NETSOL Technologies Reports Fiscal Third Quarter 2020 Financial Results

CALABASAS, Calif., May 13, 2020 (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, 2020.
Fiscal Third Quarter 2020 and Recent Operational HighlightsRegarding previously announced 12-country, $110 million contract with German auto manufacturing giant, the Company made continued progress with respect to additional NFS Ascent^® implementations and anticipates Go Live events in the coming months for the following countries: Singapore and Thailand.Regarding the same contract mentioned above, successfully implemented NETSOL’s full suite NFS Ascent Retail Platform, including its Omni Point of Sale (Omni POS) and Contract Management System (CMS), as well as the Wholesale Finance System (WFS) of its Wholesale Platform, for the same customer in Malaysia.Signed contract with a leading bank in the UK for the implementation of the NFS Ascent Retail platform, including Point of Sale solution and Contract Management System, in the cloud.Went “Live” with NETSOL’s LeaseSoft application for one of the largest independently-owned finance companies in the UK.Otoz entered into a contract with the captive auto finance company of a leading German auto manufacturer in China to launch its pilot car sharing program in China.Successfully delivered Retail system to the Company’s first Ascent customer in North America.Delivered Ascent Retail platform to the captive auto finance company of a notable Japanese equipment manufacturer in Australia and New Zealand.Implemented the i-OPS (i-operations) system with a leading captive finance company of a notable Japanese bank in Indonesia, allowing their call center workforce to contact prospects and act as an additional channel for lead generation.Successfully upsold system enhancements worth approx. $4.0 million during implementation with the captive auto finance company of a leading German Auto manufacturer in China.Generated nearly $2.0 million by providing additional services and change requests for various customers across multiple regions.In response to the economic slowdown caused by the current global pandemic, implemented a series of cost reduction initiatives and temporary salary reductions, which are expected to generate approx. $5 million in annualized savings.Fiscal Third Quarter 2020 Financial Results
Total net revenues for the third quarter of fiscal 2020 were $13.5 million, compared with $17.1 million in the prior year period. The decrease in total net revenues was primarily due to a decrease in total license fees of $2.2 million and a decrease in services revenues of $2.6 million, which was offset by an increase in total maintenance fees of $1.2 million.Total license fees were $312,000, compared with $2.5 million in the prior year period.Total maintenance fees were $4.9 million, compared with $3.7 million in the prior year period.Total services revenues were $8.3 million, compared with $10.9 million in the prior year period.Gross profit for the third quarter of fiscal 2020 was $6.0 million (or 44.5% of net revenues), compared to $8.6 million (or 50.0% of net revenues) in the third quarter of fiscal 2019. The decreases in gross profit and gross profit as a percentage of revenue were primarily due to decreases in revenue by an amount that was greater than the related decreases in cost of revenues, respectively. The decrease in cost of revenues was predominantly driven by decreases in travel, depreciation and amortization and other expenses, which were offset by a slight increase in salaries and consultants’ costs.Operating expenses for the third quarter of fiscal 2020 decreased 1% to $6.4 million (or 47.3% of net revenues) from $6.5 million (or 37.7% of net revenues) in the third quarter of fiscal 2019. The slight decrease in operating expenses was primarily due to decreases in sales and marketing expenses, depreciation and amortization, and research and development costs, which were offset by an increase in general and administrative expenses.GAAP net income attributable to NETSOL for the third quarter of fiscal 2020 totaled $1.0 million, or $0.09 per diluted share, compared with GAAP net income of $1.3 million, or $0.11 per diluted share in the third quarter of fiscal 2019. GAAP net income attributable to NETSOL included a $1.8 million gain on foreign currency exchange transactions in the third quarter of fiscal 2020, which was a significant increase compared with a gain of $47,000 in the prior year period.Non-GAAP adjusted EBITDA for the third quarter of fiscal 2020 totaled $1.8 million, or $0.15 per diluted share, compared with non-GAAP adjusted EBITDA of $2.2 million, or $0.19 per diluted share in the third quarter of fiscal 2019 (see note regarding “Use of Non-GAAP Financial Measures,” below for further discussion of this non-GAAP measure).At March 31, 2020, cash and cash equivalents were $15.7 million, a decrease from $17.0 million at the end of the prior year quarter.Management Commentary
“The start of the calendar year has been a challenging time for many, but we are pushing ahead and continuing to operate efficiently in this new-normal environment,” said company Co-Founder, Chairman and Chief Executive Officer Najeeb Ghauri. “Our operations in the fiscal third quarter were meaningfully impacted by the global slowdown occurring in many of the verticals we serve, including the greater leasing, finance and automotive industries. In direct response to this macroeconomic headwind, we’ve made strategic cost reductions in several key areas, which has allowed us to retain our entire workforce and should result in costs savings of $5 million on an annualized basis.“Additionally, our team has responded capably through this trial, and we’ve been able to operate uninterrupted since transitioning to a remote work environment. Between system enhancements and change requests with existing customers, we were able to generate an additional $2 million in revenue during the period with another $4 million to be recognized in the next few quarters, which is a testament to the commitment and skill of our implementation groups. While COVID-19 has also impacted our ability to travel and meet face-to-face with prospects, our teams are still very busy in conducting virtual demos, presentations and negotiations.“Looking ahead, while we’re encouraged by the response we’ve seen in our Chinese operations, we also understand that the roadmap for the rest of the world’s re-opening remains opaque at best. We are continuously monitoring all aspects of our global operations to maximize the health and safety of our workforce while balancing our long-term growth initiatives. As a digital-first and SaaS-focused organization, we are also constantly evaluating innovative and flexible ways to manage our cost structures without impacting the delivery and implementations of projects in all markets.”Sales Outlook
NETSOL President, Global Sales and Otoz CEO Naeem Ghauri added: “Traditionally, the fiscal fourth quarter is our strongest performance period, and we’re currently tracking in this direction with a backloaded end of the year. We expect to see sequentially stronger revenues and EBITDA, allowing us to close out the year on an upward trajectory. With the global economic outlook still uncertain, we are seeing initial signs of recovery and activity picking up. Overall, we are confident in our ability to grow in fiscal 2021.”Otoz Update
“Otoz is continuing to gain interest and traction from many different types of prospects,” continued Ghauri. “Auto OEMs, finance companies and dealers are all types of businesses that are looking to deploy our technology to increase fleet utilization and provide more flexible auto ownership models during a time when traditional purchasing models are coming under intense pressure. We are witnessing consumer habits undergo a fundamental change in usage behavior. Otoz is extremely well positioned to benefit from this paradigm shift. Based upon cloud native architecture, our technology can be implemented through a SaaS subscription model, allowing for a low-cost entry point to a wider market.”Conference Call
NETSOL Technologies management will hold a conference call today (May 13, 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: 1-201-689-8562Please 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 May 27, 2020.Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 13703209About 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 operation 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
NETSOL Technologies, Inc. and Subsidiaries
Schedule 2: Consolidated Statement of OperationsNETSOL Technologies, Inc. and SubsidiariesSchedule 3: Consolidated Statement of Cash FlowsNETSOL Technologies, Inc. and Subsidiaries
Schedule 4: Reconciliation to GAAP