Exhibit 9.01

 

 

 

NETSOL Technologies Reports Fiscal First Quarter 2021 Financial Results

 

  Net Income of $718,000, $0.06 EPS and $4.7 Million Cash from Operations
  Gross Subscription (SaaS) and Annual Recurring And Contracted Support Revenues Exceeded $5 Million for the First Time
  Major Go-Live Event, Double-Digit Recurring Revenue Growth, and Continued Cost Management Efforts Yield Fourth Straight Quarter of Profitability
  OTOZ Partnering to Launch a Digital Automotive Retail Platform for a U.S. Based Subsidiary of a Renowned German Auto Manufacturer for One of its Key Brands with an Initial Launch in California in Early Calendar 2021
  Moderate Return to Business Conditions, Coupled with High-Value, Near-Term Pipeline of Opportunities Underscore Cautiously Optimistic Growth Outlook for Fiscal 2021

 

CALABASAS, Calif., November 12, 2020 – NETSOL Technologies, Inc. (Nasdaq: NTWK), a global business services and enterprise application solutions provider, reported results for the fiscal first quarter ended September 30, 2020.

 

Fiscal First Quarter 2021 and Recent Operational Highlights

 

  Successfully implemented the NFS Ascent® Retail Platform, including the Company’s proprietary Loan Origination System (LOS) and Contract Management System (CMS) for a tier-one German auto captive finance company in China in the second phase of a previously announced $30 million contract.
  Regarding previously announced 12-country, $110 million contract with German auto manufacturing giant, the Company made continued progress with respect to additional NFS Ascent® implementations. The Company has successful Go Live events in Singapore and Thailand in September and October, respectively. The implementation process has also now begun in New Zealand and Australia.
  Announced the successful implementation of the Company’s first North American cloud-based NFS Ascent Contract Management System (CMS) for SCI Lease Corp, a Canadian-based national automotive leasing company.
  Appointed Peter Minshall as Executive Vice President (EVP) of NTA. The EVP role will report directly to the Company CEO and is responsible for the entire NTA portion of NETSOL’s business operations.
  Generated $315,000 in additional SaaS subscription and support revenues, which are recurring in nature and anticipated to gradually increase as the Company implements NFS legacy products and NFS Ascent®.
  NETSOL effectively generated approximately $1.3 million by successfully implementing change requests from various customers across multiple regions.
  NETSOL’s new mobility startup subsidiary, Otoz, is partnering to launch its digital automotive retail platform for a U.S. based subsidiary of a renowned German auto manufacturer for one of its key brands.

 

 
 

 

Fiscal First Quarter 2021 Financial Results

 

Total net revenues for the first quarter of fiscal 2021 were $12.6 million, compared with $13.6 million in the prior year period. The decrease in total net revenues was primarily due to a decrease in total license fees of $2.5 million, which was offset by an increase in subscription and support revenues of $565,000 and an increase in total service revenues of $970,000.

 

  Total license fees were $3,500, compared with $2.5 million in the prior year period.
  Total subscription (SaaS and Cloud) and support revenues were $5.2 million, compared with $4.6 million in the prior year period.
  Total services revenues were $7.5 million, compared with $6.5 million in the prior year period.

 

Gross profit for the first quarter of fiscal 2021 was $6.4 million (or 50.5% of net revenues), compared to $6.1 million (or 45.0% of net revenues) in the first quarter of fiscal 2020. The increases in gross profit and gross profit as a percentage of revenue were primarily due to decreases in cost of revenues, which were predominantly driven by a decrease in travel expenses resulting from the COVID-19 pandemic.

 

Operating expenses for the first quarter of fiscal 2021 decreased 18.2% to $5.3 million (or 42.3% of net revenues) from $6.5 million (or 48.2% of net revenues) for the first quarter of fiscal 2020. The decrease in operating expenses was primarily due to decreases in selling and marketing, professional services, research and development and general and administrative expenses, which were offset by a minor increase in depreciation and amortization.

