- Total Q2 revenue rose 31% to $16.2 million
- Records positive Q2 GAAP EPS of $0.08 per diluted share, versus a net loss of $(0.14) per share last year
- Adjusted EPS increases to $0.32 per diluted share in the quarter, and adjusted EPS of $0.46 per diluted share for the first six months of 2016
- Expects minimum total net revenue of $62 million for fiscal 2016, GAAP profitability and adjusted EPS growth for the fiscal year
- Conference Call Scheduled Today at 9 a.m. ET (6 a.m. PT) -
CALABASAS, Calif. , Feb. 11, 2016 (GLOBE NEWSWIRE) -- NetSol Technologies, Inc. (Nasdaq:NTWK), a global business services and enterprise application solutions provider, today announced results for its fiscal 2016 second quarter ended December 31, 2015.
Total net revenues for the 2016 second quarter rose 31% to $16.2 million from $12.4 million in the same period last year. The increase reflected strength in total services revenue, which includes growing services delivered to major clients as well as our joint-venture companies, rising to $12.2 million from $6.9 million last year. License fees were approximately $710,000, compared with $2.1 million last year, with the year-over-year difference relating to sales mix. Total maintenance fees, which include related-party (joint-venture) maintenance fees, remained consistent at $3.3 million for both 2015 and 2014.
On a GAAP basis, net income for the second quarter improved to $875,000, or $0.08 per diluted share, as compared with a net loss of $1.4 million, or $(0.14) per share, in the second quarter of 2015.
Non-GAAP Adjusted EBITDA (which adds back stock-based compensation expense) for the second quarter of 2016 was $3.3 million, or adjusted EPS of $0.32 per diluted share, as compared with adjusted EBITDA of $1.4 million, or adjusted EPS of $0.14 per diluted share, in the second quarter of 2015.
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 at the end of this press release.
Following is additional detail for the quarter:
- As a percentage of total revenue, total cost of revenue for the second quarter of 2016 decreased to 50% from 60% of total revenues for the same period last year;
- Gross profit rose to $8.0 million from $5.0 million last year; and
- Operational expenses were nearly flat year-over-year, with an increase in selling and marketing expenses related to new business efforts, offset by a decrease in general and administrative expenses as a result of cost rationalization initiatives.
“NetSol is at an important inflection point, with leverage continuing to build in our business model as a result of multiple large contracts underway,” said Najeeb Ghauri, CEO of NetSol. “As we implement agreements already signed in Europe, along with the recently announced 12-country NFS AscentTM implementation, we anticipate a strong year ahead.”
Naeem Ghauri, president and head of global sales, commenting on the recent contract valued at more than $100 million said, “The new contract is just beginning to contribute revenue to our overall revenue mix, and is expected to ramp up steadily in the fiscal 2016 third and fourth quarter, and then sharply in fiscal 2017. Additionally, our sales pipeline is robust, benefitting from recent wins that provide strong reference points to leverage in our marketing efforts.”
For the first six months of fiscal 2016, total revenue advanced to $29.5 million from $22.6 million for the same period one year ago. The company reported GAAP net income of $464,000, or $0.04 per diluted share, for the first six months of fiscal 2016, versus a net loss of $3.2 million, or $(0.34) per diluted share, for the same period last year. Non-GAAP adjusted EBITDA rose to $4.8 million, or adjusted EPS of $0.46 per diluted share for the first six months of fiscal 2016, from $2.4 million, or adjusted EPS of $0.26 per diluted share, for the same period in fiscal 2015.
At December 31, 2015, cash and cash equivalents were approximately $14.0 million, versus $14.2 million at June 30, 2015. Accounts receivable and accounts receivable, net-related party combined were $11.8 million, up from approximately $10 million at June 30, 2015. The quality of receivables remains strong.
Fiscal 2016 Business Outlook
The company currently expects minimum revenue of $62 million for fiscal 2016, with positive GAAP earnings per share and continued adjusted EPS growth. NetSol is currently conducting its mid-year budget review, and will provide further detail at the appropriate time.
Fiscal 2016 Second Quarter Conference Call
When: Thursday, February 11, 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 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.
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 more than 1000 professionals placed in eight strategically located support and delivery centers throughout the world.
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 “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.
