SOURCE: NetSol Technologies Inc.

November 13, 2008 09:00 ET

NetSol Technologies Reports Fiscal First Quarter 2009 Financial Results

Revenue, GAAP Net Income and EBITDA Increase Year-Over-Year, Supported by a 33% Rise in License Fees

EMERYVILLE, CA--(Marketwire - November 13, 2008) - NetSol Technologies Inc. "NetSol" (NASDAQ: NTWK) (DIFX: NTWK), a U.S. corporation providing global business services and enterprise application solutions to private and public sector organizations worldwide, today announced fiscal first quarter 2009 financial results for period ended September 30, 2008.


Fiscal First Quarter 2009 Consolidated Financial Highlights

--  Revenues increased 7.5% year-over-year to $9.3 million

    --  Service fees year-over-year were level at $5.2 million

    --  License fees increased 33% to $2.5 million

    --  Maintenance fees year-over-year were level at $1.6 million

--  GAAP net income increased to $1.0 million, or $0.04 per fully diluted
    share, versus $844,000, or $0.04 per fully diluted share, in the year
    ago period

--  EBITDA increased to $2.3 million, or $0.08 per diluted share,
    representing a 25% EBITDA margin, versus EBITDA of $1.9 million, or
    $0.08 per diluted share, in the year ago period

--  Based on the current global economic climate, NetSol is adjusting
    fiscal year 2009 financial guidance to annual revenue growth between
    20% to 25% over fiscal year 2008 levels and diluted earnings per share
    between $0.25 to $0.30

Najeeb Ghauri, NetSol Technologies chairman and chief executive officer, commented, "Our year-over-year growth in fiscal first quarter 2009 revenue, net income and EBITDA are based on the strength offered by our comprehensive range of cost effective IT solutions as well as the geographic diversity of our global customer base and client delivery platform. NetSol experienced solid growth in license fees within our core NetSol Financial Suite (NFS) as well as rising interest for our Global Business Services, in what is historically our seasonally slowest quarter of the fiscal year, and despite a challenging global economic environment. During the quarter, we secured and expanded a number of high value customer relationships including Nissan Financial Services and a new global frame agreement with Daimler Financial Services, extending NetSol's relationship with its longest standing customer to additional international markets.

"We have also made significant progress in terms of establishing additional business drivers to help fuel our growth strategy for fiscal 2009 and beyond. The recent acquisition of Ciena Solutions, a U.S. based SAP systems consulting firm, and the launch of our new global Business Process Outsourcing (BPO) practice group add new high level IT services that can be offered to our global customer base as complementary solutions. We are also continuing to explore additional joint venture opportunities to further leverage our CMMI Maturity Level 5 'Center of Excellence' to its fullest.

"In analyzing the impact of the current global economic downtown we believe it is prudent at this time to make some adjustment in our guidance for fiscal 2009. Despite taking a more conservative approach with regards to the potential influence of the current global economic downturn on our business outlook, we continue to anticipate double-digit year-over-year growth in revenue and improved profitability in fiscal 2009. Our growth projections are based on the addition of our new SAP and BPO solutions, a healthy global pipeline and increasing traction in America, Asia and the Middle East.

"While I am disappointed that it was necessary to restate certain historical financial information as filed on November 10, we have moved expeditiously with a range of strategic actions to remedy the situation and ensure the company is employing the most stringent financial controls. I am committed more than ever to building on the momentum we have established in growing NetSol into a leading global IT services provider and ultimately moving forward to build shareholder value. NetSol is healthy and strong and I am dedicated to restoring confidence in this dynamic global growth story we have built. To these ends, our recently extended one million share repurchase program and frequent senior management buying reflect our belief, that based on the current value we see in our shares, NetSol represents one of the best investments we can make," concluded Mr. Ghauri.

NetSol reported consolidated revenues of $9.3 million for the first quarter of fiscal year 2009, a 7.5% increase compared to the $8.7 million in revenues reported for the same period a year ago. Consolidated gross profit for the fourth quarter was approximately $4.7 million, or 51% of total revenues.

U.S. GAAP (Generally Accepted Accounting Principles) net income for the first quarter of fiscal year 2009 was approximately $1.0 million, or $0.04 per diluted share, which compares to GAAP net income of $844,000, or $0.04 per diluted share, in the same period of fiscal year 2008. NetSol reported EBITDA of $2.3 million, or $0.08 per diluted share, for the first quarter of fiscal year 2009, compared to EBITDA of $1.9 million, or $0.08 per diluted share, in the year ago period.

