EX-99.1 2 v113956_ex99-1.htm
EXHIBIT 99.1
NEWS RELEASE DATED MAY 13, 2008


NEWS RELEASE

NetSol Technologies Reports Third Quarter
Fiscal Year 2008 Financial Results
 
Revenues Increased 19% Year-Over-Year to $9.1 million; Gross Margin Improved to 56%

Net Income Increased to $2.3 Million or $0.09 Per Diluted Share; EBITDA Increased to $3.2 Million


CALABASAS, CA - May 13, 2008 -- NetSol Technologies Inc. (“NetSol”) (NasdaqCM: NTWK), a worldwide provider of global business services and enterprise application solutions, today announced financial results for the third quarter of fiscal year 2008, ending March 31, 2008.

Third Quarter Fiscal Year 2008 Consolidated Financial Highlights
 
·  
Revenues increased 19% to $9.1 million
 
-  
Services increased 23% to $4.6 million
 
-  
License fees increased 17% to $3.0 million
 
-  
Maintenance fees increased 11% to $1.5 million
 
·  
Gross margin increased to 56% compared to 48% in the same period a year ago
 
·  
Operating income increased 245% year-over-year to $1.8 million
 
·  
GAAP net income increased to $2.3 million, or $0.09 per diluted share, versus a loss of $229,000, or a loss of ($0.01) per diluted share, in the same period a year ago
 
·  
EBITDA totaled $3.2 million, or $0.13 per diluted share, versus EBITDA of $676,000, or $0.04 per diluted share, in the same period a year ago
 
·  
Company reiterated guidance for fiscal year 2008: Annual revenue growth between 25% to 30% and diluted earnings per share between $0.28 and $0.32

 
Najeeb Ghauri, chairman and chief executive officer, commented, “Our third quarter results provide an excellent start to the second half of fiscal 2008, which is historically NetSol’s stronger half-year period. With double-digit year-over-year growth in services, licenses, and maintenance fees translating into a significant rise in profitability, we remain on track to achieve our full year top and bottom line financial objectives. Complementing our significant financial progress, we recently launched our new BestShoring™ strategic initiative that represents our best practices approach to delivering our customers the BestSolution™. Unlike traditional outsourcing offshore vendors, BestShoring™ reflects our ability to draw upon NetSol’s global delivery infrastructure, expertise, and workforce to construct the best possible solution at the best possible price.

“Additionally, during the quarter we made key strategic investments in our North American operations to strengthen and expand our presence in the region, a critical market for NetSol’s future growth. To support this effort we made several key North American management appointments, including Greg Brinton as head of sales and Morgan Rees as senior vice president of marketing, working under the leadership of Mitch Van Wye, our chief operating officer in the region. We see these additions to NetSol’s management, as well as our investments in infrastructure, as critical to supporting our long-term growth throughout the Americas, as well as supporting our new globally-focused BestShoring™ customer solutions. We are offering BestShoring™ enterprise solutions and global business services to both new clients in various vertical markets and our 35 plus existing clients in North America.

“As a global enterprise, it is NetSol’s goal to progress with our operational objectives for each division while sustaining profitability and delivering excellent financial results. NetSol’s double-digit revenue growth and strong net income performance reflect broad-based success towards our objectives of improving margins, effectively leveraging our worldwide infrastructure, and improving operating efficiencies while expanding each of our division’s revenue streams,” concluded Mr. Ghauri.

NetSol reported consolidated revenues of $9.1 million for the third quarter of fiscal year 2008, a 19% increase compared to the $7.6 million in revenues reported for the same period a year ago. Consolidated gross profit for the third quarter was approximately $5.1 million, or 56% of revenues.

GAAP (Generally Accepted Accounting Principles) net income for the third quarter of fiscal year 2008 was approximately $2.3 million, or $0.09 per diluted share, which compares to GAAP net loss of $229,000, or a loss of $0.01 per diluted share, in the same period of fiscal year 2007. NetSol reported EBITDA of $3.2 million, or $0.13 per diluted share, for the third quarter of fiscal year 2008 compared to EBITDA of $0.7 million, or $0.04 per diluted share, in the same period a year ago.

