SOURCE: NetSol Technologies

September 19, 2007 06:00 ET

NetSol Technologies Reports Record Fiscal Fourth Quarter 2007 Financial Results

Quarterly GAAP EPS Increases to $0.07 as Net Income Grows to a Record $1.3 Million

Quarterly Revenue Grows 84% Year-Over-Year to a Record $8.6 Million

CALABASAS, CA--(Marketwire - September 19, 2007) - NetSol Technologies Inc. ("NetSol") (NASDAQ: NTWK), a multinational provider of enterprise software and IT services to the financial services industry, today announced financial results for the fiscal year 2007, ended June 30, 2007.

Fiscal Fourth Quarter 2007 Financial Highlights

 -- Revenues increased 84% year-over-year to $8.6 million
    -- License fees increased 137% year-over-year to $2.9 million
    -- Maintenance fees increased 97% year-over-year to $1.5 million
    -- Services increased 57% year-over-year to $4.2 million
 -- Gross margin increased to 62% compared to 34% in the prior year period
 -- Operating income improved to $1.9 million compared to an operating
    loss of $1.5 million in the year ago period
 -- GAAP net income increased to $1.3 million, or $0.07 per share,
    versus a loss of ($0.11) in the year ago period
 -- EBITDA increased to $2.0 million, or $0.10 per basic and diluted share
 -- Business outlook and revenue generation for fiscal year 2008 remains
    strong as NetSol scales up to deliver another solid year of growth.

NetSol Technologies, Inc. reported consolidated revenues of $8.6 million for the fourth quarter of fiscal year 2007, an 84% increase compared to the $4.7 million in revenues reported for the same period in fiscal year 2006. Consolidated gross profit for the fourth quarter was approximately $5.3 million, an increase of 234% as compared to the prior year. Gross margin for the fourth quarter of fiscal year 2007 was 62% compared to 34% in the prior year period.

GAAP (Generally Accepted Accounting Principles) net income for the fourth quarter of fiscal year 2007 was $1.3 million, or $0.07 per basic and diluted share, compared to a GAAP net loss of $1.7 million, or ($0.11) per basic and diluted share, reported in the fourth quarter of fiscal year 2006. EBITDA for the fourth quarter was $2.0 million, or $0.10 per basic and diluted share, compared to negative EBITDA of $672 thousand in the fourth quarter of fiscal year 2006.

Najeeb Ghauri, chairman and CEO stated, "Our fiscal fourth quarter 2007 financial performance was exceptional, highlighted by record quarterly revenue and GAAP net income. This represents a remarkable turnaround from a GAAP net loss in the year ago fourth quarter compared to a $1.3 million GAAP profit in the current fiscal fourth quarter, within a 12 month period. Our record top line revenue growth was fuelled by strong demand for our LeaseSoft and LeasePak solutions which experienced a 137% jump in license revenue year-over-year.

"Our services business also posted strong double digit year-over-year growth as NetSol's IT consulting services group extended its reach into new verticals. We successfully combined the strong demand for our enterprise software and IT consulting services with a clear focus on managing internal operating efficiencies and were able to achieve our goal of returning NetSol to GAAP profitability on a quarterly basis," concluded Mr. Ghauri.

NetSol Technologies recently announced its new offering for IT outsourcing and customized development services to the North American equipment and finance market, as well as the recent deployment of LeasePak 6.0. The Company continues to invest in an array of new products for the financial services vertical as well as other complementary businesses and aims to introduce additional new incremental growth engines to its business in the foreseeable future. These areas align directly with the Company's strategic vision of being a leading provider of innovative software applications and high-value IT consulting services.

