GlobeNewswire Inc | Nov 16, 2020 08:00AM EST

November 16, 2020

-- 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., Nov. 16, 2020 (GLOBE NEWSWIRE) -- 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 Companys 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 Companys 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 NETSOLs 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. -- NETSOLs 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 ResultsTotal 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 weve 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 OutlookGhauri 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 UpdateWe 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 CallNETSOL 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: 1-877-407-0789International 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 NETSOLs 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: 1-844-512-2921International replay number: 1-412-317-6671Replay ID: 13712135

About NETSOL TechnologiesNETSOL Technologies, Inc. (Nasdaq: NTWK) is a worldwide provider of IT and enterprise software solutions primarily serving the global leasing and finance industry. The Companys 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 OtozOtoz 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 StatementsThis 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 MeasuresThe 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 ColtonGateway Investor Relations1-949-574-3860investors@netsoltech.com

NETSOL Technologies, Inc. and SubsidiariesSchedule 1: Consolidated Balance Sheets

As of As of ASSETS September 30, 2020 June 30, 2020Current assets: Cash and cash $ 24,885,365 $ 20,166,830 equivalents Accounts receivable, net of allowance of 6,732,575 10,131,752 $279,903 and $435,611 Accounts receivable - related party, 1,282,505 net of allowance - of $1,373,099 and $90,594 Revenues in excess of billings, net of 18,430,766 17,198,281 allowance of $91,250 and $188,914 Revenues in excess of billings - related party, - 8,163 net of allowance of $8,163 and $0 Other current assets, net of allowance of 2,616,769 3,108,180 $1,243,633 and $0 Total current 52,665,475 51,895,711 assetsRevenues in excess of billings, net - - 1,300,289 long termConvertible notereceivable -related party, net 4,250,000 of allowance of -$4,250,000 and$0Property and 11,256,306 11,329,631 equipment, netRight of use ofassets - operating 2,133,902 2,360,129 leasesLong term 2,417,291 2,387,692 investmentOther assets 41,175 41,992 Intangible assets, 5,032,630 5,391,077 netGoodwill 9,516,568 9,516,568 Total assets $ 83,063,347 $ 88,473,089 LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities: Accounts payable and accrued $ 6,005,999 $ 5,680,837 expenses Current portion of loans and obligations 9,677,277 9,139,561 under finance leases Current portion of operating 1,165,957 1,111,912 lease obligations Unearned 2,775,600 4,095,472 revenues Common stock to 88,324 88,324 be issued Total current 19,713,157 20,116,106 liabilitiesLoans andobligations underfinance leases; 1,705,699 1,539,975 less currentmaturitiesOperating leaseobligations; less 1,110,832 1,339,965 current maturities Total 22,529,688 22,996,046 liabilitiesCommitments and contingenciesStockholders' 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 11,874,646 121,371 121,222 outstanding as of June 30, 2020 Additional 128,764,618 128,677,754 paid-in-capital Treasury stock (at cost, 394,555 shares and 247,503 shares as of September 30, 2020 and June (1,920,645 ) (1,455,969 ) 30, 2020, respectively) Accumulated (39,861,985 ) (34,269,817 ) deficit Other comprehensive (33,210,231 ) (34,085,047 ) loss Total NetSol stockholders' 53,893,128 58,988,143 equity Non-controlling 6,640,531 6,488,900 interest Total stockholders' 60,533,659 65,477,043 equity Total liabilities and $ 83,063,347 $ 88,473,089 stockholders' equity



NETSOL Technologies, Inc. and SubsidiariesSchedule 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 296,041 (1,760,190 ) transactions 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 SubsidiariesSchedule 3: Consolidated Statement of Cash Flows

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

NETSOL Technologies, Inc. and SubsidiariesSchedule 4: Reconciliation to GAAP

For the Three For the Three Months Ended Months Ended September 30, September 30, 2020 2019 Net Income (loss) attributable to $ 717,554 $ (1,827,947 ) NetSolNon-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 outstandingBasic 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 interestto net income attributable to non-controlling interest is as follows Net Income (loss) attributable to $ 405,923 $ (433,312 ) non-controlling interestIncome 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 $ 698,844 $ (191,235 ) interest