NETSOL Technologies Reports Fiscal Fourth Quarter and Full Year 2021 Financial Results

Tuesday, 28. September 2021 22:05
  • Sequential Revenue Growth Throughout the Entire Fiscal Year, Combined with Improved Cost Structures and Expense Management, Lead to 154% Increase in Operating Income and 90% Increase in Net Income for Fiscal 2021
  • Subscription and Support Revenue Eclipses $20 Million Annual Run Rate, Providing Predictable, Recurring Base to Support Anticipated New Sales Growth in Fiscal 2022
  • Company Introduces Fiscal 2022 Total Revenues and Subscription and Support Revenues Guidance of at Least 10% and 20%, Respectively

CALABASAS, Calif., Sept. 28, 2021 (GLOBE NEWSWIRE) -- NETSOL Technologies, Inc. (Nasdaq: NTWK), a global business services and enterprise application solutions provider, reported results for the fiscal fourth quarter and full year ended June 30, 2021.

Fiscal Fourth Quarter 2021 and Recent Operational Highlights

  • Subscription (SaaS and Cloud) and support revenues reached $22.2 million, a nearly 10% increase over the prior year and a $23+ million run rate projected over the coming twelve months with opportunities for upside.
  • Generated over $2.5 million by successfully implementing change requests from various customers across multiple regions during the fiscal fourth quarter. Throughout fiscal 2021, the Company generated over $7.7 million in change requests.
  • NETSOL’s U.S. based mobility startup Otoz launched its digital automotive retail platform for BMW Group Financial Services in the U.S. for its key brand MINI Anywhere. MINI Anywhere is now live with five MINI dealerships; Otoz is also scheduled to onboard additional California-based dealers before an expansion into Florida. Long term, the solution has the potential to be rolled out to over 100 MINI dealerships across all 50 states.
  • Signed an agreement with Motorcycle Group to deploy the cloud-based version of NETSOL’s flagship NFS Ascent® platform across the customer’s entire operations. This agreement marks the first official sale for NFS Ascent in the U.S. market.
  • Joined the Russell Microcap® Index at the conclusion of the 2021 Russell indexes annual reconstitution, effective June 28.
  • Became an associate member of the Consumer Bankers Association (“CBA”). CBA is the only member-driven trade association focused exclusively on retail banking, representing the nation’s largest financial institutions and the top providers of goods and services to banks.

Fiscal Fourth Quarter 2021 Financial Results
Total net revenues for the fourth quarter of fiscal 2021 were $15.4 million, compared with $13.6 million in the prior year period. The increase in total net revenues was primarily driven by an increase in total license fees of $1.0 million, an increase in subscription and support revenues of $212,000, and an increase in total services revenues of $564,000.

  • Total license fees were $1.5 million, compared with $530,000 in the prior year period.
  • Total subscription (SaaS and Cloud) and support revenues were $5.6 million, compared with $5.4 million in the prior year period.
  • Total services revenues were $8.2 million, compared with $7.7 million in the prior year period.

Gross profit for the fourth quarter of fiscal 2021 increased 6.8% to $7.5 million (or 48.8% of net revenues), compared to $7.0 million (or 51.8% of net revenues) in the fourth quarter of fiscal 2020. The increase in gross profit was primarily due to increases in revenue, offset by increases in cost of sales of $1.3 million. The increases in cost of sales were primarily due to increases in salaries and consultant fees of $885,000, depreciation of $104,000 and other costs of $289,000.

Operating expenses for the fourth quarter of fiscal 2021 increased 8.7% to $6.4 million (or 41.4% of sales) from $5.9 million (or 43.2% of sales) for the fourth quarter of fiscal 2020. The increase in operating expenses was primarily due to increases in selling and marketing and research and development, slightly offset by a decrease in general administrative expenses.

GAAP net income attributable to NETSOL for the fourth quarter of fiscal 2021 totaled $1.9 million or $0.17 per diluted share, compared with GAAP net income of $1.2 million or $0.10 per diluted share in the fourth quarter of fiscal 2020. GAAP net income attributable to NETSOL included a $918,000 gain on foreign currency exchange transactions in the fourth quarter of fiscal 2021, which was an increase from a gain of $327,000 in the prior year period.

Non-GAAP adjusted EBITDA for the fourth quarter of fiscal 2021 totaled $2.9 million or $0.26 per diluted share, compared with non-GAAP adjusted EBITDA of $2.0 million or $0.17 per diluted share in the fourth quarter of fiscal 2020 (see note regarding “Use of Non-GAAP Financial Measures,” below for further discussion of this non-GAAP measure).

At June 30, 2021, cash and cash equivalents were $33.7 million, an increase from $20.2 million at June 30, 2020.

