OREANDA-NEWS. NetSol Technologies, Inc. (Nasdaq:NTWK), a global business services and enterprise application solutions provider, today announced results for its fiscal 2016 third quarter ended March 31, 2016.

Fiscal 2016 Third-Quarter Financial Results

Total net revenues for the 2016 third quarter rose 22% to $16.0 million from $13.1 million in the same period last year.

  • Total license fees were $1.8 million, compared with $1.2 million last year
  • Total maintenance fees were $3.4 million, compared with $3.0 million last year; and
  • Total services revenues advanced to $10.7 million from $8.8 million last year.

On a GAAP basis, net income for the third quarter improved to $849,000, or $0.08 per diluted share, as compared with a net loss of $1.6 million, or $(0.17) per share, in the third quarter of 2015.

Non-GAAP Adjusted EBITDA (which primarily removes depreciation and amortization and stock-based compensation) for the third quarter of 2016 was $3.2 million, or adjusted EPS of $0.30 per diluted share, as compared with adjusted EBITDA of $1.6 million, or adjusted EPS of $0.16 per diluted share, in the third 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.

Management Commentary
“The performance for the quarter came in as expected, reflecting multiple contracts underway for our entire portfolio of finance and leasing solutions,” said Najeeb Ghauri, CEO of NetSol. “We remain on track to achieve our guidance for the year and are excited about the progress being made on implementing our $100 million-plus multi-country deal.”

Naeem Ghauri, President and Head of Global Sales, said, “The 12-country NFS AscentTM implementation began ramping up in the 2016 fourth quarter in South Korea, South Africa, Australia and China, providing excellent reference points for our marketing efforts in Europe and North America. As a result, we are witnessing a marked improvement in our sales pipeline, which is a strong indicator of a growing market need for NFS Ascent, as companies look to improve their businesses processes and productivity, consolidate IT systems and create new, efficient ways of conducting business.”

Following is additional detail for the quarter:

  • Gross profit rose to $7.5 million from $4.7 million last year;
  • Operating expenses were nearly flat year-over-year; and
  • The company purchased 705,000 shares of NetSol PK common stock during the third quarter and a total of 1.4 million shares for the first nine months of 2016 for $767,000, resulting in a decrease in non-controlling interest to 33.4%.

Fiscal 2016 First Nine Months Financial Results

For the first nine months of fiscal 2016, total net revenues advanced to $45.5 million, with services income comprising $31.9 million. This compares with total net revenues of $35.7 million for the same period one year ago, with services revenues comprising $21.6 million for first nine months of fiscal 2015. The company reported GAAP net income of $1.3 million, or $0.12 per diluted share, for the first nine months of fiscal 2016, versus a net loss of $4.9 million, or $(0.51) per share, for the same period last year.

Non-GAAP adjusted EBITDA for the fiscal 2016 year-to-date period doubled to $8.0 million, or adjusted EPS of $0.76 per diluted share, from $4.0 million, or adjusted EPS of $0.41 per diluted share, for the same period in fiscal 2015.

Fiscal 2016 Business Outlook
The company continues to expect minimum revenues of $62 million for fiscal 2016.  Adjusted EPS is expected to exceed $1.00 per diluted share for fiscal 2016.

Fiscal 2016 Third Quarter Conference Call

When: Tuesday, May 10, 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.
   

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 1,500 professionals placed in eight strategically located support and delivery centers throughout the world.

(Tables Follow)

NetSol Technologies, Inc. and Subsidiaries
 
Consolidated Balance Sheets
 
  As of March 31,   As of June 30,
ASSETS 2016   2015
Current assets:      
Cash and cash equivalents $   11,881,159     $   14,168,957  
Restricted cash     90,000         90,000  
Accounts receivable, net of allowance of $501,496 and $524,565     6,072,413         6,480,344  
Accounts receivable, net - related party     6,467,551         3,491,899  
Revenues in excess of billings     8,860,248         5,267,275  
Other current assets     2,756,621         2,012,190  
Total current assets     36,127,992         31,510,665  
Investment   555,556         -  
Property and equipment, net     23,178,350         25,119,634  
Intangible assets, net     20,276,715         22,815,467  
Goodwill     9,516,568         9,516,568  
Total assets $   89,655,181     $   88,962,334  
       
