NetSol Technologies Announces Fourth Quarter and Full Fiscal Year 2016 Financial Results

  • Total Net Revenues Increased 24% Year-over-Year for the Fourth Quarter and 26% for the Full Fiscal Year 2016
  • GAAP Diluted EPS of $0.19 for the Fourth Quarter and $0.32 for the Full Fiscal Year 2016
  • Adjusted EBITDA of $4.1 Million for the Fourth Quarter and $10.1 Million for the Full Fiscal Year 2016
  • Company Provides Fiscal Year 2017 Guidance     

– Conference Call Scheduled for Today at 9 a.m. ET (6 a.m. PT) –

CALABASAS, Calif., Sept. 15, 2016 (GLOBE NEWSWIRE) — 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 fourth quarter and fiscal year ended June 30, 2016. 

Fiscal 2016 Fourth Quarter Financial Results

Total net revenues for the fourth quarter of fiscal 2016 were $19.1 million, an increase of 24% from the prior year period. 

  • Total license fees were $4.2 million, compared with $1.4 million in the prior year period.
  • Total maintenance fees were $3.8 million, compared with $3.4 million in the prior year period.
  • Total services revenues were $11.0 million, compared with $10.6 million in the prior year period.

Gross profit for the fourth quarter of fiscal 2016 more than doubled to $10.3 million, or 53.9% of net revenues, from $5.0 million, or 32.2% of net revenues, in the fourth quarter of fiscal 2015.  

GAAP net income attributable to NetSol for the fourth quarter of fiscal 2016 improved to $2.1 million, or $0.19 per diluted share, compared with a net loss of $0.7 million, or $(0.07) per diluted share, in the fourth quarter of fiscal 2015.

Adjusted EBITDA1 for the fourth quarter of fiscal 2016 was $4.1 million, representing Adjusted EBITDA per diluted share of $0.38, compared with Adjusted EBITDA of $1.9 million, or Adjusted EBITDA per diluted share of $0.18, in the fourth quarter of fiscal 2015. 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. The company believes this supplemental disclosure provides additional insights to measure the operational performance of its business.

Fiscal 2016 Full Year Financial Results

Total net revenues for the fiscal year ended June 30, 2016 were a record $64.6 million, representing an increase of 26% from fiscal year 2015. 

  • Total license fees were $8.0 million, compared with $6.3 million in the prior fiscal year.
  • Total maintenance fees were $13.7 million, compared with $12.6 million in the prior fiscal year.
  • Total services revenues were $42.9 million, compared with $32.1 million in the prior fiscal year.

Gross profit for fiscal year 2016 increased to $30.8 million, or 47.7% of net revenues, from $17.5 million, or 34.2% of net revenues, for fiscal year 2015.

GAAP net income attributable to NetSol for the fiscal year ended June 30, 2016 improved to $3.4 million, or $0.32 per diluted share, compared with a net loss of $5.5 million, or $(0.57) per diluted share, for fiscal year 2015.

Adjusted EBITDA for the fiscal year ended June 30, 2016 more than tripled to $10.1 million, representing Adjusted EBITDA per diluted share of $0.96, from $3.3 million, or Adjusted EBITDA per diluted share of $0.34, for fiscal year 2015.

At June 30, 2016, cash and cash equivalents were $11.6 million, compared with $14.2 million at June 30, 2015.

The company purchased 1,374,000 shares of NetSol PK common stock for $767,397 during the fiscal year ended June 30, 2016, resulting in an increase in ownership to 67%.

Management Commentary

“We ended fiscal year 2016 on a high note, generating record revenue for the fourth quarter and full-year and exceeding our guidance for both revenue and Adjusted EBITDA. Our results demonstrate solid demand for our solutions and the continued execution of our growth strategy,” said Najeeb Ghauri, CEO of NetSol. “Looking to fiscal 2017, we see meaningful opportunity to continue to grow and scale our client base, and will continue to make additional investments across our business to expand our share in all our markets.”

Naeem Ghauri, President and Head of Global Sales, said, “Continued strong demand in the market, and the investments we have made in our solutions, our services capabilities and in our global team, have contributed to solid growth in our pipeline of new business opportunities compared to the prior year. The momentum we are seeing in our pipeline across all our markets, combined with our current backlog of business including the $100 million-plus NFS Ascent implementation, gives us confidence in our growth prospects for fiscal 2017.”

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 2016 Fourth Quarter Conference Call

         
When:        Thursday September 15, 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 10091540. The replay will be available through Thursday, September 22, 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.

