Records positive Q2 GAAP EPS of $0.08 per diluted share, versus a net loss of $(0.14) per share last year
Adjusted EPS increases to $0.32 per diluted share in the quarter, and adjusted EPS of $0.46 per diluted share for the first six months of 2016
Expects minimum total net revenue of $62 million for fiscal 2016, GAAP profitability and adjusted EPS growth for the fiscal year
- Conference Call Scheduled Today at 9 a.m. ET (6 a.m. PT) -
CALABASAS, Calif. , Feb. 11, 2016 (GLOBE NEWSWIRE) -- NetSol Technologies, Inc. (Nasdaq:NTWK), a global business services and enterprise application solutions provider, today announced results for its fiscal 2016 second quarter ended December 31, 2015.
Total net revenues for the 2016 second quarter rose 31% to $16.2 million from $12.4 million in the same period last year. The increase reflected strength in total services revenue, which includes growing services delivered to major clients as well as our joint-venture companies, rising to $12.2 million from $6.9 million last year. License fees were approximately $710,000, compared with $2.1 million last year, with the year-over-year difference relating to sales mix. Total maintenance fees, which include related-party (joint-venture) maintenance fees, remained consistent at $3.3 million for both 2015 and 2014.
On a GAAP basis, net income for the second quarter improved to $875,000, or $0.08 per diluted share, as compared with a net loss of $1.4 million, or $(0.14) per share, in the second quarter of 2015.
Non-GAAP Adjusted EBITDA (which adds back stock-based compensation expense) for the second quarter of 2016 was $3.3 million, or adjusted EPS of $0.32 per diluted share, as compared with adjusted EBITDA of $1.4 million, or adjusted EPS of $0.14 per diluted share, in the second 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. Following is additional detail for the quarter:
As a percentage of total revenue, total cost of revenue for the second quarter of 2016 decreased to 50% from 60% of total revenues for the same period last year;
Gross profit rose to $8.0 million from $5.0 million last year; and
Operational expenses were nearly flat year-over-year, with an increase in selling and marketing expenses related to new business efforts, offset by a decrease in general and administrative expenses as a result of cost rationalization initiatives.
“NetSol is at an important inflection point, with leverage continuing to build in our business model as a result of multiple large contracts underway,” said Najeeb Ghauri, CEO of NetSol. “As we implement agreements already signed in Europe, along with the recently announced 12-country NFS AscentTM implementation, we anticipate a strong year ahead.”
Naeem Ghauri, president and head of global sales, commenting on the recent contract valued at more than $100 million said, “The new contract is just beginning to contribute revenue to our overall revenue mix, and is expected to ramp up steadily in the fiscal 2016 third and fourth quarter, and then sharply in fiscal 2017. Additionally, our sales pipeline is robust, benefitting from recent wins that provide strong reference points to leverage in our marketing efforts.”
For the first six months of fiscal 2016, total revenue advanced to $29.5 million from $22.6 million for the same period one year ago. The company reported GAAP net income of $464,000, or $0.04 per diluted share, for the first six months of fiscal 2016, versus a net loss of $3.2 million, or $(0.34) per diluted share, for the same period last year. Non-GAAP adjusted EBITDA rose to $4.8 million, or adjusted EPS of $0.46 per diluted share for the first six months of fiscal 2016, from $2.4 million, or adjusted EPS of $0.26 per diluted share, for the same period in fiscal 2015.
At December 31, 2015, cash and cash equivalents were approximately $14.0 million, versus $14.2 million at June 30, 2015. Accounts receivable and accounts receivable, net-related party combined were $11.8 million, up from approximately $10 million at June 30, 2015. The quality of receivables remains strong.
Fiscal 2016 Business Outlook
The company currently expects minimum revenue of $62 million for fiscal 2016, with positive GAAP earnings per share and continued adjusted EPS growth. NetSol is currently conducting its mid-year budget review, and will provide further detail at the appropriate time.
Fiscal 2016 Second Quarter Conference Call When: Thursday, February 11, 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 1000 professionals placed in eight strategically located support and delivery centers throughout the world.