Full Year Fiscal 2021 Financial Results
Total net revenues for fiscal 2021 were $54.9 million, compared to $56.4 million in fiscal 2020. The decrease in total net revenues was primarily due to a decrease in services revenues of $6.4 million, which was offset by increases in subscription and support revenues of $1.9 million and license fees of $3.0 million.

  • Total license fees were $6.2 million, compared with $3.3 million in the prior fiscal year.
  • Total subscription and support revenues were $22.2 million, compared with $20.3 million in the prior fiscal year.
  • Total services revenues were $26.5 million, compared with $32.9 million in the prior fiscal year.

Gross profit for fiscal 2021 decreased to $26.4 million (or 48.0% of net revenues) from $27.0 million (or 47.8% of net revenues) for fiscal 2020. The decrease in gross profit was primarily due to a decrease in revenue, offset by a decrease in cost of sales of $841,000. The decreases in cost of sales were primarily due to decrease in travel expenses of $3.5 million, offset by increases in salaries and consultant fees of $2.1 million.

Operating expenses for fiscal 2021 decreased to $23.6 million (or 43.0% of net revenues) from $25.9 million (or 45.9% of net revenues) for fiscal 2020. The decrease in operating expenses was primarily due to decreases in general and administrative expenses and research and development costs, offset by a slight increase in selling and marketing expenses.

GAAP net income attributable to NETSOL for fiscal 2021 totaled $1.8 million or $0.15 per diluted share, compared with a net income of $937,000 or $0.08 per diluted share for fiscal 2020. GAAP net income attributable to NETSOL included a $597,000 loss on foreign currency exchange transactions in fiscal 2021, which was a decrease from a gain of $399,000 in the prior year period.

Non-GAAP adjusted EBITDA for fiscal 2021 totaled $5.4 million or $0.47 per diluted share, compared with $4.3 million or $0.37 per diluted share in fiscal 2020 (see note regarding “Use of Non-GAAP Financial Measures,” below for further discussion of this non-GAAP measure).

Stock Repurchase Program
On July 30, 2020, NETSOL’s Board of Directors approved a stock repurchase program that authorized potential repurchases of up to $2 million of its common stock over a six-month period. All shares permitted to be purchased under this July 2020 plan were purchased during the plan’s original date and prior to the conclusion of the extension of the plan. On May 21, 2021, the Board of Directors authorized an additional repurchase plan of up to $2 million worth of shares of common stock through November 20, 2021. Under the program, the Company may repurchase its common stock in the open market from time-to-time, in amounts, at prices, and at such times as the Company deems appropriate, subject to market conditions and federal and state laws governing such transactions. NETSOL expects to fund the repurchase with its existing cash balance and cash generated from operations.

As of June 30, 2021, the Company had repurchased 669,018 shares of its common stock at an aggregate value of $2,364,781.

Fiscal 2022 Financial Outlook
For the fiscal year ending June 30, 2022, the Company expects total revenues to increase by at least 10% and subscription and support revenues to increase by at least 20%. The Company’s guidance is based on existing contracts and recurring revenue from its current customer base, performance results tracked through August of this calendar year and other information available as of the date of this report.

Management Commentary
“In a challenging year, we emerged stronger than before, and we’re entering fiscal 2022 focused on a return to growth,” said NETSOL Co-Founder, Chairman and Chief Executive Officer Najeeb Ghauri. “As the world slowly begins to reopen and with a leaner cost structure to support increased sales and marketing activities, we are making investments to build for long term success in our key growth markets. As a result of several key hires made earlier in the year, we’ve been able to improve our lead generation processes. Our North American and European pipelines have shown continued outsized promise, and we’re now starting to see some of these pending deals come to fruition, most notably shown by our first NFS Ascent contract in the U.S. While we are continuing to pursue high-value, larger deals with incumbent OEMs, our ability to grow a healthy recurring revenue base with subscription contracts in these regions will allow us to more predictably grow our business over time while still maintaining the opportunity for upside.”

Company CFO Roger Almond added: “We improved our topline performance in each quarter of the year, all while making significant adjustments to our spending in the face of a travel-restricted sales environment. Our owner-centric emphasis on managing the business has yielded positive results in several key areas, highlighted by a 154% increase in operating income and a record cash position of nearly $34 million. Additionally, subscription and support revenues have now eclipsed a $20 million annual run rate, further validating our investment in a recurring revenue model and providing us stronger visibility into future performance as well.”

Conference Call
NETSOL Technologies management will hold a conference call today (September 28, 2021) at 4:30 p.m. Eastern time (1:30 p.m. Pacific time) to discuss these financial results. A question and answer session will follow management's presentation.

U.S. dial-in: 877-407-0789
International dial-in: 201-689-8562

Please 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 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 7:30 p.m. Eastern time through October 12, 2021.