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 June 30,   As of June 30,
  ASSETS   2016       2015  
Current assets:      
  Cash and cash equivalents $ 11,557,527     $ 14,168,957  
  Accounts receivable, net of allowance of $492,498  and $524,565   9,691,229       6,480,344  
  Accounts receivable, net – related party   5,691,178       3,491,899  
  Revenues in excess of billings   10,493,096       5,251,005  
  Revenues in excess of billings – related party   804,168       16,270  
  Other current assets   2,214,628       1,871,040  
    Total current assets   40,451,826       31,279,515  
Long term investment          
Restricted cash   90,000       90,000  
Property and equipment, net   22,774,435       25,119,634  
Other assets   842,553       141,150  
Intangible assets, net   19,674,033       22,815,467  
Goodwill   9,516,568       9,516,568  
    Total assets $ 93,349,415     $ 88,962,334  
           
  LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
  Accounts payable and accrued expenses $ 5,962,770     $ 5,952,561  
  Current portion of loans and obligations under capitalized leases   4,440,084       3,896,353  
  Unearned revenues   4,739,214       4,897,327  
  Common stock to be issued   88,324       88,324  
    Total current liabilities   15,230,392       14,834,565  
Long term loans and obligations under capitalized leases; less current maturities   477,692       487,492  
    Total liabilities   15,708,084       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;      
    10,713,372  shares issued and 10,686,093  outstanding as of June 30, 2016  and      
    10,307,826  shares issued and 10,280,547  outstanding as of June 30, 2015   107,134       103,078  
  Additional paid-in-capital   121,448,946       119,209,807  
  Treasury stock (27,279 shares)   (415,425 )     (415,425 )
  Accumulated deficit   (37,323,360 )     (40,726,121 )
  Stock subscription receivable   (783,172 )     (1,204,603 )
  Other comprehensive loss   (18,730,494 )     (17,167,100 )
    Total NetSol stockholders’ equity   64,303,629       59,799,636  
  Non-controlling interest   13,337,702       13,840,641  
    Total stockholders’ equity   77,641,331       73,640,277  
    Total liabilities and stockholders’ equity $ 93,349,415     $ 88,962,334  
           

NetSol Technologies, Inc. and Subsidiaries
Schedule 2: Consolidated Statement of Operations
 
      For the Three Months For the Year
      Ended June 30,   Ended June 30,
                       
                       
        2016       2015       2016       2015  
Net Revenues:                  
  License fees $ 3,090,927     $ 1,428,520     $ 6,352,441     $ 6,328,989  
  Maintenance fees   3,669,355       3,232,833       13,310,591       12,196,073  
  Services   7,800,762       8,177,176       32,288,229       24,827,822  
  License fees – related party   1,131,494             1,616,138        
  Maintenance fees – related party   147,363       158,428       365,772       395,951  
  Services – related party   3,239,592       2,397,951       10,617,022       7,299,743  
    Total net revenues   19,079,493       15,394,908       64,550,193       51,048,578  
                 
Cost of revenues:            
  Salaries and consultants   5,853,138       6,117,504       21,789,329       19,859,684  
  Travel   554,885       602,575       2,334,019       2,374,864  
  Depreciation and amortization   1,507,573       2,822,045       5,926,969       8,336,857  
  Other   875,943       890,461       3,698,290       3,020,107  
    Total cost of revenues   8,791,539       10,432,585       33,748,607       33,591,512  
                       
Gross profit   10,287,954       4,962,323       30,801,586       17,457,066  
                 
Operating expenses:            
  Selling and marketing   2,226,227       1,673,064       7,823,916       6,092,530  
  Depreciation and amortization   327,152       437,054       1,225,170       2,006,957  
  General and administrative   4,573,172       3,055,345       14,965,016       14,208,493  
  Research and development cost   123,666       84,152       485,783       314,892  
    Total operating expenses   7,250,217       5,249,615       24,499,885       22,622,872  
                       
Income (loss) from operations   3,037,737       (287,292 )     6,301,701       (5,165,806 )
                 
Other income and (expenses)            
  Gain (loss) on sale of assets   23,288       9,501       23,930       (64,598 )
  Interest expense   (68,112 )     (1,370 )     (264,511 )     (166,962 )
  Interest income   44,710       70,341       161,794       331,432  
  Loss on foreign currency exchange transactions   (502,867 )     135,937       (738,158 )     (453,770 )
  Other income   24,675       58,380       224,931       684,030  
    Total other income (expenses)   (478,306 )     272,789       (592,014 )     330,132  
                       
Net income (loss) before  income taxes   2,559,431       (14,503 )     5,709,687       (4,835,674 )
Income tax provision   (197,839 )     (178,341 )     (652,546 )     (413,498 )
Net income (loss)    2,361,592       (192,844 )     5,057,141       (5,249,172 )
  Non-controlling interest   (272,347 )     (514,534 )     (1,654,380 )     (299,646 )
Net income (loss) attributable to NetSol $ 2,089,245     $ (707,378 )   $ 3,402,761     $ (5,548,818 )
                       
                 
Net loss per share:            
  Net income (loss) per common share            
    Basic $ 0.20     $ (0.07 )   $ 0.33     $ (0.57 )
    Diluted $ 0.19     $ (0.07 )   $ 0.32     $ (0.57 )
                 
Weighted average number of shares outstanding            
  Basic   10,549,563       10,194,180       10,391,157       9,728,122  
  Diluted   10,743,241       10,194,180       10,584,835       9,728,122  
                       

NetSol Technologies, Inc. and Subsidiaries
Schedule 3: Consolidated Statement of Cash Flows
 