EBITDA is defined as earnings before interest, taxes, depreciation and amortization. The Company uses EBITDA as a measure of the Company's operating trends. Investors are cautioned that EBITDA is not a measure of liquidity or of financial performance under Generally Accepted Accounting Principles (GAAP). The EBITDA numbers presented may not be comparable to similarly-titled measures reported by other companies. EBITDA, while providing useful information, should not be considered in isolation or as an alternative to net income or cash flows as determined under GAAP. Consistent with the SEC Regulation G, the non-GAAP measures in this press release have been reconciled to the nearest GAAP measure, and this reconciliation is located under the financial table heading "Reconciliation to GAAP."

NetSol ended the third quarter of fiscal year 2008 with approximately $4.8 million dollars in cash and cash equivalents.

Fiscal Third Quarter 2008 Business Highlights
 
·  
Ranked in Software Magazine's Software 500 list of the world's largest software and service providers, joining the Software 500 list for the first time this year with a rank of 340 worldwide.
 
·  
Had NetSol’s Lahore-based IT development campus, "NetSol Village", achieve ISO 27001 certification from the International Organization for Standardization (ISO), the world's largest developer and publisher of International Standards.
 
·  
Secured a contract valued at approximately $1.5 million with one of the largest leasing companies in the Middle East.
 
·  
Sold a new LeaseSoft license in China to a major European auto manufacturer, maintaining robust momentum in the Chinese market.
 
·  
Awarded a contract for the implementation of a Land Record Management Information System (LRMIS) for the Islamabad Capital Territory, Pakistan, the second LRMIS project NetSol has been awarded.
 
·  
Launched the new LeasePak "Asset Focus Module," giving vehicle finance and commercial equipment finance product managers a robust means for tracking the revenue performance of financed assets.
 
·  
Successfully implemented the LeaseSoft product suite for Dongfeng-Nissan Automotive Finance (DNAF) China.
 
·  
Had Venture Finance, a subsidiary of ABN Amro, go live with LeaseSoft for its Block Discounting portfolio.
 
First Nine Months of Fiscal Year 2008 Consolidated Financial Highlights
 
·  
Revenues for the first nine months increased 26% to $26.1 million
 
-  
Service fees increased 40% to $13.8 million
 
-  
License fees increased 13% to $7.8 million
 
-  
Maintenance fees increased nearly 14% to $4.6 million
 
·  
Gross margin improved to 58%, compared to 50% for the same nine months period a year ago

 
NetSol reported consolidated revenues of $26.1 million for the first nine months of fiscal year 2008, a 26% increase compared to the $20.7 million in revenues reported for the same period in fiscal year 2007. Consolidated gross profit for the first nine months was $15.1 million, or 58% of revenues.

GAAP net income for the first nine months of fiscal year 2008 was approximately $5.2 million, or $0.21 per diluted share, compared to a net loss of $6.2 million, or $0.35 per diluted share, in the same period of fiscal year 2007. EBITDA increased to $8.0 million, or $0.33 per diluted share, as compared to an EBITDA loss of $3.4 million, or ($0.18) per diluted share, in the same period a year ago.
 

Conference Call & Webcast Information
NetSol will host a conference call at 11:00 a.m. ET (8:00 a.m. PT) to review the results. Najeeb Ghauri, chairman and chief executive officer, and Tina Gilger, chief financial officer, will host the call, which will be webcast live. The webcast and a supporting slide presentation will be made available online at http://www.netsoltek.com/investors/investor_relations.htm. Telephone access to the conference call is available in North America by dialing +1 (877) 407-0782 or internationally by dialing +1 (201) 689-8567.

An audio replay of the conference call will be available approximately one hour following the conclusion of the call and will be available for 30 days. To access the replay in North America dial +1 (877) 660-6853, or when calling internationally dial +1 (201) 612-7415, using replay account code # 286 and conference ID # 283654. An archived replay of the conference webcast will also be available on the NetSol Technologies web site at http://www.netsoltek.com/investors/investor_relations.htm.

