SOURCE: NetSol Technologies Inc.

September 18, 2008 06:31 ET

NetSol Technologies Reports Record Fiscal Year 2008 Financial Results

Revenues Set New Annual and Quarterly Records, Rising 25% and 23% Year-Over-Year to Total $36.6 Million and $10.5 Million Respectively; GAAP Net Income Sets a Full Year Record of $7.2 Million, or $0.28 per Diluted Share, Versus a Year Ago Loss; Fourth Quarter GAAP Net Income Increased 58% to $2.1 Million, or $0.08 per Diluted Share; EBITDA Sets New Annual and Quarterly Records Rising to $11.3 Million and $3.3 Million Respectively

CALABASAS, CA--(Marketwire - September 18, 2008) - NetSol Technologies Inc. ("NetSol") (NASDAQ: NTWK) (DIFX: NTWK), a worldwide provider of global business services and enterprise application solutions, today announced fiscal fourth quarter and full year 2008 financial results, for the fiscal year ended June 30, 2008.

FISCAL FOURTH QUARTER 2008 CONSOLIDATED FINANCIAL HIGHLIGHTS

--  Revenues increased 23% year-over-year to $10.5 million, up 16%
    sequentially from the fiscal third quarter
      --  License fees increased 67% to $4.9 million
      --  Maintenance fees increased 21% to $1.7 million
      --  Service fees decreased 8% to $3.8 million
--  GAAP net income increased to $2.1 million, or $0.08 per fully diluted
    share, versus $1.3 million, or $0.07 per fully diluted share, in the
    year ago period
--  EBITDA increased to a record $3.3 million, or $0.12 per diluted share,
    representing a 31% EBITDA margin, versus EBITDA of $2.0 million, or
    $0.10 per diluted share, in the year ago period
--  NetSol reiterates its fiscal year 2009 financial guidance calling for
    annual revenue growth between 30% to 35% over fiscal year 2008 levels
    and diluted earnings per share between $0.40 to $0.45

Najeeb Ghauri, NetSol Technologies chairman and chief executive officer, commented, "NetSol delivered a truly outstanding performance in fiscal 2008, complemented by a strong fourth quarter, as we delivered record revenue, GAAP net income and EBITDA results, all meeting or exceeding our projected full year financial guidance. These exceptional financial results were supported by our ability to execute on our strategic product and growth objectives while further strengthening our global client servicing and delivery platform. The strength of our core NetSol financial suite of products helped drive double-digit annual growth in license, service and maintenance revenues. This was complemented by the rollout of our new BestShoring™ business model and Global Business Services platform which reflect our continued focus on meeting our international clients' needs for local expertise matched with high quality offshore delivery capabilities. Our success in executing during fiscal 2008 was highlighted by rising average deal sizes as well as the expansion or penetration of business verticals such as finance, e-government and healthcare. We continue to diversify our revenue streams geographically as well as by customer focus as we expand NetSol's presence globally, while also meeting our financial growth objectives.

"We are reiterating our fiscal year 2009 financial guidance and believe that our current business backlog, strong pipeline, expanded product and service offerings, combined with our 2009 strategic growth initiatives, will provide a solid platform to meet these ambitious goals. From a strategic perspective, we are continuing to invest in our sales and marketing resources to support our core operating divisions, particularly in North America where we recently announced the opening of our new global operating headquarters, while penetrating new growth markets such as the Middle East as well as Central and South America. Overall, we continue to focus on diversifying our customer base and client delivery centers to support our global growth initiatives. I am extremely pleased with our fiscal 2008 performance and believe NetSol has never been better positioned as we look to leverage the opportunities we are seeing in the international markets for fiscal 2009," concluded Mr. Ghauri.

NetSol reported record consolidated revenues of $10.5 million for the fourth quarter of fiscal year 2008, a 23% increase compared to the $8.6 million in revenues reported for the same period a year ago. Consolidated gross profit for the fourth quarter was approximately $5.8 million, or 55% of total revenues.

U.S. GAAP (Generally Accepted Accounting Principles) net income for the fourth quarter of fiscal year 2008 was approximately $2.1 million, or $0.08 per diluted share, which compares to GAAP net income of $1.3 million or $0.07 per diluted share, in the same period of fiscal year 2007. NetSol reported EBITDA of $3.3 million, or $0.12 per diluted share, for the fourth quarter of fiscal year 2008 compared to EBITDA of $2.0 million, or $0.10 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 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."

