Calabasas November 12 2022: NETSOL Technologies, Inc. (Nasdaq: NTWK), a global business services and enterprise application solutions provider, sales pipeline continues to be strong with the addition of new prospects for NFS Ascent®, digital, and legacy solutions across various regions pushing the total pipeline size to approximately $200 million.
NETSOL Co-Founder, Chairman and Chief Executive Officer Najeeb Ghauri stated, “We drove double digit growth on a constant currency basis and the pipeline and mix of opportunities remains robust in North America and Europe. Our focus in the U.S. market is showing traction as we have been adding new talent from local and global markets to create scale and capabilities to support tier 1 companies. In addition, the rollout of the Otoz Digital Retail Platform in partnership with MINI Anywhere has been a resounding success -- 28 dealerships have subscribed and additional states are going online in the near future. We are very excited by the growing response of these dealerships across many States in the U.S.”
In the first quarter, Netsol signed a contract with a tier 1 automotive company in the U.S. for our Otoz mobility solution to manage the back-office operations for vehicle subscriptions.
During the first quarter, company partnered with Amazon Web Services to offer cloud computing services, providing an innovative transformation for our cloud-based solutions. Since this launch, we have already signed our first customer, a software house based in the U.S.
Company launched a new product offering – Flex, which is a cloud-based ready-to-use calculation engine that guarantees precise calculations at all stages of the contract lifecycle. We successfully signed our first Flex contract with European Merchant Bank.
Otoz went live with its 28th dealer and is now with dealers in 13 states. The onboarding of these new dealers will help the business generate approximately $0.750 million to $1 million in annual recurring revenues. Company has expanded their footprint within China by opening a new office in Tianjin. This office will support both the ongoing delivery operations as well as the professional services vertical growth within China. Two new statements of work for professional services signed with BAIC and BYD will also be delivered and supported by the Tianjin team. Company generated approximately $2.0 million by successfully implementing change requests from various customers across multiple regions.
Netsol successfully renegotiated an existing maintenance contract with a leading finance company of a U.S.-based auto manufacturer in China increasing the annual maintenance fees to $500K from $280K.
Fiscal First Quarter 2023 Financial Results
Total net revenues for the first quarter of fiscal 2023 were $12.7 million, compared with $13.4 million in the prior year period. The decrease in total net revenues was primarily driven by the devaluation of the foreign currencies compared to the U.S. Dollar. On a constant currency basis, net revenues were $15.5 million. The increase in revenues on a constant currency basis was driven by an increase in license fees of $314,000, an increase in subscription and support revenues of $1.0 million, and an increase in services revenue of $753,000.
- Total license fees were $250,000, and on a constant currency basis were $325,000, compared with $10,700 in the prior year period.
- Total subscription (SaaS and Cloud) and support revenues were $6 Million, and on a constant currency basis were $7.3 million, compared with $6.2 million in the prior year period.
- Total services revenues were $6.4 million, and on a constant currency basis was $7.9 million, compared with $7.2 million in the prior year period.
Gross profit for the first quarter of fiscal 2023 decreased to $4.3 million (or 33.5% of net revenues), compared to $5.4 million (or 40.6% of net revenues) in the first quarter of fiscal 2022. On a constant currency basis, gross profit for the first quarter of fiscal 2023 decreased to $4.7 million (or 30.3% of net revenues as measured on a constant currency basis). The decrease in gross profit on a constant currency basis was primarily due to increases in cost of revenues of $2.8 million, offset by a $2.1 million increase in revenue on a constant currency basis. The increases in cost of sales on a constant currency basis were primarily due to increases in salaries and consulting costs of $2.1 million, travel costs of $292,000, depreciation of $121,000, and other costs of 351,000.
Operating expenses for the first quarter of fiscal 2023 were $6.1 million (or 48.4% of sales) compared to $6.1 million (or 45.3% of sales) for the first quarter of fiscal 2022. On a constant currency basis, operating expenses for the first quarter of fiscal 2023 increased to $7.4 million (or 47.6% of sales on a constant currency basis). The increase in operating expenses was primarily due to increases in selling and marketing, general and administrative, and research and development costs.
GAAP net loss attributable to NETSOL for the first quarter of fiscal 2023 totaled $(621,000) or $(0.06) per diluted share, compared with GAAP net income of $188,000 or $0.02 per diluted share in the first quarter of fiscal 2022. On a constant currency basis, GAAP net loss attributable to NETSOL for the first quarter of fiscal 2023 totaled $(912,000) or $(0.08) per diluted share. GAAP net loss attributable to NETSOL included a $1.3 million gain on foreign currency exchange transactions and on a constant currency basis a $1.8 million gain, in the first quarter of fiscal 2023, which was an increase from a gain of $1.3 million in the prior year period.
Non-GAAP adjusted EBITDA for the first quarter of fiscal 2023 totaled ($27,000) or $0.00 per diluted share, compared with non-GAAP adjusted EBITDA of $770,000 or $0.07 per diluted share in the first quarter of fiscal 2022 (see note regarding “Use of Non-GAAP Financial Measures,” below for further discussion of this non-GAAP measure).
At September 30, 2022, cash and cash equivalents were $21.0 million, a decrease from $24.0 million at June 30, 2022. Total NetSol stockholders’ equity at September 30, 2022 was $42.1 million, or $3.73 per share.