About NetSol Technologies
NetSol Technologies (NasdaqCM: NTWK) is a worldwide provider of global business services and enterprise application solutions. NetSol uses its BestShoring™ practices and highly-experienced resources in analysis, development, quality assurance, and implementation to deliver high-quality, cost-effective solutions. Organized into specialized practices, these product and services offerings include portfolio management systems for the financial services industry, consulting, custom development, systems integration, and technical services for the global Healthcare, Insurance, Real Estate and Technology markets. NetSol's commitment to quality is demonstrated by its achievement of the ISO 9001, ISO 279001, and SEI (Software Engineering Institute) CMMI (Capability Maturity Model) Level 5 assessments, a distinction shared by fewer than 100 companies worldwide. NetSol Technologies' clients include Fortune 50 manufacturers, global automakers, financial institutions, technology providers, and governmental agencies. Headquartered in Calabasas, California, NetSol Technologies has operations and offices in London, San Francisco, Sydney, Beijing, Bangkok and Lahore. To join the NetSol Technologies Inc. email distribution list please visit: http://www.b2i.us/irpass.asp?BzID=897&to=ea&s=0.

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 "believe," "expect," "anticipate," "intend," variations of such words, and similar expressions, identify forward looking statements, 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.

# # #


Contacts:

NetSol Technologies, Inc.
Investor Relations
Tina Gilger
Christopher Chu
Chief Financial Officer
Grayling Global
Tel: +1 818-222-9195, x112
Tel: +1-646-284-9426
 
Email: cchu@hfgcg.comcchu@hfgcg.com
 
 
Financial Tables Follow


NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)

   
For the Three Months
  
For the Nine Months
  
   
Ended March 31,
  
Ended March 31,
  
   
2008
 
2007
 
2008
 
2007
 
Net Revenues:
                  
Licence fees 
  
$
2,998,867
  
$
2,554,289
  
$
7,769,226
  
$
6,851,496
  
Maintenance fees 
    
1,482,654
   
1,335,893
   
4,556,450
   
3,990,096
 
Services 
    
4,585,292
   
3,725,784
   
13,800,844
   
9,864,055
 
 Total revenues
    
9,066,813
   
7,615,966
   
26,126,520
   
20,705,647
 
Cost of revenues
                          
Salaries and consultants  
    
2,620,722
   
2,234,809
   
7,342,743
   
6,608,606
 
Travel  
    
394,841
   
447,288
   
972,998
   
1,195,315
 
Repairs and maintenance  
    
99,262
   
133,961
   
332,448
   
313,514
 
Insurance  
    
30,005
   
51,294
   
153,760
   
153,595
 
Depreciation and amortization  
    
316,652
   
279,405
   
847,288
   
693,703
 
Other  
    
522,013
   
790,927
   
1,341,513
   
1,479,478
 
 Total cost of sales
    
3,983,495
   
3,937,684
   
10,990,750
   
10,444,211
 
Gross profit
    
5,083,318
   
3,678,282
   
15,135,770
   
10,261,436
 
Operating expenses:
                          
Selling and marketing 
    
898,686
   
825,586
   
2,817,908
   
2,105,920
 
Depreciation and amortization 
    
477,630
   
483,801
   
1,422,181
   
1,389,704
 
Bad debt expense 
    
-
   
(231
)
  
3,277
   
117,267
 
Salaries and wages 
    
1,034,784
   
915,481
   
2,758,434
   
2,914,707
 
Professional services, including non-cash compensation 
    
114,436
   
254,359
   
413,437
   
774,203
 
General and adminstrative 
    
792,499
   
687,881
   
2,287,693
   
2,202,182
 
 Total operating expenses
    
3,318,035
   
3,166,877
   
9,702,930
   
9,503,983
 
Income from operations
    
1,765,283
   
511,405
   
5,432,840
   
757,453
 
Other income and (expenses):
                          
Gain (loss) on sale of assets 
    
(891
)
  
(6,729
)
  
(33,044
)
  
(19,067
)
Beneficial conversion feature 
    
-
   
-
   
-
   
(2,208,334
)
Amortization of debt discount and capitalized cost of debt 
    
-
   
-
   
-
   
(2,803,691
)
Liquidation damages 
    
-
   
(47,057
)
  
-
   
(180,890
)
Fair market value of warrants issued 
    
-
   
(33,987
)
  
-
   
(33,987
)
Interest expense 
    
(121,651
)
  
(83,819
)
  
(544,597
)
  