LIABILITIES AND STOCKHOLDERS' EQUITY      
Current liabilities:      
Accounts payable and accrued expenses $   6,354,959     $   5,952,561  
Current portion of loans and obligations under capitalized leases     4,538,218         3,896,353  
Unearned revenues     3,412,019         4,897,327  
Common stock to be issued     88,324         88,324  
Total current liabilities     14,393,520         14,834,565  
Long term loans and obligations under capitalized leases; less current maturities     315,653         487,492  
Total liabilities     14,709,173         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;      
10,558,600 shares issued and 10,531,321 outstanding as of March 31, 2016 and      
10,307,826 shares issued and 10,280,547 outstanding as of June 30, 2015     105,586         103,078  
Additional paid-in-capital     120,513,094         119,209,807  
Treasury stock (27,279 shares)     (415,425 )       (415,425 )
Accumulated deficit     (39,412,605 )       (40,726,121 )
Stock subscription receivable     (947,353 )       (1,204,603 )
Other comprehensive loss     (18,898,747 )       (17,167,100 )
Total NetSol stockholders' equity     60,944,550         59,799,636  
Non-controlling interest     14,001,458         13,840,641  
Total stockholders' equity     74,946,008         73,640,277  
Total liabilities and stockholders' equity $   89,655,181     $   88,962,334  
       
NetSol Technologies, Inc. and Subsidiaries
Consolidated Statement of Operations
 
    For the Three Months For the Nine Months
    Ended March 31, Ended March 31,
     2016 2015 2016 2015
Net Revenues:          
License fees   $   1,358,469   $   1,215,201   $   3,261,514   $   4,900,469  
Maintenance fees       3,388,526       2,978,587       9,641,236       8,963,240  
Services       8,159,490       7,022,982       24,487,467       16,650,646  
License fees - related party       484,644       -       484,644       -  
Maintenance fees - related party       28,423       43,948       218,409       237,523  
Services - related party       2,554,347       1,813,197       7,377,430       4,901,792  
Total net revenues       15,973,899       13,073,915       45,470,700       35,653,670  
           
Cost of revenues:          
Salaries and consultants        5,542,829       4,895,515       15,468,284       13,310,632  
Travel        543,672       760,065       1,779,134       1,772,289  
Depreciation and amortization        1,483,695       1,912,492       4,419,396       5,514,812  
Other        860,868       792,737       2,822,347       2,129,646  
Total cost of revenues       8,431,064       8,360,809       24,489,161       22,727,379  
           
Gross profit       7,542,835       4,713,106       20,981,539       12,926,291  
           
Operating expenses:          
Selling and marketing       1,896,295       1,712,151       5,597,689       4,419,466  
Depreciation and amortization       321,230       551,127       898,018       1,569,903  
General and administrative       3,957,028       3,997,186       10,859,751       11,584,696  
Research and development cost       132,123       84,038       362,117       230,740  
Total operating expenses       6,306,676       6,344,502       17,717,575       17,804,805  
           
Income (loss) from operations       1,236,159       (1,631,396 )     3,263,964       (4,878,514 )
           
Other income and (expenses)          
Gain (loss) on sale of assets       14,848       6,496       642       (74,099 )
Interest expense       (56,070 )     (45,234 )     (196,399 )     (165,592 )
Interest income       29,673       97,094       117,084       261,091  
Gain (loss) on foreign currency exchange transactions       12,955       (247,845 )     (235,291 )     (589,707 )
Other income        25,258       607,111       200,256       625,650  
Total other income (expenses)       26,664       417,622       (113,708 )     57,343  
           
Net income (loss) before  income taxes       1,262,823       (1,213,774 )     3,150,256       (4,821,171 )
Income tax provision       (106,209 )     (107,398 )     (454,707 )     (235,157 )
Net income (loss)        1,156,614       (1,321,172 )     2,695,549       (5,056,328 )
Non-controlling interest       (307,135 )     (315,073 )     (1,382,033 )     214,888  
Net income (loss) attributable to NetSol   $   849,479   $   (1,636,245 ) $   1,313,516   $   (4,841,440 )
           
