GlobeNewswire Inc | May 13, 2021 08:00AM EDT

May 13, 2021

-- Third Straight Quarter of Sequential Revenue Increases Driven by New Wins, Renewals, and Robust Growth of 10% In High-Margin SaaS and Cloud Business, Leading to Operating Income Improvement of Over $800,000 -- Pipeline Growth within North American and European Regions Lays Groundwork for Expected Future Sales in Key Expansion Markets

CALABASAS, Calif., May 13, 2021 (GLOBE NEWSWIRE) -- NETSOL Technologies, Inc. (Nasdaq: NTWK), a global business services and enterprise application solutions provider, reported results for the fiscal third quarter ended March 31, 2020.

Fiscal Third Quarter 2021 and Recent Operational Highlights

-- Subscription (SaaS and Cloud) and support revenues reached $5.7 million, a 10% increase over the prior year and a $23+ million run rate projected over the coming twelve months with opportunities for upside. -- Appointed James Freto as Vice President of Sales for NETSOL Technologies Americas. Freto will be responsible for developing the sales, customer relationship management, market development and growth of NETSOL products and services across North America. With his prior experience with Fortune 500 financial product and services provider FIS as a Senior Sales Executive, Freto brings directly applicable sales experience and subject matter expertise in key NETSOL markets. -- Secured a five-year, single-digit, multi-million-dollar renewal of its current agreement with an existing tier-one Japanese automotive customer in Thailand. Under the terms of the contract, this customer will continue to license certain key components of NETSOLs NFS Retail platform, including its NFS Credit Application Processing System (CAP) and NFS Contract Management System (CMS). -- Went live with the leasing division of a mid-sized regional bank in the U.S. using the SaaS version of NETSOLs LeasePak solution. -- NETSOLs mobility startup subsidiary, Otoz, announced the expected calendar second quarter launch of a U.S. Digital Retail Platform in partnership with a tier one automotive brand. Beginning in California, the solution is intended to be rolled out by over 100 dealerships across all 50 states. -- Generated over $1.0 million by successfully implementing change requests from various customers across multiple regions during the fiscal second quarter.

Fiscal Third Quarter 2021 Financial ResultsTotal net revenues for the third quarter of fiscal 2021 were $13.8 million, compared with $13.5 million in the prior year period. The increase in total net revenues was primarily driven by an increase in total license fees of $2.0 million and an increase in total subscription and support revenues of $521,000, which offset a decrease in total services revenues of $2.3 million.

-- Total license fees were $2.1 million, compared with $93,000 in the prior year period. -- Total subscription (SaaS and Cloud) and support revenues were $5.7 million, compared with $5.2 million in the prior year period. -- Total services revenues were $6.0 million, compared with $8.3 million in the prior year period.

Gross profit for the third quarter of fiscal 2021 increased 6.7% to $6.4 million (or 46.6% of net revenues), compared to $6.0 million (or 44.5% of net revenues) in the third quarter of fiscal 2020. The increases in gross profit and gross profit as a percentage of revenue were primarily due to a decrease in cost of sales of $150,000. The decrease in cost of sales was primarily due to a decrease in travel expenses of $901,000, which was offset by an increase in salaries and consultant fees of $522,000.

Operating expenses for the third quarter of fiscal 2021 decreased 6.8% to $6.0 million (or 43.3% of sales) from $6.4 million (or 47.3% of sales) for the third quarter of fiscal 2020. The decrease in operating expenses was primarily due to decreases in the general administrative expenses and research and development costs.

GAAP net loss attributable to NETSOL for the third quarter of fiscal 2021 totaled $(623,000) or $(0.05) per diluted share, compared with GAAP net income of $1.0 million or $0.09 per diluted share in the third quarter of fiscal 2020. GAAP net loss attributable to NETSOL included a $1.8 million loss on foreign currency exchange transactions in the third quarter of fiscal 2021, which was a decrease from a gain of $1.8 million in the prior year period.

Non-GAAP adjusted EBITDA for the third quarter of fiscal 2021 totaled $197,000 or $0.02 per diluted share, compared with non-GAAP adjusted EBITDA of $1.8 million or $0.15 per diluted share in the third quarter of fiscal 2020 (see note regarding Use of Non-GAAP Financial Measures, below for further discussion of this non-GAAP measure).