EBITDA is defined as earnings before interest, taxes, depreciation and amortization. The Company uses EBITDA as a measure of the Company's operating trends. Investors are cautioned that EBITDA is not a measure of liquidity or of financial performance under Generally Accepted Accounting Principles (GAAP). The EBITDA numbers presented may not be comparable to similarly titled measures reported by other companies. EBITDA, while providing useful information, should not be considered in isolation or as an alternative to net income or cash flows as determined under GAAP. Consistent with SEC Regulation G, the non-GAAP measures in this press release have been reconciled to the nearest GAAP measure, and this reconciliation is located under the financial table heading "Reconciliation to GAAP."


Fiscal First Quarter 2009 Business Highlights

--  NetSol management and the Board of Directors approved the extension of
    the Company's one million share stock repurchase program.

--  Opened NetSol's new global headquarters in Emeryville, California,
    providing a larger, centrally located high-tech facility to accommodate
    NetSol's global growth.

--  Secured a new frame agreement with Daimler Financial Services,
    extending NetSol's relationship with its longest standing customer into
    the regions of Asia Pacific and Africa.

--  Mercedes-Benz Financial Services Taiwan went live with NetSol's
    LeaseSoft Contract Management System (CMS), a key product offering
    within the NetSol Financial Suite of products.

--  Secured a multi-million dollar NetSol Financial Suite contract with the
    North American finance division of a major Asian-based automobile
    manufacturer, extending the market penetration of LeasePak, NetSol
    North America's flagship lease management system.

--  European division has successfully launched its multi-product strategy
    in Europe by signing a recent multi-million dollar agreement with a
    major European Bank, reflecting an enhanced ability to service the auto
    leasing and asset finance markets in Central and Eastern Europe.

--  European division launched its Managed IT Services Division to leverage
    the Company's BestShoring™ model in Europe.

--  Launched new global Business Process Outsourcing (BPO) service offering
    as a new revenue driver within the Company's BestShoring™ business
    model.

--  Increased penetration in the high growth Middle East market for the
    NetSol Financial Suite of products and Global Business Services
    following the previously announced contract win with Al-Amthal Leasing,
    one of the largest leasing companies in Saudi Arabia.

Conference Call & Webcast Information

NetSol will host a conference call at 11:00 a.m. ET (8:00 a.m. PT) to review the quarterly results. Najeeb Ghauri, NetSol chairman and chief executive officer, will host the call, which will be webcast live. The webcast and a supporting slide presentation will be made available online at http://www.netsoltek.com/investors/investor_relations.htm. Telephone access to the conference call is available in North America by dialing +1 (877) 407-0782 or internationally by dialing +1 (201) 689-8567.

An audio replay of the conference call will be available approximately one hour following the conclusion of the call. To access the replay in North America, dial +1 (877) 660-6853 or, when calling internationally, dial +1 (201) 612-7415, using replay account code # 286 and conference ID # 302542. An archived replay of the conference webcast will also be available on the NetSol Technologies web site at http://www.netsoltek.com/investors/investor_relations.htm.

About NetSol Technologies Inc.

NetSol Technologies (NASDAQ: NTWK) (DIFX: NTWK) is a U.S. corporation providing global business services and enterprise application solutions to private and public sector organizations worldwide. NetSol uses its BestShoring™ practices and highly experienced resources in analysis, development, quality assurance, and implementation to deliver high-quality, cost-effective solutions. Organized into specialized industries, these product and services offerings include portfolio management systems for the financial services industry, consulting, custom development, systems integration, and technical services for the global healthcare, insurance, real estate, and technology markets. NetSol's commitment to quality is demonstrated by its achievement of the ISO 9001, ISO 279001, and SEI (Software Engineering Institute) CMMI (Capability Maturity Model) Maturity Level 5 assessments, a distinction shared by fewer than 100 companies worldwide. NetSol Technologies' clients include Fortune 500 manufacturers, global automakers, financial institutions, technology providers, and governmental agencies. With its global headquarters located in Emeryville, California, NetSol Technologies has operations and offices in London, Los Angeles, Sydney, Beijing, Bangkok, and Lahore.

To learn more about NetSol Technologies Inc., visit www.netsoltech.com.

To join the NetSol Technologies Inc. email distribution list, please visit: http://www.b2i.us/irpass.asp?BzID=897&to=ea&s=0.

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 "believe," "expect," "anticipate," "intend," variations of such words, and similar expressions, identify forward-looking statements, 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.