Fiscal Fourth Quarter 2007 Business Highlights

 -- Launch of NetSol's outsourcing and customized development services to
    North American equipment and finance market
 -- Strategic partnership formed with Field Solutions to deliver
    comprehensive, robust solution for the broking market
 -- NetSol's North American Division hosts its annual user conference
 -- Key customer wins included:
    -- First fleet management system contract signed with a major
       automotive finance company
    -- Major automotive finance company in China signed a follow-on
       contract valued at more than $1.0 million
    -- NetSol won its fifth major contract in China with the signing of
       a multi-million dollar LeaseSoft contract
    -- Terex Corporation selected NetSol's LeasePak 6.0 Enterprise Edition
    -- A Fortune 100 information technology company selected NetSol's
       LeasePak 6.0 Enterprise Edition
    -- Kaupthing Singer & Friedlander Premium Finance selected NetSol to
       develop web based credit facilities
    -- NetSol was awarded a software development contract for a new
       e-Government initiative at the Pakistan Ministry of Population
       Welfare
    -- Pakistan Ministry of Health awarded NetSol a software development
       contract for a new e-Government initiative

Full Year Fiscal 2007 Consolidated Financial Highlights

 -- Revenues for the year increased 57% to $29.3 million
    -- License fees increased 89% year-over-year to $9.8 million
    -- Maintenance fees increased 123% year-over-year to $5.4 million
    -- Services increased 27% year-over-year to $14.1 million
 -- Gross margin increased to 53% compared to 52% in the prior year period
 -- Operating income improved to $2.6 million compared to an operating
    loss of $259,347 in the year ago period
 -- GAAP net loss was $4.9 million, or ($0.27) per basic and diluted
    share, including non-cash charges totaling $5.0 million relating to
    the financing for the acquisition of McCue Systems
 -- EBITDA loss for the year totaled $1.5 million, or ($0.08) per basic
    and diluted share, including one-time non-cash charges of $5.0 million

NetSol Technologies, Inc. reported consolidated revenues of $29.3 million for fiscal year 2007, a 57% increase compared to the $18.7 million in revenues reported for fiscal year 2006. Consolidated gross profit for the fiscal year 2007 was $15.6 million, an increase of 62% as compared to the prior year. Gross margin for the fiscal year 2007 was 53% compared to 52% in the prior year period.

GAAP net loss for fiscal year 2007 was approximately $4.9 million, or ($0.27) per basic and diluted share, which compares to a GAAP net loss of $1.4 million, or ($0.09) per basic and diluted share for fiscal year 2006. EBITDA loss for fiscal year 2007 was approximately $1.5 million, or ($0.08) per basic and diluted share, which compares to EBITDA of $2.2 million, or $0.15 per basic and diluted share, for fiscal year 2006.

During the first half of fiscal year 2007, NetSol recorded non-cash charges totaling $5.0 million related to the financing for the acquisition of McCue Systems in June 2006. Excluding these non-cash charges, NetSol would have reported proforma EBITDA for fiscal 2007 of approximately $3.6 million, or $0.20 per basic and diluted share, compared to EBITDA of approximately $2.2 million, or $0.15 per basic and diluted share, for the fiscal year 2006.

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 the 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."

NetSol ended fiscal year 2007 with approximately $4.0 million dollars in cash and cash equivalents.

The Company's subsidiary, NetSol Technologies, Ltd, a Pakistani company listed on the Karachi Stock Exchange (KARACHI: NETSOL), released its June 30 fiscal year end results on September 17, 2007. These results may be found on the Karachi Stock Exchange website www.kse.com.pk. The subsidiary's results represent only a portion of the Company-wide results. Consolidated results of NetSol Technologies, Inc. may be found in the Company's annual report filed on form 10-KSB.

Conference Call Information

NetSol Technologies will host a conference call at 11:00 a.m. ET (8:00 a.m. PT) today to review these results. The conference call will be web cast live and will be accompanied by a PowerPoint presentation, both may be accessed online at: http://www.netsoltek.com/investors/investor_relations.htm. To access the live teleconference investors and analysts in North America may dial +1 (877) 407-8033 or when calling internationally dial +1 (201) 689-8033.