(Tables Follow)
| NetSol Technologies, Inc. and Subsidiaries | |||||||||
| Consolidated Balance Sheets | |||||||||
| As of December 31, | As of June 30, | ||||||||
| ASSETS | 2015 | 2015 | |||||||
| Current assets: | |||||||||
| Cash and cash equivalents | $ | 13,986,773 | $ | 14,168,957 | |||||
| Restricted cash | 90,000 | 90,000 | |||||||
| Accounts receivable, net of allowance of $487,937 and $524,565 | 6,025,334 | 6,480,344 | |||||||
| Accounts receivable, net - related party | 5,749,523 | 3,491,899 | |||||||
| Revenues in excess of billings | 5,061,568 | 5,267,275 | |||||||
| Other current assets | 2,671,613 | 2,012,190 | |||||||
| Total current assets | 33,584,811 | 31,510,665 | |||||||
| Property and equipment, net | 23,251,920 | 25,119,634 | |||||||
| Intangible assets, net | 20,877,711 | 22,815,467 | |||||||
| Goodwill | 9,516,568 | 9,516,568 | |||||||
| Total assets | $ | 87,231,010 | $ | 88,962,334 | |||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||
| Current liabilities: | |||||||||
| Accounts payable and accrued expenses | $ | 5,907,103 | $ | 5,952,561 | |||||
| Current portion of loans and obligations under capitalized leases | 3,767,193 | 3,896,353 | |||||||
| Unearned revenues | 3,546,819 | 4,897,327 | |||||||
| Common stock to be issued | 88,324 | 88,324 | |||||||
| Total current liabilities | 13,309,439 | 14,834,565 | |||||||
| Long term loans and obligations under capitalized leases; less current maturities | 273,109 | 487,492 | |||||||
| Total liabilities | 13,582,548 | 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; | |||||||||
| 10,418,350 shares issued and 10,391,071 outstanding as of December 31, 2015 and | |||||||||
| 10,307,826 shares issued and 10,280,547 outstanding as of June 30, 2015 | 104,184 | 103,078 | |||||||
| Additional paid-in-capital | 119,890,798 | 119,209,807 | |||||||
| Treasury stock (27,279 shares) | (415,425 | ) | (415,425 | ) | |||||
| Accumulated deficit | (40,262,084 | ) | (40,726,121 | ) | |||||
| Stock subscription receivable | (1,139,672 | ) | (1,204,603 | ) | |||||
| Other comprehensive loss | (18,546,296 | ) | (17,167,100 | ) | |||||
| Total NetSol stockholders' equity | 59,631,505 | 59,799,636 | |||||||
| Non-controlling interest | 14,016,957 | 13,840,641 | |||||||
| Total stockholders' equity | 73,648,462 | 73,640,277 | |||||||
| Total liabilities and stockholders' equity | $ | 87,231,010 | $ | 88,962,334 | |||||
| NetSol Technologies, Inc. and Subsidiaries | |||||||||||||||||
| Consolidated Statement of Operations | |||||||||||||||||
| For the Three Months | For the Six Months | ||||||||||||||||
| Ended December 31, | Ended December 31, | ||||||||||||||||
| 2015 | 2014 | 2015 | 2014 | ||||||||||||||
| Net Revenues: | |||||||||||||||||
| License fees | $ | 709,691 | $ | 2,100,715 | $ | 1,903,045 | $ | 3,685,268 | |||||||||
| Maintenance fees | 3,240,472 | 3,276,125 | 6,252,710 | 5,984,653 | |||||||||||||
| Services | 9,574,104 | 5,378,584 | 16,327,977 | 9,627,664 | |||||||||||||
| Maintenance fees - related party | 31,755 | 53,462 | 189,986 | 193,575 | |||||||||||||
| Services - related party | 2,635,675 | 1,543,718 | 4,823,083 | 3,088,595 | |||||||||||||
| Total net revenues | 16,191,697 | 12,352,604 | 29,496,801 | 22,579,755 | |||||||||||||
| Cost of revenues: | |||||||||||||||||
| Salaries and consultants | 4,925,565 | 4,298,900 | 9,925,455 | 8,415,117 | |||||||||||||
| Travel | 754,009 | 590,353 | 1,235,462 | 1,012,224 | |||||||||||||
| Depreciation and amortization | 1,461,466 | 1,800,753 | 2,935,701 | 3,602,320 | |||||||||||||
| Other | 1,022,682 | 662,046 | 1,961,479 | 1,336,909 | |||||||||||||