At March 31, 2021, cash and cash equivalents were $30.6 million, an increase from $20.2 million at June 30, 2020.

Stock Repurchase Program On July 30, 2020, NETSOLs Board of Directors approved a stock repurchase program that authorized potential repurchases of up to $2 million of its common stock over a six-month period. After the expiry of the original program, the Companys Board of Directors approved the extension of the repurchase program through June 28, 2021. Under the program, the Company may repurchase its common stock in the open market from time-to-time, in amounts, at prices, and at such times as the Company deems appropriate, subject to market conditions and federal and state laws governing such transactions. NETSOL expects to fund the repurchase with its existing cash balance and cash generated from operations.

As of March 31, 2021, the Company had repurchased 603,688 shares of its common stock at an aggregate value of $2,064,799.

Management CommentaryIn the fiscal third quarter we continued to make incremental progress across our business as the global economy and broader leasing and financing industry slowly, but surely, begins to re-open, said NETSOL Co-Founder, Chairman and Chief Executive Officer Najeeb Ghauri. Financially, we were encouraged by the steady performance within our subscription and support segment leading to healthy operating income growth; over time, we expect to build a larger, high-margin, recurring based to drive sustainable profitability. During the period, we generated most of our new revenues from implementations and contract renewals within our APAC region, but we have also seen a significant increase in our pipeline of opportunities within the North American and European markets, which have collectively passed our APAC pipeline for the first time in our history. Going forward, our record cash position of $30 million gives us ample resources to fund rebooted global sales and marketing activities. Longer term, the pandemic has made it clear that all businesses need to have a sound digital strategy, and were confident that well benefit from this transition as customers continue to transform processes and future-proof their businesses.

Otoz Update

Since late March we have been hard at work to deploy Otozs digital, consumer-facing sales origination app for a tier one U.S. automotive OEM, said Naeem Ghauri, President of NETSOL Technologies, Inc. and Otoz CEO. This new go-to-market offering represents a breakthrough development, which deploys a cloud-native and fully digital auto sales app, designed to revolutionize the customer journey from the normally cumbersome process of buying at a dealer and replacing it with a seamless, mobile-first experience. When complete, we will be the first to market at scale, eventually rolling out across all 50 states. Our ambition is to be an early leader in this fast-evolving space. Digital will soon be the go-to channel for auto sales, and we are setting the benchmarks for its adoption by providing cutting-edge technology and building compelling customer experiences. We look forward to sharing more updates on upcoming developments on this exciting new direction for NETSOL in the U.S.

Conference CallNETSOL Technologies management will hold a conference call today (May 13, 2021) 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 through May 27, 2021.

Toll-free replay number: 1-844-512-2921International replay number: 1-412-317-6671Replay ID: 13719508

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 March 31, 2021 June 30, 2020 Current assets:

Cash and cash equivalents $ 30,599,137 $ 20,166,830 Accounts receivable, net of 12,176,722 10,131,752 allowance of $272,936and $435,611 Accounts receivable - related party, net of allowance of - 1,282,505 $1,373,099 and $90,594 Revenues in excess of billings, net of allowance of $94,706and 9,802,047 17,198,281 $188,914 Revenues in excess of billings - related party, net of allowance of - 8,163 $8,163and $0 Other current assets, net of 2,983,686 3,108,180 allowance of $1,243,633and $0 Total current assets 55,561,592 51,895,711 Revenues in excess of billings, net - 946,184 1,300,289 long termConvertible note receivable - relatedparty, net of allowance of $4,250,000 - 4,250,000 and $0Property and equipment, net 12,902,342 11,329,631 Right of use of assets - operating 1,637,125 2,360,129 leasesLong term investment 3,195,980 2,387,692 Other assets 48,841 41,992 Intangible assets, net 4,507,155 5,391,077 Goodwill 9,516,568 9,516,568 Total assets $ 88,315,787 $ 88,473,089 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued $ 6,156,782 $ 5,680,837 expenses Current portion of loans and 12,634,914 9,139,561 obligations under finance leases Current portion of operating lease 956,006 1,111,912 obligations Unearned revenues 5,728,790 4,095,472 Common stock to be issued 88,324 88,324 Total current liabilities 25,564,816 20,116,106 Loans and obligations under finance 910,107 1,539,975 leases; less current maturitiesOperating lease obligations; less 761,653 1,339,965 current maturities Total liabilities 27,236,576 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; 12,157,871 shares issued and 11,306,680 outstanding as of March 31, 2021 and 12,122,149 shares issued and 11,874,646 outstanding as of June 121,580 121,222 30, 2020 Additional paid-in-capital 128,881,744 128,677,754 Treasury stock (at cost, 851,191 shares and 247,503 shares as of March 31, 2021 and June 30, (3,520,769 ) (1,455,969 ) 2020, respectively) Accumulated deficit (40,727,320 ) (34,269,817 ) Other comprehensive loss (31,118,798 ) (34,085,047 ) Total NetSol stockholders' equity 53,636,437 58,988,143 Non-controlling interest 7,442,774 6,488,900 Total stockholders' equity 61,079,211 65,477,043 Total liabilities and $ 88,315,787 $ 88,473,089 stockholders' equity

