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NetSol Technologies Reports Sharply Higher Fiscal 2016 Second-Quarter Results; Issues Fiscal 2016 Guidance
Globe Newswire
  • Total Q2 revenue rose 31% to $16.2 million
  • 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.

Investor Contacts:

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

Media Contacts:

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

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