           
Net income (loss) per common share          
Basic   $   0.08   $   (0.17 ) $   0.13   $   (0.51 )
Diluted   $   0.08   $   (0.17 ) $   0.12   $   (0.51 )
           
Weighted average number of shares outstanding          
Basic       10,427,664       9,914,321       10,338,740       9,573,336  
Diluted       10,643,479       9,914,321       10,554,555       9,573,336  
 
NetSol Technologies, Inc. and Subsidiaries
Consolidated Statement of Cash Flows
 
  For the Nine Months
  Ended March 31,
  2016 2015
Cash flows from operating activities:    
Net income (loss) $   2,695,549   $   (5,056,328 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:     
Depreciation and amortization      5,317,414       7,084,715  
Provision for bad debts      49,605       -  
(Gain) loss on sale of assets      (642 )     74,099  
Stock issued for services      694,693       1,119,721  
Fair market value of warrants and stock options granted      145,716       466,866  
Changes in operating assets and liabilities:     
Accounts receivable      115,428       (2,369,950 )
Accounts receivable - related party      (3,111,316 )     (198,640 )
Revenues in excess of billing      (3,248,121 )     (2,734,788 )
Other current assets      (838,913 )     188,048  
Accounts payable and accrued expenses      617,112       1,008,270  
Unearned revenue      (1,305,724 )     2,984,297  
Net cash provided by operating activities     1,130,801       2,566,310  
     
Cash flows from investing activities:     
Purchases of property and equipment      (2,523,865 )     (2,499,314 )
Sales of property and equipment      556,280       209,718  
Investment      (555,556 )     -  
Purchase of subsidiary shares from open market      (767,397 )     (577,222 )
Net cash used in investing activities      (3,290,538 )     (2,866,818 )
     
Cash flows from financing activities:     
Proceeds from sale of common stock      64,931       1,863,000  
Proceeds from the exercise of stock options and warrants      728,699       116,400  
Proceeds from exercise of subsidiary options      16,744       12,306  
Restricted cash      -       2,438,844  
Dividend paid by subsidiary to Non controlling interest      -       (780,106 )
Proceeds from bank loans      1,334,285       -  
Payments on capital lease obligations and loans - net      (736,405 )     (3,459,143 )
Net cash provided by financing activities      1,408,254       191,301  
Effect of exchange rate changes      (1,536,315 )     (466,130 )
Net decrease in cash and cash equivalents      (2,287,798 )     (575,337 )
Cash and cash equivalents, beginning of the period      14,168,957       11,462,695  
Cash and cash equivalents, end of period  $   11,881,159   $   10,887,358  
 
NetSol Technologies, Inc. and Subsidiaries
Reconciliation to GAAP
 
  Three Months Three Months Nine Months Nine Months
  Ended Ended Ended Ended
  March 31, 2016 March 31, 2015 March 31, 2016 March 31, 2015
         
Net Income (loss) before preferred dividend, per GAAP  $   849,479   $   (1,636,245 ) $   1,313,516   $   (4,841,440 )
Income Taxes      106,209       107,398       454,707       235,157  
Depreciation and amortization      1,804,925       2,463,619       5,317,414       7,084,715  
Interest expense      56,070       45,234       196,399       165,592  
Interest (income)      (29,673 )     (97,094 )     (117,084 )     (261,091 )
EBITDA  $   2,787,010   $   882,912   $   7,164,952   $   2,382,933  
Add back:         
Non-cash stock-based compensation      368,674       668,807       840,409       1,586,587  
Adjusted EBITDA  $   3,155,684   $   1,551,719   $   8,005,361   $   3,969,520  
         
Adjusted EBITDA margin    19.76 %   11.87 %   17.61 %   11.13 %
         
         
Weighted Average number of shares outstanding         
Basic      10,427,664       9,914,321       10,338,740       9,573,336  
Diluted      10,643,479       9,937,750       10,554,555       9,596,765  
         
Basic adjusted EBITDA  $   0.30   $   0.16   $   0.77   $   0.41  
Diluted adjusted EBITDA  $   0.30   $   0.16   $   0.76   $   0.41