An audio replay of the conference call will be available approximately one hour following the conclusion of the call and will be available for 30 days. 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 # 253380. An archived replay of the conference webcast also will be available on the NetSol Technologies web site at: http://www.netsoltek.com/investors/investor_relations.htm

About NetSol Technologies

NetSol Technologies is a multinational provider of enterprise software and IT services to the financial services industry. NetSol helps clients to identify, evaluate and implement technology solutions to meet their strategic business challenges and maximize their bottom line. By utilizing its worldwide resources, NetSol delivers high-quality, cost-effective equipment and vehicle finance portfolio management solutions. The Company also delivers managed IT services ranging from consulting and application development to systems integration and development outsourcing. NetSol's commitment to quality is demonstrated by its achievement of both ISO 9001 and SEI (Software Engineering Institute) CMMi (Capability Maturity Model) Level 5 assessment, a distinction shared by only 94 companies worldwide. The Company's clients include global automakers, financial institutions, technology companies and governmental agencies. Headquartered in Calabasas, CA, NetSol Technologies also has operations and/or offices in London, San Francisco, Adelaide, Beijing, Lahore and Karachi, Pakistan. To learn more about NetSol Technologies, visit the Company's web site at www.netsoltek.com. Click here to join the NetSol Technologies, Inc. email distribution list: 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.


                NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENT OF OPERATIONS -- JUNE 30, 2007

                   For the Three Months Ended     For the Years Ended
                      June 30,      June 30,      June 30,      June 30,
                        2007          2006          2007          2006
                    ------------  ------------  ------------  ------------
Revenues:            (unaudited)   (unaudited)    (audited)     (audited)
 Licence fees       $  2,936,770  $  1,239,984  $  9,788,266  $  5,192,371
 Maintenance fees      1,451,243       735,537     5,441,339     2,444,075
 Services              4,188,426     2,674,706    14,052,481    11,053,966
                    ------------  ------------  ------------  ------------
  Total revenues       8,576,439     4,650,227    29,282,086    18,690,412
Cost of revenues:
  Salaries and
   consultants         2,204,328     2,020,271     8,812,934     6,117,886
  Travel and
   entertainment         334,481       283,851     1,529,796       756,880
  Communication           47,292        46,372       161,128       129,741
  Depreciation and
   amortization           60,404       239,356       652,669       733,370
  Other                  603,795       467,755     2,502,452     1,282,641
                    ------------  ------------  ------------  ------------
  Total cost of
   sales               3,250,300     3,057,605    13,658,979     9,020,518
                    ------------  ------------  ------------  ------------
Gross profit           5,326,139     1,592,622    15,623,107     9,669,894
Operating expenses:
 Selling and
  marketing              811,328       598,443     2,356,831     1,789,349
 Depreciation and
  amortization           497,461       574,907     1,988,603     2,286,678
 Salaries and wages      895,610       870,922     4,294,368     2,557,648
 Professional
  services,
  including
  non-cash
  compensation           293,499       242,554     1,067,702       607,706
 Bad debt expense         72,606         2,929       189,873        30,218
 General and
  adminstrative          866,220       790,804     3,078,862     2,657,642
                    ------------  ------------  ------------  ------------
  Total operating
   expenses            3,436,724     3,080,559    12,976,239     9,929,241
                    ------------  ------------  ------------  ------------
Income (loss) from
 operations            1,889,415    (1,487,937)    2,646,868      (259,347)
Other income and
 (expenses)
 Loss on sale of
  assets                  16,090        (1,076)       (2,977)      (35,090)
 Beneficial
  conversion
  feature                      -             -    (2,208,334)      (14,389)
 Amortization of
  debt discount and
  capitalized cost
  of debt                      -             -    (2,803,691)            -
 Liquidation
  damages                      -             -      (180,890)            -
 Fair market value
  of warrants
  issued                 (34,424)            -       (68,411)      (21,505)
 Gain on
  forgiveness of
  debt                         -             -             -         8,294
 Interest expense        (74,476)     (201,987)     (617,818)     (442,887)
 Interest income          73,248        10,391       339,164       280,276
 Other income and
  (expenses)              25,488       246,333       114,423       191,736
                    ------------  ------------  ------------  ------------
  Total other
   expenses                5,926        53,661    (5,428,534)      (33,565)
                    ------------  ------------  ------------  ------------
Net income (loss)
 before taxes and
 minority interest
 in subsidiary         1,895,341    (1,434,276)   (2,781,666)     (292,912)
                    ------------  ------------  ------------  ------------
Minority interest
 in earnings of
 subsidiary             (561,508)     (254,248)   (1,935,589)     (954,120)
Income taxes             (33,686)      (15,130)     (160,306)     (106,021)
                    ------------  ------------  ------------  ------------
Net income (loss)      1,300,147    (1,703,654)   (4,877,561)   (1,353,053)
Dividend required
 for preferred
 stockholders            (77,640)            -      (237,326)            -
Bonus stock
 dividend (minority
 holders portion)       (345,415)            -      (345,415)            -
                    ------------  ------------  ------------  ------------
Net income (loss)
 applicable to
 common
 shareholders            877,092    (1,703,654)   (5,460,302)   (1,353,053)
Other comprehensive
 (loss) gain:
 Translation
  adjustment            (259,113)     (100,069)      (55,770)      101,031
                    ------------  ------------  ------------  ------------
Comprehensive loss  $    617,979  $ (1,803,723) $ (5,516,072) $ (1,252,022)
                    ============  ============  ============  ============