(543,342
)
Interest income 
    
84,363
   
46,867
   
159,801
   
265,916
 
Gain on sale of subsidiary shares 
    
1,240,808
   
-
   
1,240,808
   
-
 
Other income and (expenses) 
    
447,889
   
10,081
   
709,113
   
88,935
 
 Total other income (expenses)
    
1,650,518
   
(114,644
)
  
1,532,081
   
(5,434,460
)
Net income (loss) before minority interest in subsidiary
    
3,415,801
   
396,761
   
6,964,921
   
(4,677,007
)
Minority interest in subsidiary
    
(1,098,703
)
  
(568,237
)
  
(1,756,509
)
  
(1,374,081
)
Income taxes
    
(15,314
)
  
(57,655
)
  
(46,272
)
  
(126,620
)
Net income (loss)
    
2,301,784
   
(229,131
)
  
5,162,140
   
(6,177,708
)
Dividend required for preferred stockholders
    
(33,508
)
  
(94,088
)
  
(145,033
)
  
(159,686
)
Subsidiary dividend (minority holders portion)
    
-
   
-
   
(817,173
)
  
-
 
Bonus stock distribution (minority holders portion)
    
-
   
-
   
(545,359
)
  
-
 
Net income (loss) applicable to common shareholders
    
2,268,276
   
(323,219
)
  
3,654,575
   
(6,337,394
)
Other comprehensive gain:
                          
Translation adjustment 
    
(910,838
)
  
81,564
   
(1,401,831
)
  
203,343
 
Comprehensive income (loss)
  
$
1,357,438
  
$
(241,655
)
$
2,252,744
  
$
(6,134,051
)
Net income (loss) per share:
                          
Basic 
  
$
0.09
  
$
(0.02
)
$
0.21
  
$
(0.36
)
Diluted 
  
$
0.09
  
$
(0.01
)
$
0.21
  
$
(0.35
)
Weighted average number of shares outstanding
                          
Basic 
    
25,205,995
   
18,311,290
   
23,686,204
   
17,680,115
 
Diluted 
    
25,665,924
   
18,311,290
   
24,146,133
   
17,680,115
 


NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET - AS OF MARCH 31, 2008
(UNAUDITED)
 
ASSETS
          
Current assets:
          
Cash and cash equivalents
  
$
4,848,513
        
Accounts receivable, net of allowance for doubtful accounts of $168,443
    
10,227,903
       
Revenues in excess of billings
    
12,006,231
       
Other current assets
    
2,933,047
       
 Total current assets
        
30,015,694
 
Property and equipment, net of accumulated depreciation
          
8,153,405
 
Other assets, long-term
          
800,435
 
Intangibles:
              
Product licenses, renewals, enhancements, copyrights,
              
 trademarks, and tradenames, net
    
9,137,381
       
Customer lists, net
    
1,906,422
       
Goodwill
    
7,786,032
       
 Total intangibles
          
18,829,835
 
 Total assets
        
$
57,799,369
  
               
LIABILITIES AND STOCKHOLDERS' EQUITY
              
Current liabilities:
              
Accounts payable and accrued expenses
  
$
3,323,046
        
Current portion of loans and obligations under capitalized leases
    
605,551
       
Other payables - acquisitions
    
83,399
       
Unearned revenues
    
3,616,555
       
Due to officers
    
184,173
       
Dividend to preferred stockholders payable
    
33,508
       
Loans payable, bank
    
1,977,689
       
 Total current liabilities
        
9,823,921
 
Obligations under capitalized leases, less current maturities
          
270,927
 
Long term loans; less current maturities
          
552,166
 
 Total liabilities
          
10,647,014
 
Minority interest
          
5,834,732
 
Commitments and contingencies
              
               
Stockholders' equity:
              
Preferred stock, 5,000,000 shares authorized;
             
 1,920 issued and outstanding
    
1,920,000
       
Common stock, $.001 par value; 45,000,000 shares authorized;
              
 25,247,568 issued and outstanding
    
25,248
       
Additional paid-in-capital
    
75,299,379
       
Treasury stock
    
(35,681
)
      
Accumulated deficit
   
(33,477,767
)
      
Stock subscription receivable
    
(600,907
)
      