Toll-free replay number: 844-512-2921
International replay number: 412-317-6671
Replay ID: 13722946

About 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, a division of NETSOL Technologies Inc. (Nasdaq: NTWK), provides business-to-business, white-label technology solutions for new mobility. The Otoz 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 digital retailing and 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. Otoz 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 operating results, including statements regarding the Company that are subject to certain risks and uncertainties such as the effect of disparate stay at home orders and social distancing requirements imposed internationally 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
949-574-3860
investors@netsoltech.com


NETSOL Technologies, Inc. and Subsidiaries
Schedule 1: Consolidated Balance Sheets

   As of As of
ASSETS
June 30, 2021 June 30, 2020
Current assets:   
Cash and cash equivalents$33,705,154  $20,166,830 
Accounts receivable, net of allowance of $166,231 and $435,611 4,184,096   10,131,752 
Accounts receivable - related party, net of allowance of $1,373,099 and $90,594 -   1,282,505 
Revenues in excess of billings, net of allowance of $136,976 and $188,914 14,680,131   17,198,281 
Revenues in excess of billings - related party, net of allowance of $8,163 and $0 -   8,163 
Other current assets, net of allowance of $1,243,633 and $0 3,009,393   3,108,180 
Total current assets 55,578,774   51,895,711 
Revenues in excess of billings, net - long term 957,603   1,300,289 
Convertible note receivable - related party, net of allowance of $4,250,000 and $0 -   4,250,000 
Property and equipment, net 12,091,812   11,329,631 
Right of use of assets - operating leases 1,345,869   2,360,129 
Long term investment 3,155,852   2,387,692 
Other assets 55,127   41,992 
Intangible assets, net 3,904,656   5,391,077 
Goodwill 9,516,568   9,516,568 
Total assets$86,606,261  $88,473,089 
      
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:   
Accounts payable and accrued expenses$6,696,035  $5,769,161 
Current portion of loans and obligations under finance leases 11,366,171   9,139,561 
Current portion of operating lease obligations 857,729   1,111,912 
Unearned revenue 4,556,626   4,095,472 
Total current liabilities 23,476,561   20,116,106 
Loans and obligations under finance leases; less current maturities 699,841   1,539,975 
Operating lease obligations; less current maturities 564,257   1,339,965 
Total liabilities 24,740,659   22,996,046 
Commitments and contingencies   
Stockholders' equity:   
Preferred stock, $.01 par value; 500,000 shares authorized; -   - 
Common stock, $.01 par value; 14,500,000 shares authorized;   
12,181,585 shares issued and 11,265,064 outstanding as of June 30, 2021 and   
12,122,149 shares issued and 11,874,646 outstanding as of June 30, 2020 121,816   121,222 
Additional paid-in-capital 129,018,826   128,677,754 
Treasury stock (at cost, 916,521 shares and 247,503 shares
  as of June 30, 2021 and June 30, 2020, respectively)
 (3,820,750)  (1,455,969)
Accumulated deficit (38,801,282)  (34,269,817)
Other comprehensive loss (31,868,481)  (34,085,047)
Total NetSol stockholders' equity 54,650,129   58,988,143 
Non-controlling interest 7,215,473   6,488,900 
Total stockholders' equity 61,865,602   65,477,043 
Total liabilities and stockholders' equity$86,606,261  $88,473,089 
      

NETSOL Technologies, Inc. and Subsidiaries
Schedule 2: Consolidated Statement of Operations

   For the Years
   Ended June 30,
    2021   2020 
Net Revenues:   
 License fees$6,249,924  $3,260,891 
 Subscription and support 22,173,745   20,254,917 
 Services 26,448,171   32,555,690 
 Services - related party 48,775   300,821 
  Total net revenues 54,920,615   56,372,319 
      
Cost of revenues:   
 Salaries and consultants 20,969,298   18,821,738 
 Travel 663,403   4,181,742 
 Depreciation and amortization 2,990,689   2,897,371 
 Other 3,944,197   3,508,098 
  Total cost of revenues 28,567,587   29,408,949 
      
Gross profit 26,353,028   26,963,370 
      
Operating expenses:   
 Selling and marketing 6,555,004   6,450,663 
 Depreciation and amortization 965,625   834,583 
 General and administrative 15,437,382   17,138,832 
 Research and development cost 674,168   1,468,954 
  Total operating expenses 23,632,179   25,893,032 
      
Income from operations 2,720,849   1,070,338 
      
Other income and (expenses)   
 Gain (loss) on sale of assets (191,935)  23,103 
 Interest expense (394,289)  (346,856)
 Interest income 1,017,432   1,569,536 
 Gain (loss) on foreign currency exchange transactions (597,433)  398,610 
 Share of net loss from equity investment (253,819)  (605,864)
 Other income 987,444   224,224 
  Total other income (expenses) 567,400   1,262,753 
      