Net income (loss)
 per share:
 Basic              $       0.07  $      (0.11) $      (0.27) $      (0.09)
                    ============  ============  ============  ============
 Diluted            $       0.07  $      (0.11) $      (0.27) $      (0.09)
                    ============  ============  ============  ============
Weighted average
 number of shares
 outstanding
 Basic                19,706,920    15,468,248    18,189,590    14,567,007
 Diluted              19,835,177    15,468,248    18,189,590    14,567,007




                NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
                        CONSOLIDATED BALANCE SHEET
                                (AUDITED)

                                                                 As of
                                                             June 30, 2007
                                                             -------------
                           ASSETS
Current assets:
  Cash and cash equivalents                                  $   4,010,164
  Accounts receivable, net of allowance for doubtful
   accounts of $168,718                                          7,937,686
  Revenues in excess of billings                                 8,501,769
  Other current assets                                           2,278,749
                                                             -------------
    Total current assets                                        22,728,368
Property and equipment, net of accumulated depreciation          7,583,752
Other assets, long-term                                          1,308,267
Intangibles:
  Product licenses, renewals, enhancements, copyrights,
   trademarks, and tradenames, net                               7,772,848
  Customer lists, net                                            2,427,405
  Goodwill                                                       7,708,501
                                                             -------------
    Total intangibles                                           17,908,754
                                                             -------------
    Total assets                                             $  49,529,141
                                                             =============

            LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued expenses                      $   3,590,652
  Current portion of notes and obligations under capitalized
   leases                                                          887,098
  Other payables - acquisitions                                    962,406
  Unearned revenues                                              2,815,660
  Due to officers                                                  356,422
  Dividend to preferred stockholders payable                        77,640
  Loans payable, bank                                            3,097,928
                                                             -------------
    Total current liabilities                                   11,787,806
Obligations under capitalized leases, less current
 maturities                                                        339,759
                                                             -------------
    Total liabilities                                           12,127,565
Minority interest                                                3,552,635
Commitments and contingencies                                            -

Stockholders' equity:
  Preferred stock, 5,000,000 shares authorized; 4,130 issued
   and outstanding                                               4,130,000
  Common stock, $.001 par value; 45,000,000 shares
   authorized; 20,556,553 issued and outstanding                    20,556
  Additional paid-in-capital                                    66,988,147
  Treasury stock                                                   (10,194)
  Accumulated deficit                                          (37,132,343)
  Stock subscription receivable                                 (1,001,407)
  Common stock to be issued                                      1,329,612
  Other comprehensive loss                                        (475,430)
                                                             -------------
    Total stockholders' equity                                  33,848,941
                                                             -------------
    Total liabilities and stockholders' equity               $  49,529,141
                                                             =============