 

GAAP net income attributable to NETSOL for the first quarter of fiscal 2021 totaled $718,000 or $0.06 per diluted share, compared with GAAP net loss of $(1.8) million or $(0.16) per diluted share in the first quarter of fiscal 2020. GAAP net income attributable to NETSOL included a $296,000 gain on foreign currency exchange transactions in the first quarter of fiscal 2020, which was a significant increase compared with a loss of $1.8 million in the prior year period.

 

Non-GAAP adjusted EBITDA for the first quarter of fiscal 2021 totaled $1.6 million or $0.14 per diluted share, compared with non-GAAP adjusted EBITDA loss of $(1.1) million or $(0.09) per diluted share in the first quarter of fiscal 2020 (see note regarding “Use of Non-GAAP Financial Measures,” below for further discussion of this non-GAAP measure).

 

At September 30, 2020, cash and cash equivalents were $24.9 million, an increase from $20.2 million at June 30, 2020.

 

Management Commentary

 

“The beginning of the fiscal year was an extension of the same business conditions we’ve witnessed since the pandemic took hold, but we are continuing to operate efficiently, control costs and execute on our long-term strategic growth plan,” said NETSOL Co-Founder, Chairman and Chief Executive Officer Najeeb Ghauri. “Financially, we generated roughly $1.3 million from change requests and reduced expenses by nearly 20% leading to sustained profitability on a trailing-twelve-month basis. We also grew our recurring revenue base by double digits to $5.2 million. As we layer on maintenance fees through larger, traditional, enterprise contracts and increase our SaaS-based footprint, we expect to build this base over time, which provides for more predictable revenues with a more attractive margin profile.

 

 
 

 

“During fiscal Q1, we were very active on the implementation front and had multiple successful ‘Go Live’ events within our APAC region for a pair of major international auto manufacturers. We are also gaining traction with mid-size auto captives in our North American and European markets with the latter comprising a greater portion of overall revenues compared to last year. Our Otoz Innovation Lab remains a bright spot, making great progress on current partnerships, including work with a renowned German OEM on a digital automotive retail platform for one of its key brands. With several catalysts on the horizon, we are optimistic about our prospects for the new fiscal year.”

 

Sales Outlook

 

Ghauri added: “Sales discussions with a number of potential customers remain active, and we are confident that the market is beginning to pick up in all global regions. We have a number of high-value, near-term opportunities in our pipeline and are cautiously optimistic about our growth outlook.”

 

Otoz Update

 

“We recently began a partnership to launch a fully-digital mobile app for a major German auto captive in the U.S. that will enable a touchless customer journey, all built on the Otoz platform,” said Naeem Ghauri, CEO of Otoz. “The end product will be rolled out to hundreds of auto dealers across the U.S. and is expected to generate significant SaaS revenues for our business. Separately, we are in the final contract negotiation stages with a number of other major players in the automotive space and look forward to announcing those agreements in the near future.”

 

Conference Call

 

NETSOL Technologies management will hold a conference call today (November 16, 2020) at 9:00 a.m. Eastern time (6:00 a.m. Pacific time) to discuss these financial results. A question and answer session will follow management’s presentation.

 

U.S. dial-in: 1-877-407-0789

International dial-in: 1-201-689-8562

 

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 1-949-574-3860.

 

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 12:00 p.m. Eastern time on the same day through November 30, 2020.

