NETSOL Technologies Reports Second Quarter Fiscal 2025 Results

Double digit growth in subscription and support revenues in 2Q’25Total service revenue increased 26% in 2Q’2545% gross margins in 2Q’25Cash and cash equivalents increased to $21.3 million ENCINO, Calif., Feb. 13, 2025 (GLOBE NEWSWIRE) -- NETSOL Technologies, Inc. (Nasdaq: NTWK), a global business services and asset finance solutions provider, reported results for the second fiscal quarter and six months ended December 31, 2024. Najeeb Ghauri, Co-Founder, Chief Executive Officer, and Chairman of NETSOL Technologies Inc., commented, “Our second quarter of fiscal 2025 was highlighted by strong growth in recurring revenues which have been a key strategic focus of ours. During the quarter, we also made investments in the business which better position us for long-term growth. While these investments, particularly in AI, impacted our short-term profitability, they better position us to capitalize on our established expertise as a leading provider of business services and asset financing solutions. With a strong sales pipeline and growing market presence in the US, we believe that we are well positioned to drive positive results in the full fiscal year.” Second Quarter 2025 Financial Results Total net revenues for the second quarter of fiscal 2025 increased 2% to $15.5 million, compared with $15.2 million in the prior year period, driven primarily by increases in subscription and support revenues and services revenues in the quarter. On a constant currency basis, total net revenues were $15.4 million. Total license fees were $73,000 compared with $3.0 million in the prior year period.Total subscription (SaaS and cloud) and support revenues increased 27% to $8.6 million compared with $6.8 million in the prior year period. Total subscription and support revenues as percentage of sales were 56%, compared with 45% in the prior year period. Included in subscription and support revenues in the quarter is a one-time catch up of approximately $1.0 million. Absent this one-time catch up, total subscription and support revenues in the quarter would have increased approximately 12% compared to the prior year period, which more accurately reflects increases in contract values. Total subscription and support revenues on a constant currency basis were $8.6 million.Total services revenues increased 26% to $6.8 million, compared with $5.4 million in the prior year period. Total services revenues on a constant currency basis were $6.7 million. Gross profit for the second quarter of fiscal 2025 was $6.9 million or 45% of net revenues, compared to $7.2 million or 47% of net revenues in the second quarter of fiscal 2024. On a constant currency basis, gross profit was $6.9 million or 45% of net revenues. Operating expenses for the second quarter of fiscal 2025 were $7.4 million or 48% of sales compared to $6.1 million or 40% of sales for the second quarter of fiscal 2024. On a constant currency basis, operating expenses were $7.3 million or 47% of sales. The increase in operating expenses is primarily related to increased sales and marketing costs as the Company continues to invest in growth opportunities. Loss from operations for the second quarter of fiscal 2025 was $(487,000) compared to income from operations of $1.0 million in the second quarter of fiscal 2024. On a constant currency basis, loss from operations was $389,000. GAAP net loss attributable to NETSOL for the second quarter of fiscal 2025 totaled $(1.1 million) or $(0.10) per diluted share, compared with GAAP net income of $408,000 or $0.04 per diluted share in the prior year period. Included in GAAP net loss attributable to NETSOL in the quarter was a loss on foreign currency exchange transactions of $(698,000). Non-GAAP EBITDA for the second quarter of fiscal 2025 was a loss of $(775,000) or $(0.07) per diluted share, compared with non-GAAP EBITDA of $1.4 million or $0.12 per diluted share in the second quarter of fiscal 2024 (see note regarding “Use of Non-GAAP Financial Measures,” below for further discussion of this non-GAAP measure). Non-GAAP adjusted EBITDA for the second quarter of fiscal 2025 was a loss of $(789,000) or $(0.07) per diluted share, compared with a non-GAAP adjusted EBITDA of $725,000 or $0.06 per diluted share in the prior year period (see note regarding “Use of Non-GAAP Financial Measures,” below for further discussion of this non-GAAP measure). Six Months Ended December 31, 2024, Financial Results Total net revenues for the six months ended December 31, 2024, were $30.1 million, compared to $29.5 million