| Total cost of revenues | 8,163,722 | 7,352,052 | 16,058,097 | 14,366,570 | |||||||||||||
| Gross profit | 8,027,975 | 5,000,552 | 13,438,704 | 8,213,185 | |||||||||||||
| Operating expenses: | |||||||||||||||||
| Selling and marketing | 2,002,990 | 1,574,955 | 3,701,394 | 2,707,315 | |||||||||||||
| Depreciation and amortization | 285,616 | 438,003 | 576,788 | 1,018,776 | |||||||||||||
| General and administrative | 3,536,676 | 3,911,754 | 6,902,723 | 7,587,509 | |||||||||||||
| Research and development cost | 117,924 | 80,437 | 229,994 | 146,702 | |||||||||||||
| Total operating expenses | 5,943,206 | 6,005,149 | 11,410,899 | 11,460,302 | |||||||||||||
| Income (loss) from operations | 2,084,769 | (1,004,597 | ) | 2,027,805 | (3,247,117 | ) | |||||||||||
| Other income and (expenses) | |||||||||||||||||
| Loss on sale of assets | (2,333 | ) | (69,543 | ) | (14,206 | ) | (80,595 | ) | |||||||||
| Interest expense | (72,156 | ) | (47,265 | ) | (140,329 | ) | (120,358 | ) | |||||||||
| Interest income | 35,299 | 106,078 | 87,411 | 163,997 | |||||||||||||
| Loss on foreign currency exchange transactions | (134,527 | ) | (421,082 | ) | (248,246 | ) | (341,862 | ) | |||||||||
| Other income | 120,684 | 18,162 | 174,998 | 18,541 | |||||||||||||
| Total other income (expenses) | (53,033 | ) | (413,650 | ) | (140,372 | ) | (360,277 | ) | |||||||||
| Net income (loss) before income taxes | 2,031,736 | (1,418,247 | ) | 1,887,433 | (3,607,394 | ) | |||||||||||
| Income tax provision | (273,275 | ) | (87,683 | ) | (348,498 | ) | (127,759 | ) | |||||||||
| Net income (loss) | 1,758,461 | (1,505,930 | ) | 1,538,935 | (3,735,153 | ) | |||||||||||
| Non-controlling interest | (883,396 | ) | 138,764 | (1,074,898 | ) | 529,961 | |||||||||||
| Net income (loss) attributable to NetSol | $ | 875,065 | $ | (1,367,166 | ) | $ | 464,037 | $ | (3,205,192 | ) | |||||||
| Net income (loss) per common share | |||||||||||||||||
| Basic | $ | 0.08 | $ | (0.14 | ) | $ | 0.05 | $ | (0.34 | ) | |||||||
| Diluted | $ | 0.08 | $ | (0.14 | ) | $ | 0.04 | $ | (0.34 | ) | |||||||
| Weighted average number of shares outstanding | |||||||||||||||||
| Basic | 10,308,186 | 9,654,334 | 10,294,760 | 9,433,829 | |||||||||||||
| Diluted | 10,548,922 | 9,654,334 | 10,535,496 | 9,433,829 | |||||||||||||
| NetSol Technologies, Inc. and Subsidiaries | |||||||||||
| Consolidated Statement of Cash Flows | |||||||||||
| For the Six Months | |||||||||||
| Ended December 31, | |||||||||||
| 2015 | 2014 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income (loss) | $ | 1,538,935 | $ | (3,735,156 | ) | ||||||
| Adjustments to reconcile net income (loss) | |||||||||||
| to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | 3,512,489 | 4,621,096 | |||||||||
| Provision for bad debts | 37,043 | - | |||||||||
| Loss on sale of assets | 14,206 | 80,595 | |||||||||
| Stock issued for services | 326,019 | 606,536 | |||||||||
| Fair market value of warrants and stock options granted | 145,716 | 311,244 | |||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable | 111,967 | (2,279,774 | ) | ||||||||
| Accounts receivable - related party | (2,383,828 | ) | 40,907 | ||||||||
| Revenues in excess of billing | 535,937 | (765,672 | ) | ||||||||
| Other current assets | (758,802 | ) | 286,838 | ||||||||
| Accounts payable and accrued expenses | 142,008 | 59 | |||||||||
| Unearned revenue | (1,190,072 | ) | 4,857,469 | ||||||||
| Net cash provided by operating activities | 2,031,618 | 4,024,142 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Purchases of property and equipment | (1,177,443 | ) | (1,772,866 | ) | |||||||
| Sales of property and equipment | 357,933 | 179,904 | |||||||||