Financial Tables Follow


                NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
                   CONSOLIDATED STATEMENT OF OPERATIONS
                                (Unaudited)


                                                  For the Three Months
                                                   Ended September 30,
                                                   2008           2007
                                               ------------   ------------
Net Revenues:
  License fees                                 $  2,529,808   $  1,903,552
  Maintenance fees                                1,593,734      1,583,420
  Services                                        5,177,425      5,166,265
                                               ------------   ------------
     Total revenues                               9,300,967      8,653,237
Cost of revenues:
  Salaries and consultants                        2,640,713      2,321,030
  Travel                                            485,936        266,828
  Repairs and maintenance                           106,665        114,154
  Insurance                                          32,839         38,645
  Depreciation and amortization                     551,325        258,907
  Other                                             751,068        387,891
                                               ------------   ------------
     Total cost of revenues                       4,568,546      3,387,455
                                               ------------   ------------
Gross profit                                      4,732,421      5,265,782
Operating expenses:
  Selling and marketing                             969,518        832,493
  Depreciation and amortization                     480,208        464,647
  Bad debt expense                                        -          2,439
  Salaries and wages                                979,254        907,879
  Professional services, including non-cash
   compensation                                     306,886        160,050
  General and administrative                        868,117        678,573
                                               ------------   ------------
     Total operating expenses                     3,603,983      3,046,081
                                               ------------   ------------
Income from operations                            1,128,438      2,219,701
Other income and (expenses)
  Loss on sale of assets                           (165,738)       (32,223)
  Interest expense                                 (203,892)      (233,804)
  Interest income                                    27,941         33,863
  Gain on foreign currency exchange rates         2,007,882         55,986
  Fair market value of options issued              (117,300)             -
  Other income                                       16,454         55,961
                                               ------------   ------------
     Total other expenses                         1,565,347       (120,217)
                                               ------------   ------------
Net income before minority interest in
 subsidiary                                       2,693,785      2,099,484
Minority interest in subsidiary
 (restated 2007)                                 (1,629,761)    (1,152,107)
Income taxes                                         (7,182)       (32,441)
                                               ------------   ------------
Net income (restated 2007)                        1,056,842        914,936
Dividend required for preferred stockholders        (33,876)       (71,157)
                                               ------------   ------------
Net income (loss) applicable to common
 shareholders (restated 2007)                     1,022,966        843,779
Other comprehensive income (loss):
  Translation adjustment                         (2,895,310)       162,403
                                               ------------   ------------
Comprehensive income (restated 2007)           $ (1,872,344)  $  1,006,182
                                               ============   ============

Net income per share (restated 2007):
  Basic                                        $       0.04   $       0.04
                                               ============   ============
  Diluted                                      $       0.04   $       0.04
                                               ============   ============
Weighted average number of shares outstanding
  Basic                                          26,307,175     21,425,235
  Diluted                                        28,029,442     22,844,361




                NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
                        CONSOLIDATED BALANCE SHEETS


                                                  As of           As of
                                                 9/30/08         6/30/08
                                               (Unaudited)      (Audited)
                                                               (Restated)
                         ASSETS
Current assets:
  Cash and cash equivalents                    $  9,778,690   $  6,275,238
  Certificates of deposit                           106,949              -
  Accounts receivable, net of allowance for
   doubtful accounts                             13,886,153     10,988,888
  Revenues in excess of billings                 12,099,722     11,053,042
  Other current assets                            2,118,275      2,406,407
                                               ------------   ------------
     Total current assets                        37,989,789     30,723,575
Property and equipment, net of accumulated
 depreciation                                     8,324,257      9,176,780
Other assets, long-term                             981,957      1,866,437
Intangibles:
  Product licenses, renewals, enhancements,
   copyrights, trademarks, and tradenames, net    9,988,525     10,837,856
  Customer lists, net                             1,559,101      1,732,761
  Goodwill                                        9,439,285      9,439,285
                                               ------------   ------------
     Total intangibles                           20,986,911     22,009,902
                                               ------------   ------------
     Total assets                              $ 68,282,914   $ 63,776,694
                                               ============   ============

     LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued expenses        $  3,123,928   $  4,116,659
  Current portion of loans and obligations
   under capitalized leases                       4,133,872      2,280,110
  Other payables - acquisitions                     103,226        846,215
  Unearned revenues                               4,037,556      3,293,728
  Due to officers                                         -        184,173
  Dividend to preferred stockholders payable         33,876         33,508
  Cash dividend to minority shareholders of
   subsidiary                                       315,889              -
  Loans payable, bank                             2,559,509      2,932,551
                                               ------------   ------------
     Total current liabilities                   14,307,856     13,686,944
Obligations under capitalized leases, less
 current maturities                                 267,358        332,307
Convertible notes payable                         6,000,000              -
Long term loans; less current maturities            296,698        411,608
                                               ------------   ------------
     Total liabilities                           14,871,912     14,430,859
Minority interest                                 7,136,565      7,857,969
Commitments and contingencies                             -              -

