NETSOL Technologies Announces Fiscal 2017 First Quarter Financial Results
| ● | Total Net Revenues Increased 13% Year-Over-Year to $15.0 million for the First Quarter | |
| ● | GAAP Diluted EPS of $(0.17) for the First Quarter | |
| ● | NETSOL Reiterates Fiscal Year 2017 Guidance |
- Conference Call Scheduled for Today at 9 a.m. ET (6 a.m. PT) -
CALABASAS, Calif. – November 14, 2016 – NETSOL Technologies, Inc. (Nasdaq: NTWK), a global business services and enterprise application solutions provider to the Asset Finance and Leasing industry, today announced financial results for the fiscal 2017 first quarter ended September 30, 2016.
Fiscal 2017 First Quarter Financial Results
Total net revenues for the first quarter of fiscal 2017 were $15.0 million, an increase of 13% from the prior year period.
| ● | Total license fees were $3.7 million, representing an increase of 214% from $1.2 million in the prior year period. | |
| ● | Total maintenance fees were $3.5 million, representing an increase of 11% from $3.2 million in the prior year period. | |
| ● | Total services revenues were $7.7 million, representing a decrease of 14% from $8.9 million in the prior year period. |
Gross profit for the first quarter of fiscal 2017 was $6.1 million, or 41% of net revenues, an increase of 16% from $5.2 million, or 40% of net revenues, in the first quarter of fiscal 2016.
GAAP net loss attributable to NETSOL for the first quarter of fiscal 2017 was $1.8 million, or $(0.17) per diluted share, compared with a net loss of $0.4 million, or $(0.04) per diluted share, in the first quarter of fiscal 2016.
Adjusted EBITDA 1 for the first quarter of fiscal 2017 was $180,000, representing Adjusted EBITDA per diluted share of $0.02, compared with Adjusted EBITDA of $659,000, or Adjusted EBITDA per diluted share of $0.06, in the first quarter of fiscal 2016.
At September 30, 2016, cash and cash equivalents were $11.2 million, compared with $11.6 million at June 30, 2016 and $10.1 million at September 30, 2015.
Management Commentary
“It was a solid start to the year, as we delivered strong growth in license and maintenance fees in what is typically our slowest quarter of the fiscal year” said Najeeb Ghauri, CEO of NETSOL. “Demand for our solutions remains strong, and our flagship NFS Ascent product continues to gain momentum across all our markets. The strategic investments we are making to capitalize on the significant market opportunity in the United States and Europe are gaining traction, and will enable us to accelerate our growth in these markets over the long-term.”
Fiscal 2017 Financial Outlook
The Company’s financial outlook for the fiscal year ending June 30, 2017 is as follows:
| ● | Total net revenues of $73 to $75 million for fiscal 2017. | |
| ● | Non-GAAP Adjusted EBITDA, net, of $13 to $14 million for fiscal 2017. |
Fiscal 2017 First Quarter Conference Call
| When: | Monday November 14, 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 replay will be available one hour after the end of the conference call and can be accessed by dialing 1-877-344-7529 (domestic) or 1-412-317-0088 (international); the replay access code is 10094841. The replay will be available through Monday, November 21, 2016.
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.
1 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. Beginning with the fourth quarter of fiscal 2016, NetSol has revised its calculation of Adjusted EBITDA to exclude the portion of Adjusted EBITDA that is attributable to its subsidiaries that have a minority interest.
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 1,500+ professionals placed in eight strategically located support and delivery centers throughout the world. NFSTM, LeasePakTM, LeaseSoft or NFS AscentTM – help companies transform their Finance and Leasing operations, providing a fully automated asset-based finance solution covering the complete leasing and finance lifecycle.
Investors can receive news releases and invitations to special events by accessing our online signup form at http://ir.netsoltech.com/email-alerts.
Forward-Looking Statements
Certain statements in this press release are forward-looking in nature, including, but not limited to, expected net revenue and adjusted EPS amounts for the full fiscal year and the growing market need for NFS Ascent, and accordingly, 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.