| Purchase of non-controlling interest in subsidiaries | (347,623 | ) | (577,222 | ) | |||||||
| Net cash used in investing activities | (1,167,133 | ) | (2,170,184 | ) | |||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from sale of common stock | 64,931 | 1,610,000 | |||||||||
| Proceeds from the exercise of stock options and warrants | 194,680 | 116,400 | |||||||||
| Restricted cash | - | 2,438,844 | |||||||||
| Dividend paid by subsidiary to non-controlling interest | - | (780,106 | ) | ||||||||
| Proceeds from bank loans | 306,750 | 57,405 | |||||||||
| Payments on capital lease obligations and loans - net | (530,733 | ) | (2,867,974 | ) | |||||||
| Net cash provided by financing activities | 35,628 | 574,569 | |||||||||
| Effect of exchange rate changes | (1,082,297 | ) | (404,696 | ) | |||||||
| Net increase (decrease) in cash and cash equivalents | (182,184 | ) | 2,023,831 | ||||||||
| Cash and cash equivalents, beginning of the period | 14,168,957 | 11,462,695 | |||||||||
| Cash and cash equivalents, end of period | $ | 13,986,773 | $ | 13,486,526 | |||||||
| NetSol Technologies, Inc. and Subsidiaries | |||||||||||||||
| Reconciliation to GAAP | |||||||||||||||
| Three Months | Three Months | Six Months | Six Months | ||||||||||||
| Ended | Ended | Ended | Ended | ||||||||||||
| December 31, 2015 | December 31, 2014 | December 31, 2015 | December 31, 2014 | ||||||||||||
| Net Income (loss) before preferred dividend, per GAAP | $ | 875,065 | $ | (1,367,166 | ) | $ | 464,037 | $ | (3,205,192 | ) | |||||
| Income Taxes | 273,275 | 87,683 | 348,498 | 127,759 | |||||||||||
| Depreciation and amortization | 1,747,082 | 2,238,756 | 3,512,489 | 4,621,096 | |||||||||||
| Interest expense | 72,156 | 47,265 | 140,329 | 120,358 | |||||||||||
| Interest (income) | (35,299 | ) | (106,078 | ) | (87,411 | ) | (163,997 | ) | |||||||
| EBITDA | $ | 2,932,279 | $ | 900,460 | $ | 4,377,942 | $ | 1,500,024 | |||||||
| Add back: | |||||||||||||||
| Non-cash stock-based compensation | 393,985 | 471,996 | 471,735 | 917,780 | |||||||||||
| Adjusted EBITDA | $ | 3,326,264 | $ | 1,372,456 | $ | 4,849,677 | $ | 2,417,804 | |||||||
| Adjusted EBITDA margin | 20.54 | % | 11.11 | % | 16.44 | % | 10.71 | % | |||||||
| Weighted Average number of shares outstanding | |||||||||||||||
| Basic | 10,308,186 | 9,654,334 | 10,294,760 | 9,433,829 | |||||||||||
| Diluted | 10,548,922 | 9,654,334 | 10,535,497 | 9,433,829 | |||||||||||
| Basic adjusted EBITDA | $ | 0.32 | $ | 0.14 | $ | 0.47 | $ | 0.26 | |||||||
| Diluted adjusted EBITDA | $ | 0.32 | $ | 0.14 | $ | 0.46 | $ | 0.26 | |||||||
From time to time, NetSol may refer to Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, Amortization and Stock-based Compensation) and “non-GAAP adjusted diluted EPS or Adjusted EPS” 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 diluted EPS or Adjusted EPS does not measure diluted EPS as defined by GAAP, is not derived in accordance with GAAP and should not be considered by the reader as an alternative to reported diluted EPS. The reconciliation of GAAP and non-GAAP financial measures for the three and six month periods ended December 31, 2015 and 2014 are included in the above table. NetSol’s management believes that Adjusted EBITDA and Adjusted EPS 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 these are not representative of our ongoing operating performance and 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.
Investor Contacts:
PondelWilkinson
Roger Pondel | Matt Sheldon
investors@netsoltech.com
(310) 279-5980
Media Contacts:
PondelWilkinson
George Medici | gmedici@pondel.com
(310) 279-5968