Stockholders' equity:
  Preferred stock, 5,000,000 shares
   authorized; 1,920; 4,130 issued and
   outstanding                                    1,920,000      1,920,000
  Common stock, $.001 par value; 95,000,000
   shares authorized; 26,219,770; 25,545,482
   issued and 26,051,274; 25,525,886
   outstanding                                       26,220         25,545
  Additional paid-in-capital                     76,657,363     74,950,286
  Treasury stock (168,496; 19,596 shares)          (321,008)       (35,681)
  Accumulated deficit                           (32,048,738)   (33,071,702)
  Stock subscription receivable                    (708,904)      (600,907)
  Common stock to be issued                         392,737      1,048,249
  Other comprehensive loss                       (5,643,233)    (2,747,924)
                                               ------------   ------------
     Total stockholders' equity                  40,274,437     41,487,866
                                               ------------   ------------
     Total liabilities and stockholders'
      equity                                   $ 62,282,914   $ 63,776,694
                                               ============   ============




                NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
                         STATEMENTS OF CASH FLOWS
                                (Unaudited)


                                                  For the Three Months
                                                      Ended Sept 30,
                                                   2008           2007
                                               ------------   ------------
Cash flows from operating activities:
  Net income (restated 2007)                   $  1,056,842   $    914,936
  Adjustments to reconcile net income to net
   cash (used in) provided by operating
   activities:
  Depreciation and amortization                   1,031,533        723,554
  Provision for uncollectible accounts                    -              -
  Loss on sale of assets                            165,738         32,223
  Minority interest in subsidiary
   (restated 2007)                                1,629,761      1,152,107
  Stock issued for services                          33,163              -
  Fair market value of warrants and stock
   options granted                                  207,000         24,320
  Changes in operating assets and liabilities:
    Increase in accounts receivable              (3,942,317)      (353,500)
    Increase in other current assets             (1,960,129)    (1,080,375)
    Decrease in accounts payable and accrued
     expenses                                      (259,967)    (1,130,337)
                                               ------------   ------------
  Net cash (used in) provided by operating
   activities                                    (2,038,376)       282,928
Cash flows from investing activities:
  Purchases of property and equipment              (930,058)      (745,901)
  Sales of property and equipment                    40,900         85,076
  Payments of acquisition payable                  (742,989)      (879,007)
  Purchase of treasury stock                       (285,328)             -
  Short-term investments held for sale             (113,738)             -
  Increase in intangible assets                    (689,544)      (841,312)
                                               ------------   ------------
  Net cash used in investing activities          (2,720,757)    (2,381,144)
Cash flows from financing activities:
  Proceeds from sale of common stock                150,000        250,000
  Proceeds from the exercise of stock options
   and warrants                                     520,569        903,499
  Purchase of subsidiary stock in Pakistan         (250,000)             -
  Proceeds from convertible notes payable         6,000,000              -
  Proceeds from bank loans                        1,768,212      2,444,291
  Payments on bank loans                            (75,732)       (25,110)
  Bank overdraft                                    257,502              -
  Payments on capital lease obligations
   & loans - net                                   (121,418)      (692,353)
                                               ------------   ------------
  Net cash provided by financing activities       8,249,133      2,880,327
Effect of exchange rate changes in cash              13,451         44,966
                                               ------------   ------------
Net increase in cash and cash equivalents         3,503,451        827,077
Cash and cash equivalents, beginning of year      6,275,239      4,010,164
                                               ------------   ------------
Cash and cash equivalents, end of quarter       $ 9,778,690   $  4,837,241
                                               ============   ============




                NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
                          RECONCILIATION TO GAAP
                                (UNAUDITED)


                                                              Three Months
                                                                 Ended
                                                             Sept. 30, 2008
                                                             --------------

Net income per GAAP (applicable to common shareholders)      $    1,056,842
  Income taxes                                                        7,182
  Depreciation and amortization                                   1,031,533
  Interest expense                                                  203,892
                                                             --------------
     EBITDA income                                           $    2,299,449
                                                             ==============


Weighted average number of shares outstanding
  Basic                                                          26,307,175
  Diluted                                                        28,029,442

                                                             --------------
Basic EBITDA EPS                                             $         0.09
                                                             ==============
Diluted EBITDA EPS                                           $         0.08
                                                             ==============

Contact Information

  • Contacts:

    NetSol Technologies, Inc.
    Tina Gilger
    Chief Financial Officer
    Tel: +1 818-222-9195, x112

    Investor Relations
    Christopher Chu
    Grayling Global
    Tel: +1-646-284-9426