FISCAL YEAR 2008 BUSINESS HIGHLIGHTS

--  Introduced BestShoring™ and Global Business Services strategy as an
    evolution of NetSol's core business offerings across NetSol's
    international delivery centers.
--  Increased sales of NetSol's financial suite of products with
    multi-million deals in Asia, North America and Europe, supporting
    higher average deal sizes and increased diversification of NetSol's
    global customer base.
--  Expanded addressable markets and business verticals with increased
    penetration in finance, e-government, healthcare and defense.
--  Strengthened North American operations with key management additions
    as well as additional sales and marketing resources.
--  Billable resources in the NetSol Innovation Group joint venture
    increased to 130 employees.
--  Increased branding and customer reach into the Middle East including a
    LeaseSoft contract win with one of the largest leasing companies in
    Saudi Arabia.
--  Expanded global capital market access and Middle East market presence,
    becoming the first U.S. Company to successfully dual list on the Dubai
    International Financial Exchange (DIFX).
--  Awarded second pilot project for the implementation of a Land Record
    Management Information System (LRMIS) for the Islamabad Capital
    Territory, Pakistan, the second LRMIS project NetSol has been awarded.
--  NetSol Technologies' Development Center in Lahore achieved ISO 27001
    certification.

FISCAL YEAR 2008 CONSOLIDATED FINANCIAL HIGHLIGHTS

--  Revenues for the full fiscal 2008 year increased 25% to $36.6 million
      --  License fees improved 30% to $12.7 million
      --  Maintenance fees increased 16% to $6.3 million
      --  Service fees increased 26% to $17.7 million
--  Gross margin improved to 57% compared to 53% in the same period a
    year ago
--  GAAP net income increased to a record $7.2 million, or $0.28 per
    diluted share
--  EBITDA increased to a record $11.3 million, or $0.44 per diluted share,
    representing a 31% EBITDA margin

NetSol reported record consolidated revenues of $36.6 million for the full fiscal 2008 year, a 25% increase compared to the $29.3 million in revenues reported for the full fiscal 2007 year. Consolidated gross profit for the full fiscal 2008 year was $20.9 million, or 57% of revenues.

GAAP net income for the 2008 full fiscal year was a record $7.2 million, or $0.28 per diluted share, compared to net loss of $4.9 million, or a loss of $0.28 per diluted share, for the full 2007 fiscal year. EBITDA increased to a record $11.3 million, or $0.44 per diluted share, as compared to EBITDA loss of $1.5 million, or a loss of $0.08 per diluted share, in the year ago period.

Conference Call & Webcast Information

NetSol will host a conference call at 11:00 a.m. ET (8:00 a.m. PT) to review the results. Najeeb Ghauri, chairman and chief executive officer, Tina Gilger, chief financial officer, and Naeem Ghauri, Europe division president, 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 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 # 295907. 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

NetSol Technologies (NASDAQ: NTWK) (DIFX: NTWK) is a worldwide provider of global business services and enterprise application solutions. 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 practices, 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) 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. Headquartered in Calabasas, California, NetSol Technologies has operations and offices in London, San Francisco, Sydney, Beijing, Bangkok, and Lahore. To join the NetSol Technologies Inc. email distribution list please visit: http://www.b2i.us/irpass.asp?BzID=897&to=ea&s=0.