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

                                                      For the Years
                                                      Ended June 30,
                                                    2007          2006
                                                ------------  ------------
 Cash flows from operating activities:
    Net loss from continuing operations         $ (5,460,302) $ (1,353,053)
    Adjustments to reconcile net loss to net
     cash (used in)/provided by operating
     activities:
    Depreciation and amortization                  2,641,272     3,020,048
    Provision for uncollectible accounts             189,873        30,218
    Gain on forgiveness of debt                            -        (8,294)
    Loss on sale of assets                             2,977        35,090
    Minority interest in subsidiary                1,935,589       954,120
    Stock issued for services                         88,099       200,194
    Stock issued for convertible note payable
     interest                                        311,868             -
    Stock issued for dividends payable to
     preferred stockholders                          159,686             -
    Bonus stock dividend issued by subsidiary        345,415             -
    Fair market value of warrants and stock
     options granted                                 136,571        25,618
    Beneficial conversion feature                  2,208,334        14,389
    Amortization of capitalized cost of debt       2,815,358       100,172
    Changes in operating assets and
     liabilities:
      Increase in accounts receivable             (2,858,608)   (1,351,660)
      Increase in other current assets            (3,199,796)   (3,789,179)
      Increase in accounts payable and accrued
       expenses                                      560,136       430,419
                                                ------------  ------------
    Net cash (used in)/provided by operating
     activities                                     (123,528)   (1,691,918)
 Cash flows from investing activities:
    Purchases of property and equipment           (2,420,470)   (2,709,569)
    Sales of property and equipment                  366,088       301,684
    Purchases of certificates of deposit                   -    (1,534,371)
    Proceeds from sale of certificates of
     deposit                                       1,737,481             -
    (Payments)/accruals of acquisition payable    (4,027,753)    4,086,204
    Increase in intangible assets                 (3,295,262)   (5,027,968)
    Cash brought in at acquisition                         -       473,890
                                                ------------  ------------
    Net cash used in investing activities         (7,639,916)   (4,410,130)
 Cash flows from financing activities:
    Proceeds from sale of common stock             1,030,093     1,400,000
    Proceeds from the exercise of stock options
     and warrants                                  1,008,250       669,382
    Capital contributed from sale of subsidiary
     stock                                                 -     4,031,001
    Dividend to preferred shareholders payable        77,640             -
    Reduction of restricted cash                   4,533,555    (4,533,555)
    Proceeds from convertible notes payable                -     5,500,000
    Proceeds from loans from officers                165,000             -
    Payments on capital lease obligations &
     loans - net                                   2,359,017        82,650
                                                ------------  ------------
    Net cash provided by financing activities      9,173,555     7,149,478
 Effect of exchange rate changes in cash             106,285        74,611
                                                ------------  ------------
 Net increase in cash and cash equivalents         1,516,396     1,122,041
 Cash and cash equivalents, beginning of year      2,493,768     1,371,727
                                                ------------  ------------
 Cash and cash equivalents, end of year         $  4,010,164  $  2,493,768
                                                ============  ============


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

                                                             For the Year
                                                                 Ended
                                                             June 30, 2007
                                                             -------------

 Net loss per GAAP                                           $  (4,877,561)
   One-time, non-cash expenses:
     Beneficial conversion feature                               2,208,334
     Amortization of debt discount and capitalized cost of
      debt                                                       2,803,691
                                                             -------------
                                                                 5,012,025

                                                             -------------
 Pro-forma income                                            $     134,464
                                                             =============

Weighted average number of shares outstanding
  Basic and diluted                                             18,189,590

                                                             -------------
 Pro-forma EPS                                               $        0.01
                                                             =============



 EBITDA - GAAP                                                  (1,458,165)
   One-time, non-cash expenses:
     Beneficial conversion feature                               2,208,334
     Amortization of debt discount and capitalized cost of
      debt                                                       2,803,691
                                                             -------------
                                                                 5,012,025

                                                             -------------
 Pro-forma EBITDA                                            $   3,553,860
                                                             =============

Weighted average number of shares outstanding
  Basic and diluted                                             18,189,590

                                                             -------------
 Pro-forma EBITDA EPS                                        $        0.20
                                                             =============

Contact Information

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

    Investor Relations
    Christopher Chu
    The Global Consulting Group
    Tel: +1-646-284-9426
    Email: cchu@hfgcg.com