in the prior year period. On a constant currency basis, total net revenues were $29.8 million. License fees totaled $74,000 compared with $4.3 million in the prior year period. License fees on a constant currency basis were $71,000.Total subscription (SaaS and Cloud) and support revenues for the six months ended December 31, 2024, increased 26% to $16.8 million from $13.3 million in the prior year period. Subscription and support revenues in the six months ended December 31, 2024, included a one-time catch up of approximately $1.7 million. Absent this one-time catch up, total subscription and support revenues for the six months ended December 31, 2024 would have increased approximately 14% compared to the previous period, which more accurately reflects increases in contract values. Total subscription and support revenues on a constant currency basis were $16.7 million.Total services revenues increased 11% to $13.2 million from $11.9 million in the prior year period. Total services revenues on a constant currency basis were $13.0 million. The increase in total services revenues during this period is primarily related to increased implementation services in the US and the UK. Gross profit for the six months ended December 31, 2024, was $13.5 million or 45% of net revenues, compared with $13.3 million of 45% of net revenues in the prior year period. On a constant currency basis, gross profit for the six months ended December 31, 2024, was $13.6 million or 46% of net revenues as measured on a constant currency basis. Operating expenses for the six months ended December 31, 2024, were $14.7 million or 49% of sales, compared with $12.0 million or 41% of sales in the prior year period. On a constant currency basis, operating expenses for the six months ended December 31, 2024, were $14.4 million or 48% of sales on as measured on a constant currency basis. GAAP net loss attributable to NETSOL for the six months ended December 31, 2024, totaled $(1.1 million) or $(0.09) per diluted share, compared with GAAP net income of $439,000 or $0.04 per diluted share in the prior year period. On a constant currency basis, GAAP net loss attributable to NETSOL for the first six months of fiscal 2025 totaled $(877,000) or $(0.08) per diluted share. Non-GAAP EBITDA for the six months ended December 31, 2024, was a loss of $(473,000) or $(0.04) per diluted share, compared with non-GAAP EBITDA of $2.2 million or $0.19 per diluted share in the prior year period (see note regarding “Use of Non-GAAP Financial Measures,” below for further discussion of this non-GAAP measure). Non-GAAP adjusted EBITDA for the six months ended December 31, 2024, was a loss of $(585,000) or $(0.05) per diluted share, compared with non-GAAP adjusted EBITDA of $1.2 million or $0.10 per diluted share in the prior year period (see note regarding “Use of Non-GAAP Financial Measures,” below for further discussion of this non-GAAP measure). Balance Sheet and Capital Structure Cash and cash equivalents was $21.3 million as of December 31, 2024, compared with $19.1 million as of June 30, 2024. Working capital was $23.0 million as of December 31, 2024, compared with $23.6 million as of June 30, 2024. Total NETSOL stockholders’ equity at December 31, 2024, was $33.9 million or $2.91 per share. Management Commentary Najeeb Ghauri, Co-Founder, Chief Executive Officer, and Chairman of NETSOL Technologies Inc., commented, “We’re investing in AI product development to enhance our already robust suite of asset finance and leasing solutions. Our Transcend Retail platform is gaining encouraging traction, primarily driven by our agreement with a major German auto manufacturer that continues to ramp. Internationally, we announced a multi-million dollar expansion agreement during the quarter with a longstanding customer in China, and subsequent to the quarter, we expanded an existing agreement with a leading Japanese equipment finance company that is now live with our Transcend Finance platform in their operations in New Zealand and Australia. Contracts like these demonstrate both the depth of our customer relationships, and the superior performance and reliability of our products.” Roger Almond, Chief Financial Officer of NETSOL Technologies Inc., commented, “The growth in recurring revenues during the quarter demonstrates the continued evolution of our business model that over time should drive enhanced predictability and profitability in our business. During the quarter, the strategic investments we made in sales and marketing, coupled with the fluctuation in our licensing revenue as well as fluctuations