NetSol Technologies Reports Record Fiscal Second-Quarter Revenue

Second-Quarter Revenue Increases 37% to $11.8 Million; Net Income Advances to $2.2 Million, or $0.28 per Diluted Share

EBITDA Rises to $3.7 Million, or $0.47 per Diluted Share

CALABASAS, Calif., Feb. 12, 2013 (GLOBE NEWSWIRE) -- NetSol Technologies, Inc. (Nasdaq:NTWK), a worldwide provider of global IT and enterprise application solutions, today reported sharply improved financial results for its fiscal 2013 second quarter ended December 31, 2012.

Total revenue for the second quarter rose to $11.8 million, the highest second quarter in the company's history. This compares with $8.6 million in the second quarter of fiscal 2012.

Second-quarter license revenue increased to $3.5 million from $2.0 million in the comparable period in fiscal 2012. Maintenance revenue improved to $2.7 million from $2.1 million, as a result of select price increases, bringing certain customers up to market. Service revenue grew to $5.6 million from $4.4 million in the same period last fiscal year, primarily as a result of an increase in customization and enhancement of the company's NFS solution for Asia-based clients.

"Our financial performance demonstrates that the strategic initiatives we put in place to bring NetSol to its next stage of growth are well underway, evidenced by two consecutive record setting quarters and a record 2012 fiscal year," said Najeeb Ghauri, CEO of NetSol. "With favorable trends and brand recognition in Asia, especially in China, combined with marketing efforts for new products in the U.S. and across the world, we are well positioned for continued growth."

Click here to watch a video of Najeeb discussing the quarter and the trends that are driving NetSol's growth or visit http://bit.ly/NetSol-2Q2013-Earnings.

Total operating expenses for the fiscal 2013 second quarter amounted to $3.8 million, sequentially equal to the first quarter, although up from $3.5 million in the fiscal 2012 second quarter. The increase is related to hiring of new sales and marketing staff both at Vroozi and the NFS division, and a larger headcount as a result of the VLS acquisition.

Operating income for the second quarter of fiscal 2013 rose to $2.9 million from $1.2 million in the comparable period last year.

NetSol achieved second-quarter net income of $2.2 million, equal to $0.28 per diluted share, compared with $320,000, or $0.06 per share, in the comparable period of the prior fiscal year. This includes a $1.5 million deduction of net income for non-controlling interest, compared with a deduction of $826,000 in the prior year period. Weighted average number of diluted shares outstanding for the period was 8.0 million shares, compared with 5.7 million shares for the second quarter of fiscal 2012.

The net EBITDA (a non-GAAP measure), was $3.7 million for the fiscal 2013 second quarter or $0.47 per diluted share, versus $1.6 million or $0.28 per diluted share for the fiscal 2012 second quarter. The reconciliation of net EBITDA to net income, the most comparable non-GAAP financial measure, as well as a further explanation about adjusted EBITDA, is included in the financial tables at the end of this news release.

For the first half of fiscal 2013, total revenue rose to $22.9 million from $14.8 million for the first six months of fiscal 2012. Net income for the fiscal 2013 year-to-date period was $3.2 million, or $0.40 per diluted share, compared with a net loss of $1.1 million, or a loss of $0.20 per share, last year.

NetSol's cash and cash equivalents balance rose to $9.6 million at December 31, 2012, up from $7.6 million at June 30, 2012.

Recent Highlights:
  • Received three new orders for NetSol Financial Suite (NFS™) solution, representing more than $5 million in combined license, maintenance, and service billings;
  • Completed two NFS implementations in China;
  • Renegotiated maintenance agreements with NetSol Technologies Europe clients, resulting in increased maintenance revenue;
  • Secured a sole partnership contract in Pakistan with Encase Guidance Software, a world leader in digital forensics, to carry out investigations, including intellectual property theft, incident response and audit compliance;
  • Signed an information security consulting and implementation agreement through Atheeb NetSol Saudi Company Limited;
  • Began development of mobile applications for clients;
  • Virtual Lease Services, NetSol's joint venture with Investec, was awarded a new chip and pin contract, resulting in sustained increase in business volume and incremental revenue contribution from the division;
  • Vroozi signed an agreement with a global packaging company to conduct a multi-country roll-out of its cloud-based business shopping platform.

Business and Financial Outlook

"As we look at the second half of the year, our pipeline visibility continues to improve for new NFS implementations," Ghauri said. "Combined with anticipated improvements in maintenance revenue, an increase in custom projects, and incremental revenue contributions from our VLS and Vroozi subsidiaries, the second half of the year is shaping up to be a strong period for NetSol."

The company maintains its financial guidance, anticipating growing total annual revenue to a range of approximately $46 million to $49 million for fiscal 2013, and achieving earnings per diluted share of approximately $0.80 to $1.00 for the year.

Fiscal 2013 Second Quarter Conference Call
When: Tuesday, February 12
Time: 11:00 a.m. Eastern
Phone: 1-888-549-7760 (domestic)
  1-480-629-9866 (international)
Conference ID: 4595976

A live Webcast will be available online on NetSol's website at http://www.netsoltech.com/us/investors/event-presentation, where it will be archived for 90 days.

