwill 9,516,568 9,516,568
Total assets$ 89,655,181 $ 88,962,334
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses$ 6,354,959 $ 5,952,561
Current portion of loans and obligations under capitalized leases 4,538,218 3,896,353
Unearned revenues 3,412,019 4,897,327
Common stock to be issued 88,324 88,324
Total current liabilities 14,393,520 14,834,565
Long term loans and obligations under capitalized leases; less current maturities 315,653 487,492
Total liabilities 14,709,173 15,322,057
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value; 500,000 shares authorized; - -
Common stock, $.01 par value; 14,500,000 shares authorized;
10,558,600 shares issued and 10,531,321 outstanding as of March 31, 2016 and
10,307,826 shares issued and 10,280,547 outstanding as of June 30, 2015 105,586 103,078
Additional paid-in-capital 120,513,094 119,209,807
Treasury stock (27,279 shares) (415,425) (415,425)
Accumulated deficit (39,412,605) (40,726,121)
Stock subscription receivable (947,353) (1,204,603)
Other comprehensive loss (18,898,747) (17,167,100)
Total NetSol stockholders' equity 60,944,550 59,799,636
Non-controlling interest 14,001,458 13,840,641
Total stockholders' equity 74,946,008 73,640,277
Total liabilities and stockholders' equity$ 89,655,181 $ 88,962,334


NetSol Technologies, Inc. and Subsidiaries
Consolidated Statement of Operations
For the Three MonthsFor the Nine Months
Ended March 31,Ended March 31,
2016201520162015
Net Revenues:
License fees $ 1,358,469 $ 1,215,201 $ 3,261,514 $ 4,900,469
Maintenance fees 3,388,526 2,978,587 9,641,236 8,963,240
Services 8,159,490 7,022,982 24,487,467 16,650,646
License fees - related party 484,644 - 484,644 -
Maintenance fees - related party 28,423 43,948 218,409 237,523
Services - related party 2,554,347 1,813,197 7,377,430 4,901,792
Total net revenues 15,973,899 13,073,915 45,470,700 35,653,670
Cost of revenues:
Salaries and consultants 5,542,829 4,895,515 15,468,284 13,310,632
Travel 543,672 760,065 1,779,134 1,772,289
Depreciation and amortization 1,483,695 1,912,492 4,419,396 5,514,812
Other 860,868 792,737 2,822,347 2,129,646
Total cost of revenues 8,431,064 8,360,809 24,489,161 22,727,379
Gross profit 7,542,835 4,713,106 20,981,539 12,926,291
Operating expenses:
Selling and marketing 1,896,295 1,712,151 5,597,689 4,419,466
Depreciation and amortization 321,230 551,127 898,018 1,569,903
General and administrative 3,957,028 3,997,186 10,859,751 11,584,696
Research and development cost 132,123 84,038 362,117 230,740
Total operating expenses 6,306,676 6,344,502 17,717,575 17,804,805
Income (loss) from operations 1,236,159 (1,631,396) 3,263,964 (4,878,514)
Other income and (expenses)
Gain (loss) on sale of assets 14,848 6,496 642 (74,099)
Interest expense (56,070) (45,234) (196,399) (165,592)
Interest income 29,673 97,094 117,084 261,091
Gain (loss) on foreign currency exchange transactions 12,955 (247,845) (235,291) (589,707)
Other income 25,258 607,111 200,256 625,650
Total other income (expenses) 26,664 417,622 (113,708) 57,343
Net income (loss) before income taxes 1,262,823 (1,213,774) 3,150,256 (4,821,171)
Income tax provision (106,209) (107,398) (454,707) (235,157)
Net income (loss) 1,156,614 (1,321,172) 2,695,549 (5,056,328)
Non-controlling interest (307,135) (315,073) (1,382,033) 214,888
Net income (loss) attributable to NetSol $ 849,479 $ (1,636,245)$ 1,313,516 $ (4,841,440)
Net income (loss) per common share
Basic $ 0.08 $ (0.17)$ 0.13 $ (0.51)
Diluted $ 0.08 $ (0.17)$ 0.12 $ (0.51)
Weighted average number of shares outstanding
Basic 10,427,664 9,914,321 10,338,740 9,573,336
Diluted 10,643,479 9,914,321 10,554,555 9,573,336