in the foreign currency exchange rate, impacted our profitability. We are confident that the sustained growth in our recurring revenue, coupled with the investments we are making in the long-term growth of our business will translate into enhanced value for our shareholders. Importantly, our robust balance sheet with substantial cash and shareholders’ equity provides a strong financial underpinning to the business as we execute on our strategy.” Conference Call NETSOL Technologies management will hold a conference call on Thursday, February 13, 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: 877-407-0789International dial-in: 201-689-8562 Please call the conference telephone number 5-10 minutes prior to the start time and provide the operator with the conference ID: NETSOL. The operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Investor Relations at 203-972-9200. The conference call will also be broadcast live and available for replay here, along with additional replay access being provided through the company information section of NETSOL’s website. A telephone replay of the conference call will be available approximately three hours after the call concludes through Thursday, February 27, 2024. Toll-free replay number: 844-512-2921International replay number: 412-317-6671Replay ID: 13751199 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 Company’s suite of applications is backed by 40 years of domain expertise and supported by a committed team of professionals placed in ten strategically located support and delivery centers throughout the world. NETSOL’s products help companies transform their finance and leasing operations, providing a fully automated asset-based finance solution covering the complete leasing and finance lifecycle. Forward-Looking StatementsThis 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. 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: IMS Investor Relationsnetsol@imsinvestorrelations.com+1 203-972-9200 NETSOL Technologies, Inc. and Subsidiaries1: Consolidated Balance Sheets ASSETSDecember 31, 2024 June 30, 2024Current assets: Cash and cash equivalents$21,270,642 $19,127,165 Accounts receivable, net of allowance of $17,028 and $398,809 7,829,823 13,049,614 Revenues in excess of billings, net of allowance of $595,875 and $116,148 10,661,549 12,684,518 Other current assets 3,191,378 2,600,786 Total current assets 42,953,392 47,462,083 Revenues in excess of billings, net - long term 777,428 954,029 Property and equipment, net 4,934,498 5,106,842 Right of use assets - operating leases 1,069,948 1,328,624 Other assets 32,339 32,340 Intangible assets, net - - Goodwill 9,302,524 9,302,524 Total assets$59,070,129 $64,186,442 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses$7,332,560 $8,232,342 Current portion of loans and obligations under finance leases 8,784,232 6,276,125 Current portion of operating lease obligations 518,075 608,202 Unearned revenue 3,320,286 8,752,153 Total current liabilities 19,955,153 23,868,822 Loans and obligations under finance leases; less current maturities 86,951 95,771 Operating lease obligations; less current maturities 512,062 688,749 Total liabilities 20,554,166 24,653,342 Stockholders' equity: Preferred stock, $.01 par value; 500,000 shares authorized; - - Common stock, $.01 par value; 14,500,000 shares authorized; 12,589,046 shares issued and 11,650,015 outstanding as of December 31, 2024 , 12,359,922 shares issued and 11,420,891 outstanding as of June 30, 2024 125,894 123,602 Additional paid-in-capital 129,194,697 128,783,865 Treasury stock (at cost, 939,031 shares as of December 31, 2024 and June 30, 2024) (3,920,856) (3,920,856) Accumulated deficit (45,288,560) (44,212,313) Other comprehensive loss (46,187,766) (45,935,616) Total NetSol stockholders' equity 33,923,409 34,838,682 Non-controlling interest 4,592,554 4,694,418 Total stockholders' equity 38,515,963 39,533,100 Total liabilities and stockholders' equity$59,070,129 $64,186,442 NETSOL Technologies, Inc. and SubsidiariesSchedule 2: Consolidated Statement of Operations For the Three Months For the Six Months Ended December 31, Ended December 31, 2024 2023 2024 2023 Net Revenues: License fees$72,688 $2,990,453 $73,917 $4,270,902 Subscription and support 8,642,629 6,827,781 16,835,100 13,340,024 Services 6,821,344 5,419,707 13,226,142 11,869,196 Total net revenues 15,536,661 15,237,941 30,135,159 29,480,122 Cost of revenues 8,616,320 8,062,204 16,650,706 16,142,368 Gross profit 6,920,341 7,175,737 13,484,453 13,337,754 Operating expenses: Selling, general and administrative 