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
2015
2015
Current assets:
Cash and cash equivalents
$
13,986,773
$
14,168,957
Restricted cash
90,000
90,000
Accounts receivable, net of allowance of $487,937 and $524,565
6,025,334
6,480,344
Accounts receivable, net - related party
5,749,523
3,491,899
Revenues in excess of billings
5,061,568
5,267,275
Other current assets
2,671,613
2,012,190
Total current assets
33,584,811
31,510,665
Property and equipment, net
23,251,920
25,119,634
Intangible assets, net
20,877,711
22,815,467
Goodwill
9,516,568
9,516,568
Total assets
$
87,231,010
$
88,962,334
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses
$
5,907,103
$
5,952,561
Current portion of loans and obligations under capitalized leases
3,767,193
3,896,353
Unearned revenues
3,546,819
4,897,327
Common stock to be issued
88,324
88,324
Total current liabilities
13,309,439
14,834,565
Long term loans and obligations under capitalized leases; less current maturities
273,109
487,492
Total liabilities
13,582,548
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;
10,418,350 shares issued and 10,391,071 outstanding as of December 31, 2015 and
10,307,826 shares issued and 10,280,547 outstanding as of June 30, 2015
104,184
103,078
Additional paid-in-capital
119,890,798
119,209,807
Treasury stock (27,279 shares)
(415,425
)
(415,425
)
Accumulated deficit
(40,262,084
)
(40,726,121
)
Stock subscription receivable
(1,139,672
)
(1,204,603
)
Other comprehensive loss
(18,546,296
)
(17,167,100
)
Total NetSol stockholders' equity
59,631,505
59,799,636
Non-controlling interest
14,016,957
13,840,641
Total stockholders' equity
73,648,462
73,640,277
Total liabilities and stockholders' equity
$
87,231,010
$
88,962,334
NetSol Technologies, Inc. and Subsidiaries
Consolidated Statement of Operations
For the Three Months
For the Six Months
Ended December 31,
Ended December 31,
2015
2014
2015
2014
Net Revenues:
License fees
$
709,691
$
2,100,715
$
1,903,045
$
3,685,268
Maintenance fees
3,240,472
3,276,125
6,252,710
5,984,653
Services
9,574,104
5,378,584
16,327,977
9,627,664
Maintenance fees - related party
31,755
53,462
189,986
193,575
Services - related party
2,635,675
1,543,718
4,823,083
3,088,595
Total net revenues
16,191,697
12,352,604
29,496,801
22,579,755
Cost of revenues:
Salaries and consultants
4,925,565
4,298,900
9,925,455
8,415,117
Travel
754,009
590,353
1,235,462
1,012,224
Depreciation and amortization
1,461,466
1,800,753
2,935,701
3,602,320
Other
1,022,682
662,046
1,961,479
1,336,909
Total cost of revenues
8,163,722
7,352,052
16,058,097
14,366,570
Gross profit
8,027,975
5,000,552
13,438,704
8,213,185
Operating expenses:
Selling and marketing
2,002,990
1,574,955
3,701,394
2,707,315
Depreciation and amortization
285,616
438,003
576,788
1,018,776
General and administrative
3,536,676
3,911,754
6,902,723
7,587,509
Research and development cost
117,924
80,437
229,994
146,702
Total operating expenses
5,943,206
6,005,149
11,410,899
11,460,302
Income (loss) from operations
2,084,769
(1,004,597
)
2,027,805
(3,247,117
)
Other income and (expenses)
Loss on sale of assets
(2,333
)
(69,543
)
(14,206
)
(80,595
)
Interest expense
(72,156
)
(47,265
)
(140,329
)
(120,358
)
Interest income
35,299
106,078
87,411
163,997
Loss on foreign currency exchange transactions
(134,527
)
(421,082
)
(248,246
)
(341,862
)
Other income
120,684
18,162
174,998
18,541
Total other income (expenses)
(53,033
)
(413,650
)
(140,372
)
(360,277
)
Net income (loss) before income taxes
2,031,736
(1,418,247
)
1,887,433
(3,607,394
)
Income tax provision