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

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


                       For the Three Months            For the Year
                          Ended June 30,              Ended June 30,
                        2008          2007          2008          2007
                    ------------  ------------  ------------  ------------
Net Revenues:              (UNAUDITED)                  (AUDITED)
  License fees      $  4,915,813  $  2,936,770  $ 12,685,039  $  9,788,266
  Maintenance fees     1,749,871     1,451,243     6,306,321     5,441,339
  Services             3,849,971     4,188,426    17,650,815    14,052,481
                    ------------  ------------  ------------  ------------
    Total revenues    10,515,655     8,576,439    36,642,175    29,282,086
Cost of revenues
  Salaries and
   consultants         2,728,921     2,204,328    10,071,664     8,812,934
  Travel                 746,745       334,481     1,719,743     1,529,796
  Repairs and
   maintenance            72,692       117,448       405,140       430,962
  Insurance               85,283        58,302       239,043       211,897
  Depreciation and
   amortization          551,166       100,779     1,398,454       794,482
  Other                  548,587       434,962     1,890,100     1,914,440
                    ------------  ------------  ------------  ------------
    Total cost of
     sales             4,733,394     3,250,300    15,724,144    13,694,511
                    ------------  ------------  ------------  ------------
Gross profit           5,782,261     5,326,139    20,918,031    15,587,575
Operating expenses:
  Selling and
   marketing             904,562     1,056,004     3,722,470     3,161,924
  Depreciation and
   amortization          517,321       457,086     1,939,502     1,846,790
  Bad debt expense        55,016        72,606        58,293       189,873
  Salaries and
   wages                 945,402       781,794     3,703,836     3,696,501
  Professional
   services,
   including
   non-cash
   compensation          413,490       293,499       837,598     1,067,702
  General and
   adminstrative       1,170,091       775,735     3,447,113     2,977,917
                    ------------  ------------  ------------  ------------
    Total operating
     expenses          4,005,882     3,436,724    13,708,812    12,940,707
                    ------------  ------------  ------------  ------------
Income from
 operations            1,776,379     1,889,415     7,209,219     2,646,868
Other income and
 (expenses):
  Gain (Loss) on
   sale of assets         (2,440)       16,090       (35,484)       (2,977)
  Beneficial
   conversion
   feature                     -             -             -    (2,208,334)
  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)
  Interest expense       (82,043)      (74,476)     (626,708)     (617,818)
  Interest income         35,234        38,092       195,103       201,015
  Gain on sale of
   subsidiary
   shares                      -             -     1,240,808             -
  Gain on foreign
   currency
   exchange rates      1,430,669        42,434     2,020,839       178,522
  Other income and
   (expenses)             29,600        18,210       148,544        74,050
                    ------------  ------------  ------------  ------------
    Total other
     income
     (expenses)        1,411,020         5,926     2,943,102    (5,428,534)
                    ------------  ------------  ------------  ------------
Net income (loss)
 before minority
 interest in
 subsidiary            3,187,399     1,895,341    10,152,321    (2,781,666)
Minority interest
 in subsidiary        (1,051,781)     (561,508)   (2,808,291)   (1,935,589)
Income taxes             (75,710)      (33,686)     (121,982)     (160,306)
                    ------------  ------------  ------------  ------------
Net income (loss)      2,059,908     1,300,147     7,222,048    (4,877,561)
Dividend required
 for preferred
 stockholders            (33,508)      (77,640)     (178,541)     (237,326)
Subsidiary dividend
 (minority holders
 portion)                      -             -      (817,173)            -
Bonus stock
 distribution
 (minority holders
 portion)               (615,635)     (345,415)   (1,160,994)     (345,415)
                    ------------  ------------  ------------  ------------
Net income (loss)
 applicable to
 common
 shareholders          1,410,765       877,092     5,065,340    (5,460,302)
Other comprehensive
 loss:
  Translation
   adjustment         (2,390,317)     (259,113)   (3,792,148)      (55,770)
                    ------------  ------------  ------------  ------------
Comprehensive
 income (loss)      $   (979,552) $    617,979  $  1,273,192  $ (5,516,072)
                    ============  ============  ============  ============
Net income (loss)
 per share:
  Basic             $       0.08  $       0.06  $       0.29  $      (0.28)
                    ============  ============  ============  ============
  Diluted           $       0.08  $       0.07  $       0.28  $      (0.28)
                    ============  ============  ============  ============
Weighted average
 number of shares
 outstanding
  Basic               25,425,042    19,706,920    24,118,538    18,189,590
  Diluted             27,303,554    19,835,177    25,997,049    18,189,590




               NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
            CONSOLIDATED BALANCE SHEET - AS OF JUNE 30, 2008


                    ASSETS
Current assets:
  Cash and cash equivalents                       $ 6,275,238
  Accounts receivable, net of allowance for
   doubtful accounts of $108,538                   10,988,888
  Revenues in excess of billings                   11,053,042
  Other current assets                              2,406,407
                                                  -----------
    Total current assets                                         30,723,575
Property and equipment, net of accumulated
 depreciation                                                     9,176,780
Other assets, long-term                                           1,866,437
Intangibles:
  Product licenses, renewals, enhancements,
   copyrights, trademarks, and tradenames, net     10,837,856
  Customer lists, net                               1,732,761
  Goodwill                                          9,439,285
                                                  -----------
    Total intangibles                                            22,009,902
                                                               ------------
    Total assets                                               $ 63,776,694
                                                               ============

     LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued expenses           $ 4,116,659
  Current portion of loans and obligations under
   capitalized leases                               2,280,110
  Other payables - acquisitions                       846,215
  Unearned revenues                                 3,293,728
  Due to officers                                     184,173
  Dividend to preferred stockholders payable           33,508
  Loans payable, bank                               2,932,551
                                                  -----------
    Total current liabilities                                    13,686,944
Obligations under capitalized leases, less
 current maturities                                                 332,307
Long term loans; less current maturities                            411,608
                                                               ------------
    Total liabilities                                            14,430,859
Minority interest                                                 6,866,514
Commitments and contingencies                                             -