Net income before income taxes 3,288,249   2,333,091 
Income tax provision (1,026,617)  (1,141,068)
Net income  2,261,632   1,192,023 
 Non-controlling interest (483,375)  (254,942)
Net income attributable to NetSol$1,778,257  $937,081 
      
      
      
Net income per share:   
 Net income per common share   
  Basic$0.15  $0.08 
  Diluted$0.15  $0.08 
      
Weighted average number of shares outstanding   
 Basic 11,499,983   11,734,648 
 Diluted 11,499,983   11,784,414 
      

NETSOL Technologies, Inc. and Subsidiaries
Schedule 3: Consolidated Statement of Cash Flows

       
    For the Years
    Ended June 30,
     2021   2020 
Cash flows from operating activities:   
 Net income$2,261,632  $1,192,023 
 Adjustments to reconcile net income   
  to net cash provided by operating activities:   
 Depreciation and amortization 3,956,314   3,731,954 
 Provision for bad debts (332,325)  184,944 
 Share of net loss from investment under equity method 253,819   605,864 
 (Gain) loss on sale of assets 191,935   (23,103)
 Gain on forgiveness of loan (469,721)  - 
 Stock based compensation 342,153   808,616 
 Changes in operating assets and liabilities:   
  Accounts receivable 6,861,454   2,035,843 
  Accounts receivable - related party -   1,957,864 
  Revenues in excess of billing 2,839,709   (3,252,704)
  Revenues in excess of billing - related party -   105,441 
  Other current assets (857,708)  (132,175)
  Accounts payable and accrued expenses 474,098   (1,399,828)
  Unearned revenue 204,563   (1,842,313)
 Net cash provided by operating activities 15,725,923   3,972,426 
       
Cash flows from investing activities:   
 Purchases of property and equipment (2,551,283)  (1,377,145)
 Sales of property and equipment 188,233   106,180 
 Convertible note receivable - related party -   (600,000)
 Investment in associates (155,500)  (94,500)
 Purchase of subsidiary shares -   (89,425)
 Net cash used in investing activities (2,518,550)  (2,054,890)
       
Cash flows from financing activities:   
 Proceeds from exercise of subsidiary options -   11,621 
 Purchase of treasury stock (2,364,781)  - 
 Dividend paid by subsidiary to non-controlling interest -   (1,920,618)
 Proceeds from bank loans 1,898,013   4,221,203 
 Payments on finance lease obligations and loans - net (698,797)  (611,913)
 Net cash provided by (used in) financing activities (1,165,565)  1,700,293 
Effect of exchange rate changes 1,496,516   (817,363)
Net increase in cash and cash equivalents 13,538,324   2,800,466 
Cash and cash equivalents at beginning of the period 20,166,830   17,366,364 
Cash and cash equivalents at end of period$33,705,154  $20,166,830 
       

NETSOL Technologies, Inc. and Subsidiaries
Schedule 4: Reconciliation to GAAP

 For the Year Ended For the Year Ended
 June 30, 2021 June 30, 2020
    
Net Income (loss) attributable to NetSol$1,778,257  $937,081 
Non-controlling interest 483,375   254,942 
Income taxes 1,026,617   1,141,068 
Depreciation and amortization 3,956,314   3,731,954 
Interest expense 394,289   346,856 
Interest (income) (1,017,432)  (1,569,536)
EBITDA$6,621,420  $4,842,365 
Add back:   
Non-cash stock-based compensation 342,153   808,616 
Adjusted EBITDA, gross$6,963,573  $5,650,981 
Less non-controlling interest (a) (1,588,701)  (1,330,352)
Adjusted EBITDA, net$5,374,872  $4,320,629 
    
    
Weighted Average number of shares outstanding   
Basic 11,499,983   11,734,648 
Diluted 11,499,983   11,784,414 
    
Basic adjusted EBITDA$0.47  $0.37 
Diluted adjusted EBITDA$0.47  $0.37 
    
    
(a)The reconciliation of adjusted EBITDA of non-controlling interest   
to net income attributable to non-controlling interest is as follows   
    
Net Income (loss) attributable to non-controlling interest$483,375  $254,942 
Income Taxes 147,688   223,675 
Depreciation and amortization 1,115,734   1,060,605 
Interest expense 121,740   100,373 
Interest (income) (319,674)  (391,644)
EBITDA$1,548,863  $1,247,951 
Add back:   
Non-cash stock-based compensation 39,838   82,401 
Adjusted EBITDA of non-controlling interest$1,588,701  $1,330,352 
    

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