        For the Year
        Ended June 30,
          2016       2015  
Cash flows from operating activities:       
  Net income (loss) $ 5,057,141     $ (5,249,172 )
  Adjustments to reconcile net income (loss)      
  to net cash provided by operating activities:      
  Depreciation and amortization   7,152,139       10,343,814  
  Provision for bad debts   237,703       (434,928 )
  (Gain) loss on sale of assets   (23,930 )     64,598  
  Stock issued for services   1,264,618       1,375,149  
  Fair market value of warrants and stock options granted   268,591       622,488  
  Changes in operating assets and liabilities:       
  Accounts receivable   (3,758,422 )     (871,959 )
  Accounts receivable – related party   (2,564,819 )     (1,179,931 )
  Revenues in excess of billing   (4,987,772 )     (2,997,449 )
  Revenues in excess of billing – related party   (884,738 )     (16,281 )
  Other current assets   (729,359 )     580,618  
  Accounts payable and accrued expenses   558,033       726,700  
  Unearned revenue   69,851       2,114,635  
  Net cash provided by operating activities    1,659,036       5,078,282  
             
Cash flows from investing activities:       
  Purchases of property and equipment   (3,335,921 )     (3,558,712 )
  Sales of property and equipment   986,433       1,102,615  
  Investment   (555,556 )      
  Purchase of subsidiary shares from open market   (767,397 )     (577,222 )
  Net cash used in investing activities    (3,672,441 )     (3,033,319 )
             
Cash flows from financing activities:       
  Proceeds from sale of common stock   64,931       2,294,599  
  Proceeds from the exercise of stock options and warrants   1,137,480       191,400  
  Proceeds from exercise of subsidiary options       16,744       12,185  
  Restricted cash         2,438,844  
  Dividend paid by subsidiary to Non controlling interest   (1,003,853 )     (806,937 )
  Proceeds from bank loans   1,333,406       1,410,313  
  Payments on capital lease obligations and loans – net   (950,529 )     (4,079,174 )
  Net cash provided by financing activities    598,179       1,461,230  
Effect of exchange rate changes    (1,196,204 )     (799,931 )
Net increase (decrease) in cash and cash equivalents    (2,611,430 )     2,706,262  
Cash and cash equivalents, beginning of the period   14,168,957       11,462,695  
Cash and cash equivalents, end of period  $ 11,557,527     $ 14,168,957  
             

NetSol Technologies, Inc. and Subsidiaries
Schedule 4: Reconciliation to GAAP
 
  Three Months   Three Months   Year   Year
  Ended   Ended   Ended   Ended
  June 30, 2016   June 30, 2015   June 30, 2016   June 30, 2015
               
Net Income (loss) before preferred dividend, per GAAP $ 2,089,245     $ (707,378 )   $ 3,402,761     $ (5,548,818 )
Non-controlling interest   272,347       514,534       1,654,380       299,646  
Income taxes   197,839       178,341       652,546       413,498  
Depreciation and amortization   1,834,725       3,259,099       7,152,139       10,343,814  
Interest expense   68,112       1,370       264,511       166,962  
Interest (income)   (44,710 )     (70,341 )     (161,794 )     (331,432 )
EBITDA $ 4,417,558     $ 3,175,625     $ 12,964,543     $ 5,343,670  
Add back:              
Non-cash stock-based compensation   692,800       411,050       1,533,209       1,997,637  
Adjusted EBITDA, gross $ 5,110,358     $ 3,586,675     $ 14,497,752     $ 7,341,307  
Less non-controlling interest (a)   (1,007,875 )     (1,721,389 )     (4,356,858 )     (4,008,592 )
Adjusted EBITDA, net $ 4,102,483     $ 1,865,286     $ 10,140,894     $ 3,332,715  
               
               
Weighted Average number of shares outstanding              
Basic   10,549,563       10,194,180       10,391,157       9,728,122  
Diluted   10,743,241       10,233,625       10,584,835       9,767,657  
               
Basic adjusted EBITDA $ 0.39     $ 0.18     $ 0.98     $ 0.34  
Diluted adjusted EBITDA $ 0.38     $ 0.18     $ 0.96     $ 0.34  
               
               
(a)The reconciliation of adjusted EBITDA of non-controlling interest              
to net income attributable to non-controlling interest is as follows              
               
Net Income (loss) applicable to non-controlling interest $ 272,347     $ 514,534     $ 1,654,380     $ 299,646  
Income Taxes   69,751       104,339       146,450       178,689  
Depreciation and amortization   600,763       1,095,632       2,388,098       3,442,235  
Interest expense   21,732       10,274       81,189       51,023  
Interest (income)   (7,901 )     (15,526 )     (41,565 )     (98,638 )
EBITDA $ 956,692     $ 1,709,253     $ 4,228,552     $ 3,872,955  
Add back:              
Non-cash stock-based compensation   51,183       12,136       128,306       135,637  
Adjusted EBITDA of non-controlling interest $ 1,007,875     $ 1,721,389     $ 4,356,858     $ 4,008,592  
               

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 and twelve month periods ended June 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.