 

Toll-free replay number: 1-844-512-2921

International replay number: 1-412-317-6671

Replay ID: 13712135

 

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 provides business-to-business, white-label technology solutions for new mobility. Our 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 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. Our 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 stay at home orders and social distancing imposed 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

1-949-574-3860

investors@netsoltech.com

 

 
 

 

NETSOL Technologies, Inc. and Subsidiaries

Schedule 1: Consolidated Balance Sheets

 

   As of   As of 
ASSETS  September 30, 2020   June 30, 2020 
Current assets:          
Cash and cash equivalents  $24,885,365   $20,166,830 
Accounts receivable, net of allowance of $279,903 and $435,611   6,732,575    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 $91,250 and $188,914   18,430,766    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   2,616,769    3,108,180 
Total current assets   52,665,475    51,895,711 
Revenues in excess of billings, net - long term   -    1,300,289 
Convertible note receivable - related party, net of allowance of $4,250,000  and $0   -    4,250,000 
Property and equipment, net   11,256,306    11,329,631 
Right of use of assets - operating leases   2,133,902    2,360,129 
Long term investment   2,417,291    2,387,692 
Other assets   41,175    41,992 
Intangible assets, net   5,032,630    5,391,077 
Goodwill   9,516,568    9,516,568 
Total assets  $83,063,347   $88,473,089 
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
Current liabilities:          
Accounts payable and accrued expenses  $6,005,999   $5,680,837 
Current portion of loans and obligations under finance leases   9,677,277    9,139,561 
Current portion of operating lease obligations   1,165,957    1,111,912 
Unearned revenues   2,775,600    4,095,472 
Common stock to be issued   88,324    88,324 
Total current liabilities   19,713,157    20,116,106 
Loans and obligations under finance leases; less current maturities   1,705,699    1,539,975 
Operating lease obligations; less current maturities   1,110,832    1,339,965 
Total liabilities   22,529,688    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;          
12,137,045 shares issued and 11,742,490 outstanding as of September 30, 2020 and 12,122,149 shares issued and 11,874,646 outstanding as of June 30, 2020   121,371    121,222 
Additional paid-in-capital   128,764,618    128,677,754 
Treasury stock (at cost, 394,555 shares and 247,503 shares as of September 30, 2020 and June 30, 2020, respectively)   (1,920,645)   (1,455,969)
Accumulated deficit   (39,861,985)   (34,269,817)
Other comprehensive loss   (33,210,231)   (34,085,047)
Total NetSol stockholders' equity   53,893,128    58,988,143 
Non-controlling interest   6,640,531    6,488,900 
Total stockholders' equity   60,533,659    65,477,043 
Total liabilities and stockholders' equity  $83,063,347   $88,473,089 

 

 
 

 

NETSOL Technologies, Inc. and Subsidiaries

Schedule 2: Consolidated Statement of Operations

 

   For the Three Months 
   Ended September 30, 
   2020   2019 
Net Revenues:          
License fees  $3,475   $2,464,216 
Subscription and support   5,171,863    4,606,376 
Services   7,472,040    6,418,891 
Services - related party   -    82,933 
Total net revenues   12,647,378    13,572,416 
           
Cost of revenues:          
Salaries and consultants   4,526,649    4,454,964 
Travel   103,752    1,342,635 
Depreciation and amortization   707,249    719,665 
Other   928,153    944,524 
Total cost of revenues   6,265,803    7,461,788 
           
Gross profit   6,381,575    6,110,628 
           
Operating expenses:          
Selling and marketing   1,609,604    1,743,868 
Depreciation and amortization   221,790    202,387 
General and administrative   3,427,636    3,918,613 
Research and development cost   85,989    672,970 
Total operating expenses   5,345,019    6,537,838 
           
Income (loss) from operations   1,036,556    (427,210)
           
Other income and (expenses)          
Loss on sale of assets   (21,742)   (289)
Interest expense   (103,327)   (63,663)
Interest income   200,821    399,229 
Gain (loss) on foreign currency exchange transactions   296,041    (1,760,190)
Share of net loss from equity investment   (107,850)   (189,224)
Other income   87,272    18,326 
Total other income (expenses)   351,215    (1,595,811)
           
Net income (loss) before  income taxes   1,387,771    (2,023,021)
Income tax provision   (264,294)   (238,238)
Net income (loss)   1,123,477    (2,261,259)
Non-controlling interest   (405,923)   433,312 
Net income (loss) attributable to NetSol  $717,554   $(1,827,947)
           