Investor Contact
ICR
William Maina
(646) 277-1236
investors@netsoltech.com
NETSOL Technologies, Inc. and Subsidiaries
Schedule 1: Consolidated Balance Sheets
| As of | As of | |||||||
| September 30, 2016 | June 30, 2016 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 11,156,437 | $ | 11,557,527 | ||||
| Accounts receivable, net of allowance of $500,853 and $492,498 | 7,142,255 | 9,691,229 | ||||||
| Accounts receivable, net - related party | 5,384,573 | 5,691,178 | ||||||
| Revenues in excess of billings | 13,358,858 | 10,493,096 | ||||||
| Revenues in excess of billings - related party | 682,049 | 804,168 | ||||||
| Other current assets | 3,192,425 | 2,214,628 | ||||||
| Total current assets | 40,916,597 | 40,451,826 | ||||||
| Restricted cash | 90,000 | 90,000 | ||||||
| Property and equipment, net | 22,612,752 | 22,774,435 | ||||||
| Other assets | 1,604,731 | 842,553 | ||||||
| Intangible assets, net | 19,326,259 | 19,674,033 | ||||||
| Goodwill | 9,516,568 | 9,516,568 | ||||||
| Total assets | $ | 94,066,907 | $ | 93,349,415 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 6,389,128 | $ | 5,962,770 | ||||
| Current portion of loans and obligations under capitalized leases | 4,408,173 | 4,440,084 | ||||||
| Unearned revenues | 4,419,692 | 4,739,214 | ||||||
| Common stock to be issued | 88,324 | 88,324 | ||||||
| Total current liabilities | 15,305,317 | 15,230,392 | ||||||
| Long term loans and obligations under capitalized leases; less current maturities | 539,859 | 477,692 | ||||||
| Total liabilities | 15,845,176 | 15,708,084 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, $.01 par value; 500,000 shares authorized; | - | - | ||||||
| Common stock, $.01 par value; 14,500,000 shares authorized; 10,882,281 shares issued and 10,855,002 outstanding as of September 30, 2016 and 10,713,372 shares issued and 10,686,093 outstanding as of June 30, 2016 | 108,823 | 107,134 | ||||||
| Additional paid-in-capital | 122,367,231 | 121,448,946 | ||||||
| Treasury stock (27,279 shares) | (415,425 | ) | (415,425 | ) | ||||
| Accumulated deficit | (39,089,079 | ) | (37,323,360 | ) | ||||
| Stock subscription receivable | (602,811 | ) | (783,172 | ) | ||||
| Other comprehensive loss | (17,960,133 | ) | (18,730,494 | ) | ||||
| Total NetSol stockholders’ equity | 64,408,606 | 64,303,629 | ||||||
| Non-controlling interest | 13,813,125 | 13,337,702 | ||||||
| Total stockholders’ equity | 78,221,731 | 77,641,331 | ||||||
| Total liabilities and stockholders’ equity | $ | 94,066,907 | $ | 93,349,415 | ||||
NETSOL Technologies, Inc. and Subsidiaries
Schedule 2: Consolidated Statement of Operations
| For the Three Months | ||||||||
| Ended September 30, | ||||||||
| 2016 | 2015 | |||||||
| Net Revenues: | ||||||||
| License fees | $ | 3,499,860 | $ | 1,193,354 | ||||
| Maintenance fees | 3,402,821 | 3,012,238 | ||||||
| Services | 5,806,717 | 6,753,873 | ||||||
| License fees - related party | 246,957 | - | ||||||
| Maintenance fees - related party | 130,631 | 158,231 | ||||||
| Services - related party | 1,914,572 | 2,187,408 | ||||||
| Total net revenues | 15,001,558 | 13,305,104 | ||||||
| Cost of revenues: | ||||||||
| Salaries and consultants | 5,893,349 | 5,161,249 | ||||||
| Travel | 711,895 | 481,453 | ||||||
| Depreciation and amortization | 1,330,872 | 1,474,235 | ||||||
| Other | 972,338 | 938,797 | ||||||
| Total cost of revenues | 8,908,454 | 8,055,734 | ||||||
| Gross profit | 6,093,104 | 5,249,370 | ||||||
| Operating expenses: | ||||||||
| Selling and marketing | 2,411,136 | 1,698,404 | ||||||
| Depreciation and amortization | 269,097 | 291,172 | ||||||
| General and administrative | 4,552,098 | 3,204,688 | ||||||
| Research and development cost | 92,932 | 112,070 | ||||||
| Total operating expenses | 7,325,263 | 5,306,334 | ||||||
| Loss from operations | (1,232,159 | ) | (56,964 | ) | ||||
| Other income and (expenses) | ||||||||
| Loss on sale of assets | (2,403 | ) | (11,873 | ) | ||||
| Interest expense | (54,475 | ) | (68,173 | ) | ||||
| Interest income | 30,440 | 52,112 | ||||||
| Loss on foreign currency exchange transactions | (414,896 | ) | (113,719 | ) | ||||
| Other income | 21,560 | 54,314 | ||||||
| Total other income (expenses) | (419,774 | ) | (87,339 | ) | ||||
| Net loss before income taxes | (1,651,933 | ) | (144,303 | ) | ||||
| Income tax provision | (39,875 | ) | (75,223 | ) | ||||
| Net loss | (1,691,808 | ) | (219,526 | ) | ||||
| Non-controlling interest | (73,911 | ) | (191,502 | ) | ||||
| Net loss attributable to NetSol | $ | (1,765,719 | ) | $ | (411,028 | ) | ||
| Net loss per share: | ||||||||
| Net loss per common share | ||||||||
| Basic | $ | (0.17 | ) | $ | (0.04 | ) | ||
| Diluted | $ | (0.17 | ) | $ | (0.04 | ) | ||
| Weighted average number of shares outstanding | ||||||||
| Basic | 10,697,425 | 10,281,335 | ||||||