Stockholders' equity:
  Preferred stock, 5,000,000 shares authorized;
   1,920 issued and outstanding                     1,920,000
  Common stock, $.001 par value; 95,000,000
   shares authorized; 25,545,482 issued and
   outstanding                                         25,545
  Additional paid-in-capital                       76,456,697
  Treasury stock                                      (35,681)
  Accumulated deficit                             (32,067,003)
  Stock subscription receivable                      (600,907)
  Common stock to be issued                         1,048,249
  Other comprehensive loss                         (4,267,579)
                                                  -----------
    Total stockholders' equity                                   42,479,321
                                                               ------------
    Total liabilities and stockholders' equity                 $ 63,776,694
                                                               ============




                NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
                         STATEMENTS OF CASH FLOWS


                                                      For the Years
                                                      Ended June 30,
                                                    2008          2007
                                                ------------  ------------
Cash flows from operating activities:
  Net income (loss) from continuing
   operations                                   $  7,222,048  $ (4,877,561)
  Adjustments to reconcile net income (loss)
   applicable to common shareholders to
   net cash provided by (used in) operating
   activities:
  Depreciation and amortization                    3,337,956     2,641,272
  Bad debt expense                                    58,293       189,873
  Loss on sale of assets                              35,484         2,977
  Gain on sale of subsidiary shares in Pakistan   (1,240,808)            -
  Minority interest in subsidiary                  2,808,291     1,935,589
  Stock issued for services                          167,926        88,099
  Stock issued for convertible note payable
   interest                                                -       311,868
  Fair market value of warrants and stock
   options granted                                    24,320       136,571
  Beneficial conversion feature                            -     2,208,334
  Amortization of capitalized cost of debt                 -     2,815,358
  Changes in operating assets and liabilities:
    Increase in accounts receivable               (4,123,995)   (2,858,608)
    Increase in other current assets              (4,980,504)   (3,359,736)
    Decrease in long-term assets                     229,622       159,940
    Increase in accounts payable and accrued
     expenses                                        233,408       560,136
                                                ------------  ------------
  Net cash provided by/(used in) operating
   activities                                      3,772,041       (45,888)
Cash flows from investing activities:
  Purchases of property and equipment             (4,435,755)   (2,420,470)
  Sales of property and equipment                     15,838       366,088
  Net proceeds of certificates of deposit                  -     1,737,481
  Bank overdraft                                      85,335             -
  Payments of acquisition payable                   (879,007)   (4,027,753)
  Increase in intangible assets                   (4,829,369)   (3,295,262)
                                                ------------  ------------
  Net cash used in investing activities          (10,042,958)   (7,639,916)
Cash flows from financing activities:
  Proceeds from sale of common stock               1,500,000     1,030,093
  Proceeds from the exercise of stock options
   and warrants                                    3,282,827     1,008,250
  Proceeds from sale of subsidiary stock           1,765,615             -
  Finance costs incurred for sale of common
   stock                                             (10,000)            -
  Purchase of treasury stock                         (25,486)            -
  Reduction of restricted cash                             -     4,533,555
  Proceeds from loans from officers                        -       165,000
  Proceeds from bank loans                         5,441,870             -
  Payments on bank loans                             (99,936)            -
  Payments on capital lease obligations &
   loans - net                                    (3,409,496)    2,359,017
                                                ------------  ------------
  Net cash provided by financing activities        8,445,394     9,095,915
Effect of exchange rate changes in cash               90,597       106,285
                                                ------------  ------------
Net increase in cash and cash equivalents          2,265,074     1,516,396
Cash and cash equivalents, beginning of year       4,010,164     2,493,768
                                                ------------  ------------
Cash and cash equivalents, end of year          $  6,275,238  $  4,010,164
                                                ============  ============




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


                                              For the Three   For the Year
                                              Months Ended        Ended
                                              June 30, 2008   June 30, 2008
                                              -------------   -------------

Net income per GAAP (applicable to common
 shareholders)                                $   2,059,908   $   7,222,049
  Income taxes                                       75,710         121,982
  Depreciation and amortization                   1,068,487       3,354,472
  Interest expense                                   82,043         626,640
                                              -------------   -------------
    EBITDA income                             $   3,286,148   $  11,325,143
                                              =============   =============

Weighted average number of shares
 outstanding
  Basic                                          25,425,042      24,118,538
  Diluted                                        27,303,554      25,997,049

                                              -------------   -------------
Basic EBITDA EPS                              $        0.13   $        0.47
                                              =============   =============
Diluted EBITDA EPS                            $        0.12   $        0.44
                                              =============   =============

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
    Email: cchu@hfgcg.com