Net income per share:          
Net income per common share          
Basic  $0.06   $(0.16)
Diluted  $0.06   $(0.16)
           
Weighted average number of shares outstanding          
Basic   11,787,233    11,664,239 
Diluted   11,787,233    11,664,239 

 

 
 

 

NETSOL Technologies, Inc. and Subsidiaries

Schedule 3: Consolidated Statement of Cash Flows

 

   For the Three Months 
   Ended September 30, 
   2020   2019 
Cash flows from operating activities:          
Net income (loss)  $1,123,477   $(2,261,259)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:          
Depreciation and amortization   929,039    922,052 
Provision for bad debts   (258,160)   (38,621)
Share of net loss from investment under equity method   107,850    189,224 
Loss on sale of assets   21,742    289 
Stock based compensation   90,995    164,293 
Changes in operating assets and liabilities:          
Accounts receivable   3,823,299    4,836,183 
Accounts receivable - related party   -    46,016 
Revenues in excess of billing   394,995    (1,870,517)
Revenues in excess of billing - related party   -    66,330 
Other current assets   (393,253)   (278,677)
Accounts payable and accrued expenses   255,239    122,012 
Unearned revenue   (1,383,619)   (1,631,245)
Net cash provided by operating activities   4,711,604    266,080 
           
Cash flows from investing activities:          
Purchases of property and equipment   (489,289)   (321,125)
Sales of property and equipment   32,673    958 
Convertible note receivable - related party   -    (435,000)
Investment in associates   (60,500)   - 
Net cash used in investing activities   (517,116)   (755,167)
           
Cash flows from financing activities:          
Proceeds from exercise of subsidiary options   -    11,621 
Purchase of treasury stock   (464,676)   - 
Proceeds from bank loans   697,295    - 
Payments on finance lease obligations and loans - net   (143,506)   (147,376)
Net cash provided by (used in) financing activities   89,113    (135,755)
Effect of exchange rate changes   434,934    879,857 
Net increase in cash and cash equivalents   4,718,535    255,015 
Cash and cash equivalents at beginning of the period   20,166,830    17,366,364 
Cash and cash equivalents at end of period  $24,885,365   $17,621,379 

 

 
 

 

NETSOL Technologies, Inc. and Subsidiaries

Schedule 4: Reconciliation to GAAP

 

   For the Three
Months Ended
   For the Three
Months Ended
 
   September 30, 2020   September 30, 2019 
         
Net Income (loss) attributable to NetSol  $717,554   $(1,827,947)
Non-controlling interest   405,923    (433,312)
Income taxes   264,294    238,238 
Depreciation and amortization   929,039    922,052 
Interest expense   103,327    63,663 
Interest (income)   (200,821)   (399,229)
EBITDA  $2,219,316   $(1,436,535)
Add back:          
Non-cash stock-based compensation   90,995    164,293 
Adjusted EBITDA, gross  $2,310,311   $(1,272,242)
Less non-controlling interest (a)   (698,844)   191,235 
Adjusted EBITDA, net  $1,611,467   $(1,081,007)
           
Weighted Average number of shares outstanding          
Basic   11,787,233    11,664,239 
Diluted   11,787,233    11,664,239 
           
Basic adjusted EBITDA  $0.14   $(0.09)
Diluted adjusted EBITDA  $0.14   $(0.09)
           
(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  $405,923   $(433,312)
Income Taxes   48,649    53,335 
Depreciation and amortization   264,565    259,635 
Interest expense   31,520    19,041 
Interest (income)   (65,957)   (105,501)
EBITDA  $684,700   $(206,802)
Add back:          
Non-cash stock-based compensation   14,144    15,567 
Adjusted EBITDA of non-controlling interest  $698,844   $(191,235)

 

 

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