Netsol Technologies Inc 8-K, filed Feb 13, 2025
Netsol Technologies Inc (NTWK)
About this 8-K
Netsol Technologies Inc filed this 8-K on February 13, 2025.
Items reported
- Item 2.02: Financial results
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Item 2.02 Results of Operations and Financial Condition.
On February 13, 2025, NetSol Technologies, Inc. issued a press release announcing results of operations and financial conditions for the quarter ended December 31, 2024. The press release is furnished as Exhibit 99.1 to this Form 8-K.
The information in this report shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document field under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Exhibits
| 99.1 | News Release dated February 13, 2025 |
| 104 | Inline XBRL for the cover page of this Current Report on Form 8-K |
| Page 2 |
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| NETSOL TECHNOLOGIES, INC. | |
| Date: February 13, 2025 | /s/ Najeeb Ghauri |
| NAJEEB GHAURI | |
| Chief Executive Officer |
| Date: February 13, 2025 | /s/ Roger Almond |
| ROGER ALMOND | |
| Chief Financial Officer |
| Page 3 |
Exhibit 99.1
NETSOL Technologies Reports Second Quarter Fiscal 2025 Results
| ● | Double digit growth in subscription and support revenues in 2Q’25 | |
| ● | Total service revenue increased 26% in 2Q’25 | |
| ● | 45% gross margins in 2Q’25 | |
| ● | Cash and cash equivalents increased to $21.3 million |
Encino, Calif., February 13, 2025 – 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: 877-407-0789
International 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: 844-512-2921
International replay number: 412-317-6671
Replay ID: 13751199
About NETSOL Technologies
NETSOL 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 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.
Use of Non-GAAP Financial Measures
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 in Schedule 4 of this press release.
Investor Relations Contact:
IMS Investor Relations
netsol@imsinvestorrelations.com
+1 203-972-9200
NETSOL Technologies, Inc. and Subsidiaries
1: Consolidated Balance Sheets
| December 31, 2024 | June 30, 2024 | |||||||
| ASSETS | ||||||||
| Current 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 Subsidiaries
Schedule 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 Subsidiaries
Schedule 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 Subsidiaries
Schedule 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 | ||||||||