7,073,622 5,807,494 14,037,943 11,240,463 Research and development cost 333,669 341,411 693,618 719,830 Total operating expenses 7,407,291 6,148,905 14,731,561 11,960,293 Income (loss) from operations (486,950) 1,026,832 (1,247,108) 1,377,461 Other income and (expenses) Interest expense (236,386) (290,322) (494,605) (566,339) Interest income 529,072 468,280 1,298,939 882,998 Gain (loss) on foreign currency exchange transactions (698,392) (14,617) (155,847) (148,870) Other income 38,064 (57,305) 191,555 576 Total other income (expenses) (367,642) 106,036 840,042 168,365 Net income before income taxes (854,592) 1,132,868 (407,066) 1,545,826 Income tax provision (331,614) (150,053) (561,431) (271,948)Net income (1,186,206) 982,815 (968,497) 1,273,878 Non-controlling interest 39,164 (574,499) (107,750) (834,672)Net income attributable to NetSol$(1,147,042) $408,316 $(1,076,247) $439,206 Net income per share: Net income per common share Basic$(0.10) $0.04 $(0.09) $0.04 Diluted$(0.10) $0.04 $(0.09) $0.04 Weighted average number of shares outstanding Basic 11,484,298 11,372,819 11,456,996 11,359,338 Diluted 11,484,298 11,372,819 11,456,996 11,359,338 NETSOL Technologies, Inc. and SubsidiariesSchedule 3: Consolidated Statement of Cash Flows For the Six Months Ended December 31, 2024 2023 Cash flows from operating activities: Net income (loss)$(968,497) $1,273,878 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 738,582 959,949 Provision (reversal) for bad debts 475,172 29,191 Gain on sale of assets (25,084) (98) Stock based compensation 95,134 111,787 Changes in operating assets and liabilities: Accounts receivable 4,405,610 5,722,791 Revenues in excess of billing 2,688,774 (4,239,762) Other current assets (170,856) 329,171 Accounts payable and accrued expenses (878,148) 72,501 Unearned revenue (5,990,971) (3,654,724) Net cash provided by operating activities 369,716 604,684 Cash flows from investing activities: Purchases of property and equipment (568,134) (570,584) Sales of property and equipment 45,535 1,248 Purchase of subsidiary shares (8,878) - Net cash used in investing activities (531,477) (569,336) Cash flows from financing activities: Proceeds from the exercise of stock options and warrants 430,000 - Dividend paid by subsidiary to non-controlling interest (306,799) - Proceeds from bank loans 2,676,932 135,123 Payments on finance lease obligations and loans - net (162,370) (162,482) Net cash provided by (used in) financing activities 2,637,763 (27,359) Effect of exchange rate changes (332,525) 118,273 Net increase (decrease) in cash and cash equivalents 2,143,477 126,262 Cash and cash equivalents at beginning of the period 19,127,165 15,533,254 Cash and cash equivalents at end of period $21,270,642 $15,659,516 NETSOL Technologies, Inc. and SubsidiariesSchedule 4: Reconciliation to GAAP For the Three Months For the Six Months Ended December 31, Ended December 31, 2024 2023 2024 2023 Net Income (loss) attributable to NetSol$(1,147,042) $408,316 $(1,076,247) $439,206 Non-controlling interest (39,164) 574,499 107,750 834,672 Income taxes 331,614 150,053 561,431 271,948 Depreciation and amortization 372,585 429,163 738,582 959,949 Interest expense 236,386 290,322 494,605 566,339 Interest (income) (529,072) (468,280) (1,298,939) (882,998)EBITDA$(774,693) $1,384,073 $(472,818) $2,189,116 Add back: Non-cash stock-based compensation 47,355 51,433 95,134 111,787 Adjusted EBITDA, gross$(727,338) $1,435,506 $(377,684) $2,300,903 Less non-controlling interest (a) (61,529) (710,171) (207,310) (1,109,611)Adjusted EBITDA, net$(788,867) $725,335 $(584,994) $1,191,292 Weighted Average number of shares outstanding Basic 11,484,298 11,372,819 11,456,996 11,359,338 Diluted 11,484,298 11,372,819 11,456,996 11,359,338 Basic adjusted EBITDA$(0.07) $0.06 $(0.05) $0.10 Diluted adjusted EBITDA$(0.07) $0.06 $(0.05) $0.10 (a)The reconciliation of adjusted EBITDA of non-controlling interest to net income attributable to non-controlling interest is as follows Net Income (loss) attributable to non-controlling interest$(39,164) $574,499 $107,750 $834,672 Income Taxes 102,414 75,407 173,001 111,784 Depreciation and amortization 92,546 109,765 181,681 251,116 Interest expense 68,636 91,295 147,828 177,184 Interest (income) (165,365) (144,578) (408,012) (272,669)EBITDA$59,067 $706,388 $202,248 $1,102,087 Add back: Non-cash stock-based compensation 2,462 3,783 5,062 7,524 Adjusted EBITDA of non-controlling interest$61,529 $710,171 $207,310 $1,109,611

NETSOL Technologies Reports Second Quarter Fiscal 2025 Results

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