NETSOL Technologies, Inc. and SubsidiariesSchedule 2: Consolidated Statement of Operations

For the Three Months For the Nine Months Ended March 31, Ended March 31, 2021 2020 2021 2020 Net Revenues: License fees $ 2,120,963 $ 93,076 $ 4,710,942 $ 2,733,998 Subscription 5,674,776 5,153,692 16,571,441 14,864,804 and support Services 5,988,257 8,222,227 18,270,451 24,992,271 Services - - 61,842 - 202,199 related party Total net 13,783,996 13,530,837 39,552,834 42,793,272 revenues Cost of revenues: Salaries and 5,372,302 4,850,438 15,193,613 13,931,274 consultants Travel 151,075 1,052,033 414,001 3,967,591 Depreciation and 759,768 737,637 2,180,766 2,191,654 amortization Other 1,075,403 868,491 2,915,122 2,767,927 Total cost 7,358,548 7,508,599 20,703,502 22,858,446 of revenues Gross profit 6,425,448 6,022,238 18,849,332 19,934,826 Operating expenses: Selling and 1,595,967 1,587,821 4,763,598 5,189,785 marketing Depreciation and 272,075 206,035 715,437 623,901 amortization General and 3,860,509 4,151,394 11,353,933 12,638,797 administrative Research and development 234,678 453,050 431,086 1,580,625 cost Total operating 5,963,229 6,398,300 17,264,054 20,033,108 expenses Income (loss) from 462,219 (376,062 ) 1,585,278 (98,282 ) operations Other income and (expenses) Gain (loss) on (53,012 ) 129 (127,285 ) 368 sale of assets Interest (98,656 ) (94,395 ) (296,224 ) (246,064 ) expense Interest income 231,979 448,368 643,654 1,283,279 Gain (loss) on foreign currency (1,825,349 ) 1,770,894 (1,515,327 ) 71,765 exchange transactions Share of net loss from (80,953 ) (78,502 ) (232,488 ) (432,522 ) equity investment Other income 521,758 17,012 654,395 243,325 Total other income (1,304,233 ) 2,063,506 (873,275 ) 920,151 (expenses) Net income (loss)before income (842,014 ) 1,687,444 712,003 821,869 taxesIncome tax (133,156 ) (218,351 ) (642,884 ) (1,067,099 ) provisionNet income (loss) (975,170 ) 1,469,093 69,119 (245,230 ) Non-controlling 351,939 (468,286 ) (216,900 ) 4,065 interestNet income (loss)attributable to $ (623,231 ) $ 1,000,807 $ (147,781 ) $ (241,165 ) NetSol Net income (loss) per share: Net income (loss) per common share Basic $ (0.05 ) $ 0.09 $ (0.01 ) $ (0.02 ) Diluted $ (0.05 ) $ 0.09 $ (0.01 ) $ (0.02 ) Weighted averagenumber of shares outstanding Basic 11,343,406 11,753,063 11,571,878 11,713,827 Diluted 11,343,406 11,753,063 11,571,878 11,713,827

NETSOL Technologies, Inc. and SubsidiariesSchedule 3: Consolidated Statement of Cash Flows