Common stock to be issued
    
64,612
       
Other comprehensive loss
    
(1,877,261
)
      
 Total stockholders' equity
        
41,317,623
 
 Total liabilities and stockholders' equity
        
$
57,799,369
  


NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(UNAUDITED)

   
For the Nine Months
 
   
Ended March 31,
 
   
2008
 
2007
 
Cash flows from operating activities:
         
Net income (loss) applicable to common shareholders
 
$
5,162,140
  
$
(6,177,708
)
Adjustments to reconcile net income (loss) applicable to common
             
shareholders to net cash provided by (used in) operating activities:
             
Depreciation and amortization
   
2,269,469
   
2,083,407
 
Bad debt expense
   
3,277
   
117,267
 
Loss on sale of assets
   
33,044
   
19,067
 
Gain on sale of subsidiary shares in Pakistan
   
(1,240,808
)
  
-
 
Minority interest in subsidiary
   
1,756,509
   
1,374,081
 
Stock issued for services
   
48,163
   
88,099
 
Stock issued for convertible note payable interest
   
-
   
311,868
 
Fair market value of warrants and stock options granted
   
24,320
   
33,987
 
Beneficial conversion feature
   
-
   
2,208,334
 
Amortization of debt discount and capitalized cost of debt
   
-
   
2,803,691
 
Changes in operating assets and liabilities:
             
Decrease/(increase) in accounts receivable
   
(2,087,736
)
  
(1,913,135
)
Increase in other current assets
   
(4,885,181
)
  
(2,793,410
)
(Decrease)/increase in accounts payable and accrued expenses
   
(510,968
)
  
1,716,251
 
Net cash provided by (used in) operating activities
   
572,229
   
(128,201
)
Cash flows from investing activities:
             
Purchases of property and equipment
   
(1,985,651
)
  
(1,282,427
)
Sales of property and equipment
   
120,436
   
208,419
 
Net proceeds of certificates of deposit
   
-
   
1,737,481
 
Payment for acquisition
   
(879,007
)
  
(4,027,753
)
Increase in intangible assets
   
(2,219,673
)
  
(2,001,502
)
Net cash used in investing activities
   
(4,963,895
)
  
(5,365,782
)
Cash flows from financing activities:
             
Proceeds from sale of common stock
   
1,500,000
   
30,093
 
Proceeds from the exercise of stock options
   
2,800,917
   
704,250
 
Proceeds from sale of subsidiary stock
   
1,765,615
   
-
 
Finance costs incurred for sale of common stock
   
(10,000
)
  
-
 
Purchase of treasury stock
   
(25,486
)
  
-
 
Reduction in restricted cash
   
-
   
4,533,555
 
Proceeds from loans from officers
   
-
   
165,000
 
Proceeds from bank loans
   
3,862,759
   
-
 
Payments on bank loans
   
(1,245,846
)
  
-
 
Capital lease obligations & loans (net)
   
(3,462,334
)
  
874,128
 
Net cash provided by financing activities
   
5,185,625
   
6,307,026
 
Effect of exchange rate changes in cash
   
44,390
   
76,159
 
Net increase in cash and cash equivalents
   
838,349
   
889,202
 
Cash and cash equivalents, beginning of period
   
4,010,164
   
2,493,768
 
Cash and cash equivalents, end of period
 
$
4,848,513
  
$
3,382,970
  

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
RECONCILIATION TO GAAP
(UNAUDITED)

   
Three Months
 
Nine Months
 
   
Ended
 
Ended
 
   
March 31, 2008
  
March 31, 2008
  
           
Net income per GAAP (applicable to common shareholders)
 
$
2,301,785
  
$
5,162,140
  
Income taxes
   
15,314
   
46,272
 
Depreciaiton and amortization
   
794,282
   
2,285,985
 
Interest expense
   
121,651
   
544,597
 
 EBITDA income
 
$
3,233,032
  
$
8,038,994
  
               
               
Weighted average number of shares outstanding
              
Basic
    
25,205,995
   
23,686,204
 
Diluted
   
25,665,924
   
24,146,133
 
                       
Basic EBITDA EPS
 
$
0.13
  
$
0.34
  
Diluted DBITDA EPS
 
$
0.13
  
$
0.33