(273,275
)
(87,683
)
(348,498
)
(127,759
)
Net income (loss)
1,758,461
(1,505,930
)
1,538,935
(3,735,153
)
Non-controlling interest
(883,396
)
138,764
(1,074,898
)
529,961
Net income (loss) attributable to NetSol
$
875,065
$
(1,367,166
)
$
464,037
$
(3,205,192
)
Net income (loss) per common share
Basic
$
0.08
$
(0.14
)
$
0.05
$
(0.34
)
Diluted
$
0.08
$
(0.14
)
$
0.04
$
(0.34
)
Weighted average number of shares outstanding
Basic
10,308,186
9,654,334
10,294,760
9,433,829
Diluted
10,548,922
9,654,334
10,535,496
9,433,829
NetSol Technologies, Inc. and Subsidiaries
Consolidated Statement of Cash Flows
For the Six Months
Ended December 31,
2015
2014
Cash flows from operating activities:
Net income (loss)
$
1,538,935
$
(3,735,156
)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization
3,512,489
4,621,096
Provision for bad debts
37,043
-
Loss on sale of assets
14,206
80,595
Stock issued for services
326,019
606,536
Fair market value of warrants and stock options granted
145,716
311,244
Changes in operating assets and liabilities:
Accounts receivable
111,967
(2,279,774
)
Accounts receivable - related party
(2,383,828
)
40,907
Revenues in excess of billing
535,937
(765,672
)
Other current assets
(758,802
)
286,838
Accounts payable and accrued expenses
142,008
59
Unearned revenue
(1,190,072
)
4,857,469
Net cash provided by operating activities
2,031,618
4,024,142
Cash flows from investing activities:
Purchases of property and equipment
(1,177,443
)
(1,772,866
)
Sales of property and equipment
357,933
179,904
Purchase of non-controlling interest in subsidiaries
(347,623
)
(577,222
)
Net cash used in investing activities
(1,167,133
)
(2,170,184
)
Cash flows from financing activities:
Proceeds from sale of common stock
64,931
1,610,000
Proceeds from the exercise of stock options and warrants
194,680
116,400
Restricted cash
-
2,438,844
Dividend paid by subsidiary to non-controlling interest
-
(780,106
)
Proceeds from bank loans
306,750
57,405
Payments on capital lease obligations and loans - net
(530,733
)
(2,867,974
)
Net cash provided by financing activities
35,628
574,569
Effect of exchange rate changes
(1,082,297
)
(404,696
)
Net increase (decrease) in cash and cash equivalents
(182,184
)
2,023,831
Cash and cash equivalents, beginning of the period
14,168,957
11,462,695
Cash and cash equivalents, end of period
$
13,986,773
$
13,486,526
NetSol Technologies, Inc. and Subsidiaries
Reconciliation to GAAP
Three Months
Three Months
Six Months
Six Months
Ended
Ended
Ended
Ended
December 31, 2015
December 31, 2014
December 31, 2015
December 31, 2014
Net Income (loss) before preferred dividend, per GAAP
$
875,065
$
(1,367,166
)
$
464,037
$
(3,205,192
)
Income Taxes
273,275
87,683
348,498
127,759
Depreciation and amortization
1,747,082
2,238,756
3,512,489
4,621,096
Interest expense
72,156
47,265
140,329
120,358
Interest (income)
(35,299
)
(106,078
)
(87,411
)
(163,997
)
EBITDA
$
2,932,279
$
900,460
$
4,377,942
$
1,500,024
Add back:
Non-cash stock-based compensation
393,985
471,996
471,735
917,780
Adjusted EBITDA
$
3,326,264
$
1,372,456
$
4,849,677
$
2,417,804
Adjusted EBITDA margin
20.54
%
11.11
%
16.44
%
10.71
%
Weighted Average number of shares outstanding
Basic
10,308,186
9,654,334
10,294,760
9,433,829
Diluted
10,548,922
9,654,334
10,535,497
9,433,829
Basic adjusted EBITDA
$
0.32
$
0.14
$
0.47
$
0.26
Diluted adjusted EBITDA
$
0.32
$
0.14
$
0.46
$
0.26
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 six month periods ended December 31, 2015 and 2014 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.