For the Nine Months Ended March 31, 2021 2020 Cash flows from operating activities: Net income (loss) $ 69,119 $ (245,230 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 2,896,203 2,815,555 Provision for bad debts (280,363 ) 75,437 Share of net loss from investment 232,488 432,522 under equity method (Gain) loss on sale of assets 127,285 (368 ) Stock based compensation 239,333 565,287 Changes in operating assets and liabilities: Accounts receivable (777,953 ) (651,991 ) Accounts receivable - related - 1,979,232 party Revenues in excess of billing 7,485,646 (1,394,184 ) Revenues in excess of billing - - 106,592 related party Other current assets (791,849 ) (824,068 ) Accounts payable and accrued (69,021 ) 63,289 expenses Unearned revenue 1,256,456 (2,510,954 ) Net cash provided by operating 10,387,344 411,119 activities Cash flows from investing activities: Purchases of property and equipment (2,109,058 ) (1,011,285 ) Sales of property and equipment 131,293 33,820 Convertible note receivable - - (600,000 ) related party Investment in associates (155,500 ) - Net cash used in investing (2,133,265 ) (1,577,465 ) activities Cash flows from financing activities: Proceeds from exercise of subsidiary - 11,621 options Purchase of treasury stock (2,064,800 ) - Dividend paid by subsidiary to - (1,920,618 ) non-controlling interest Proceeds from bank loans 2,109,572 2,312,968 Payments on finance lease (533,344 ) (422,051 ) obligations and loans - net Net cash used in financing (488,572 ) (18,080 ) activitiesEffect of exchange rate changes 2,666,800 (438,610 ) Net increase (decrease) in cash and 10,432,307 (1,623,036 ) cash equivalentsCash and cash equivalents at beginning 20,166,830 17,366,364 of the periodCash and cash equivalents at end of $ 30,599,137 $ 15,743,328 period

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

For the Three For the Three For the Nine For the Nine Months Ended Months Ended Months Ended Months Ended March 31, 2021 March 31, 2020 March 31, 2021 March 31, 2020 Net Income(loss) $ (623,231 ) $ 1,000,807 $ (147,781 ) $ (241,165 ) attributable toNetSolNon-controlling (351,939 ) 468,286 216,900 (4,065 ) interestIncome taxes 133,156 218,351 642,884 1,067,099 Depreciationand 1,031,843 943,672 2,896,203 2,815,555 amortizationInterest 98,656 94,395 296,224 246,064 expenseInterest (231,979 ) (448,368 ) (643,654 ) (1,283,279 ) (income)EBITDA $ 56,506 $ 2,277,143 $ 3,260,776 $ 2,600,209 Add back: Non-cashstock-based 74,169 236,702 239,333 565,287 compensationAdjusted $ 130,675 $ 2,513,845 $ 3,500,109 $ 3,165,496 EBITDA, grossLessnon-controlling 66,659 (729,735 ) (1,074,038 ) (885,144 ) interest (a)Adjusted $ 197,334 $ 1,784,110 $ 2,426,071 $ 2,280,352 EBITDA, net WeightedAverage number of sharesoutstandingBasic 11,343,406 11,753,063 11,571,878 11,713,827 Diluted 11,343,406 11,753,063 11,571,878 11,713,827 Basic adjusted $ 0.02 $ 0.15 $ 0.21 $ 0.19 EBITDADiluted $ 0.02 $ 0.15 $ 0.21 $ 0.19 adjusted EBITDA (a)Thereconciliationof adjusted EBITDA ofnon-controllinginterestto net incomeattributable tonon-controlling interest is asfollows Net Income(loss)attributable to $ (351,939 ) $ 468,286 $ 216,900 $ (4,065 ) non-controllinginterestIncome Taxes 34,867 59,983 127,749 303,610 Depreciationand 283,716 271,244 812,816 800,882 amortizationInterest 29,585 28,068 89,929 72,600 expenseInterest (71,440 ) (113,413 ) (204,604 ) (334,584 ) (income)EBITDA $ (75,211 ) $ 714,168 $ 1,042,790 $ 838,443 Add back: Non-cashstock-based 8,552 15,567 31,248 46,701 compensationAdjusted EBITDAof $ (66,659 ) $ 729,735 $ 1,074,038 $ 885,144 non-controllinginterest