NetSol Technologies, Inc. and Subsidiaries
Consolidated Statement of Cash Flows
For the Nine Months
Ended March 31,
20162015
Cash flows from operating activities:
Net income (loss)$ 2,695,549 $ (5,056,328)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 5,317,414 7,084,715
Provision for bad debts 49,605 -
(Gain) loss on sale of assets (642) 74,099
Stock issued for services 694,693 1,119,721
Fair market value of warrants and stock options granted 145,716 466,866
Changes in operating assets and liabilities:
Accounts receivable 115,428 (2,369,950)
Accounts receivable - related party (3,111,316) (198,640)
Revenues in excess of billing (3,248,121) (2,734,788)
Other current assets (838,913) 188,048
Accounts payable and accrued expenses 617,112 1,008,270
Unearned revenue (1,305,724) 2,984,297
Net cash provided by operating activities 1,130,801 2,566,310
Cash flows from investing activities:
Purchases of property and equipment (2,523,865) (2,499,314)
Sales of property and equipment 556,280 209,718
Investment (555,556) -
Purchase of subsidiary shares from open market (767,397) (577,222)
Net cash used in investing activities (3,290,538) (2,866,818)
Cash flows from financing activities:
Proceeds from sale of common stock 64,931 1,863,000
Proceeds from the exercise of stock options and warrants 728,699 116,400
Proceeds from exercise of subsidiary options 16,744 12,306
Restricted cash - 2,438,844
Dividend paid by subsidiary to Non controlling interest - (780,106)
Proceeds from bank loans 1,334,285 -
Payments on capital lease obligations and loans - net (736,405) (3,459,143)
Net cash provided by financing activities 1,408,254 191,301
Effect of exchange rate changes (1,536,315) (466,130)
Net decrease in cash and cash equivalents (2,287,798) (575,337)
Cash and cash equivalents, beginning of the period 14,168,957 11,462,695
Cash and cash equivalents, end of period $ 11,881,159 $ 10,887,358


NetSol Technologies, Inc. and Subsidiaries
Reconciliation to GAAP
Three MonthsThree MonthsNine MonthsNine Months
EndedEndedEndedEnded
March 31, 2016March 31, 2015March 31, 2016March 31, 2015
Net Income (loss) before preferred dividend, per GAAP $ 849,479 $ (1,636,245)$ 1,313,516 $ (4,841,440)
Income Taxes 106,209 107,398 454,707 235,157
Depreciation and amortization 1,804,925 2,463,619 5,317,414 7,084,715
Interest expense 56,070 45,234 196,399 165,592
Interest (income) (29,673) (97,094) (117,084) (261,091)
EBITDA $ 2,787,010 $ 882,912 $ 7,164,952 $ 2,382,933
Add back:
Non-cash stock-based compensation 368,674 668,807 840,409 1,586,587
Adjusted EBITDA $ 3,155,684 $ 1,551,719 $ 8,005,361 $ 3,969,520
Adjusted EBITDA margin 19.76
% 11.87
% 17.61
% 11.13
%
Weighted Average number of shares outstanding
Basic 10,427,664 9,914,321 10,338,740 9,573,336
Diluted 10,643,479 9,937,750 10,554,555 9,596,765
Basic adjusted EBITDA $ 0.30 $ 0.16 $ 0.77 $ 0.41
Diluted adjusted EBITDA $ 0.30 $ 0.16 $ 0.76 $ 0.41

From time to time, NetSol may refer to Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, Amortization and Stock-based Compensation) and “non-GAAP adjusted diluted EPS or Adjusted EPS” in its conference calls and discussions with investors and analysts in connection with the company’s reported historical financial results. Adjusted EBITDA does not represent cash flows from operations as defined by generally accepted accounting principles (“GAAP”), is not derived in accordance with GAAP and should not be considered by the reader as an alternative to net income (the most comparable GAAP financial measure to Adjusted EBITDA). Non-GAAP adjusted diluted EPS or Adjusted EPS does not measure diluted EPS as defined by GAAP, is not derived in accordance with GAAP and should not be considered by the reader as an alternative to reported diluted EPS. The reconciliation of GAAP and non-GAAP financial measures for the three and nine month periods ended March 31, 2016 and 2015 are included in the above table. NetSol’s management believes that Adjusted EBITDA and Adjusted EPS are helpful as an indicator of the current financial performance of the company. NetSol also adjusts for non-cash items, such as stock-based compensation as we believe these are not representative of our ongoing operating performance and we believe excluding these costs provide a useful metric by which to compare performance from period to period. Management strongly encourages investors to review the company’s consolidated financial statements in their entirety and to not rely on any single financial measure in evaluating the company.

Investor Contacts:

PondelWilkinson
Matt Sheldon | Roger Pondel
investors@netsoltech.com
(310) 279-5980

Media Contacts:

PondelWilkinson
George Medici | gmedici@pondel.com
(310) 279-5968

Source:NetSol Technologies, Inc.