| Diluted | 10,697,425 | 10,281,335 | ||||||
NETSOL Technologies, Inc. and Subsidiaries
Schedule 3: Consolidated Statement of Cash Flows
| For the Three Months | ||||||||
| Ended September 30, | ||||||||
| 2016 | 2015 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (1,691,808 | ) | $ | (219,526 | ) | ||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 1,599,969 | 1,765,407 | ||||||
| Provision for bad debts | - | 36,780 | ||||||
| Loss on sale of assets | 2,403 | 11,873 | ||||||
| Stock issued for services | 865,456 | 77,750 | ||||||
| Fair market value of warrants and stock options granted | 21,804 | - | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 2,336,894 | (1,268,570 | ) | |||||
| Accounts receivable - related party | 121,800 | (975,266 | ) | |||||
| Revenues in excess of billing | (2,746,917 | ) | (773,583 | ) | ||||
| Revenues in excess of billing - related party | 93,208 | (138,926 | ) | |||||
| Other current assets | 306,339 | (322,533 | ) | |||||
| Accounts payable and accrued expenses | (780,569 | ) | (833,638 | ) | ||||
| Unearned revenue | (346,108 | ) | (538,259 | ) | ||||
| Net cash used in operating activities | (217,529 | ) | (3,178,491 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | (554,873 | ) | (625,794 | ) | ||||
| Sales of property and equipment | 151,818 | 180,258 | ||||||
| Investment | (555,555 | ) | - | |||||
| Net cash used in investing activities | (958,610 | ) | (445,536 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from sale of common stock | - | 64,931 | ||||||
| Proceeds from the exercise of stock options and warrants | 276,861 | - | ||||||
| Proceeds from exercise of subsidiary options | 14,013 | - | ||||||
| Proceeds from bank loans | - | 437,070 | ||||||
| Payments on capital lease obligations and loans - net | (49,117 | ) | (174,385 | ) | ||||
| Net cash provided by financing activities | 241,757 | 327,616 | ||||||
| Effect of exchange rate changes | 533,292 | (797,222 | ) | |||||
| Net decrease in cash and cash equivalents | (401,090 | ) | (4,093,633 | ) | ||||
| Cash and cash equivalents, beginning of the period | 11,557,527 | 14,168,957 | ||||||
| Cash and cash equivalents, end of period | $ | 11,156,437 | $ | 10,075,324 | ||||
NETSOL Technologies, Inc. and Subsidiaries
Schedule 4: Reconciliation to GAAP
| Three Months | Three Months | |||||||
| Ended | Ended | |||||||
| September 30, 2016 | September 30, 2015 | |||||||
| Net Income (loss) before preferred dividend, per GAAP | $ | (1,765,719 | ) | $ | (411,028 | ) | ||
| Non-controlling interest | 73,911 | 191,502 | ||||||
| Income taxes | 39,875 | 75,223 | ||||||
| Depreciation and amortization | 1,599,969 | 1,765,407 | ||||||
| Interest expense | 54,475 | 68,173 | ||||||
| Interest (income) | (30,440 | ) | (52,112 | ) | ||||
| EBITDA | $ | (27,929 | ) | $ | 1,637,165 | |||
| Add back: | ||||||||
| Non-cash stock-based compensation | 887,260 | 77,750 | ||||||
| Adjusted EBITDA, gross | $ | 859,331 | $ | 1,714,915 | ||||
| Less non-controlling interest (a) | (679,817 | ) | (1,055,531 | ) | ||||
| Adjusted EBITDA, net | $ | 179,514 | $ | 659,384 | ||||
| Weighted Average number of shares outstanding | ||||||||
| Basic | 10,697,425 | 10,281,335 | ||||||
| Diluted | 10,861,290 | 10,392,669 | ||||||
| Basic adjusted EBITDA | $ | 0.02 | $ | 0.06 | ||||
| Diluted adjusted EBITDA | $ | 0.02 | $ | 0.06 | ||||
| (a)The reconciliation of adjusted EBITDA of non-controlling interest to net income attributable to non-controlling interest is as follows | ||||||||
| Net Income attributable to non-controlling interest | $ | 73,911 | $ | 191,502 | ||||
| Income Taxes | 7,648 | 13,874 | ||||||
| Depreciation and amortization | 525,926 | 825,866 | ||||||
| Interest expense | 17,691 | 18,342 | ||||||
| Interest (income) | (9,557 | ) | (16,450 | ) | ||||
| EBITDA | $ | 615,619 | $ | 1,033,134 | ||||
| Add back: | ||||||||
| Non-cash stock-based compensation | 64,198 | 22,397 | ||||||
| Adjusted EBITDA of non-controlling interest | $ | 679,817 | $ | 1,055,531 | ||||
From time to time, NETSOL may refer to Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, Amortization and Stock-based Compensation) and “non-GAAP adjusted EBITDA per diluted share or Adjusted EBITDA per diluted share” 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 EBITDA per diluted share or Adjusted EBITDA per diluted share is not derived in accordance with GAAP and should not be considered by the reader as an alternative to reported GAAP diluted EPS. The reconciliation of GAAP and non-GAAP financial measures for the three month periods ended September 30, 2016 and 2015 are included in the above table. NETSOL’s management believes that Adjusted EBITDA and Adjusted EBITDA per diluted share 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 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.