About NetSol Technologies

NetSol Technologies, Inc. ( www.netsoltech.com) is a worldwide provider of global IT and enterprise application solutions that include credit and finance portfolio management systems, SAP consulting and services, custom development, systems integration, and technical services for the global Financial, Leasing, Insurance, Energy, and Technology markets. Headquartered in Calabasas, Calif., NetSol's product and services offerings have achieved ISO 9001, ISO 20000, ISO 27001, and SEI (Software Engineering Institute) CMMI (Capability Maturity Model) Maturity Level 5 assessments, a distinction shared by only 178 companies worldwide. The company's clients include Fortune 500 manufacturers, global automakers, financial institutions, utilities, technology providers, and government agencies. NetSol has delivery and support locations in San Francisco, London, Beijing, Bangkok, Lahore, Adelaide and Riyadh.

Investors can receive news releases and invitations to special events by accessing our online signup form at http://www.netsoltech.com/us/investors/signupform

The NetSol Technologies, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=9832

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.
 
NetSol Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets
     
   As of December 31,   As of June 30, 
ASSETS  2012   2012 
Current assets:    
Cash and cash equivalents  $ 9,579,693  $ 7,599,607
Restricted cash  2,398,659  141,231
Accounts receivable, net   15,621,790  13,757,637
Revenues in excess of billings  11,443,669  12,131,329
Other current assets  2,118,234  2,648,302
Total current assets  41,162,045  36,278,106
Investment under equity method  547,306  --
Property and equipment, net  18,434,767  16,912,795
     
Intangible assets, net  28,756,690  28,502,983
Goodwill  9,653,330  9,653,330
Total intangibles  38,410,020  38,156,313
Total assets  $ 98,554,138  $ 91,347,214
     
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:    
Accounts payable and accrued expenses  $ 4,034,587  $ 3,869,355
Current portion of loans and obligations under capitalized leases  3,473,417  1,896,238
Other payables - acquisitions  103,226  103,226
Unearned revenues  4,510,426  2,704,661
Convertible notes payable , current portion  2,656,245  2,809,093
Loans payable, bank  2,051,282  2,116,402
Common stock to be issued  88,325  105,575
Total current liabilities  16,917,508  13,604,550
Obligations under capitalized leases, less current maturities  276,821  260,107
Convertible notes payable less current maturities  --  936,364
Long term loans; less current maturities  1,294,976  1,551,541
Total liabilities  18,489,305  16,352,562
Commitments and contingencies    
Stockholders' equity:    
Common stock, $.01 par value; 15,000,000 shares authorized; 8,021,489 & 7,513,745 issued and outstanding as of December 31, 2012 and June 30, 2012  80,215  75,137
Additional paid-in-capital  109,220,684  106,101,165
Treasury stock  (415,425)  (415,425)
Accumulated deficit  (28,532,291)  (31,684,399)
Stock subscription receivable  (2,342,238)  (2,119,488)
Other comprehensive loss  (13,893,118)  (12,361,759)
Total NetSol shareholders' equity  64,117,827  59,595,231
Non-controlling interest  15,947,006  15,399,421
Total stockholders' equity  80,064,833  74,994,652
Total liabilities and stockholders' equity  $ 98,554,138  $ 91,347,214
 
 
NetSol Technologies, Inc. and Subsidiaries
Consolidated Statement of Operations
         
   For the Three Months   For the Six Months 
   Ended December 31,   Ended December 31, 
  2012 2011 2012 2011
Net Revenues:        
License fees  3,505,847  2,047,855  6,747,348  3,123,705
Maintenance fees  2,664,813  2,121,282  4,710,519  4,158,488
Services  5,637,009  4,436,915  11,421,702  7,552,567
Total net revenues   11,807,669  8,606,052  22,879,569  14,834,760
Cost of revenues:        
Salaries and consultants   2,948,533  2,287,803  6,334,201  4,671,214
Travel   386,194  254,169  711,488  539,841
Repairs and maintenance   123,722  96,723  251,719  170,917
Insurance   41,007  31,348  78,726  67,216
Depreciation and amortization   1,024,007  812,510  1,982,158  1,601,615
Other   558,777  421,416  1,480,635  937,825
Total cost of revenues  5,082,240  3,903,969  10,838,927  7,988,628
Gross profit  6,725,429  4,702,083  12,040,642  6,846,132
Operating expenses:        
Selling and marketing  931,210  735,132  1,694,173  1,435,413
Depreciation and amortization  333,435  289,030  675,436  480,704
Bad debt expense  54,889  --  54,889  192,250
Salaries and wages  1,192,787  1,152,023  2,346,660  1,958,587
Professional services, including non-cash compensation   156,668  236,911  363,170  423,660
General and administrative  1,136,792  1,072,483  2,484,720  1,965,455
Total operating expenses  3,805,781  3,485,579  7,619,048  6,456,069
Income from operations  2,919,648  1,216,504  4,421,594  390,063
Other income and (expenses)        
(Loss) gain on sale of assets  (275)  (1,633)  14,021  (3,274)
Interest expense  (179,932)  (158,957)  (472,321)  (419,164)
Interest income  31,617  7,264  55,784  40,069
Gain on foreign currency exchange transactions  504,738  160,125  899,894  39,219
Share of net income (loss) from equity investment  484,487  --  484,487  (100,000)
Beneficial conversion feature  (74,384)  (61,441)  (442,128)  (74,247)
Other income (expense)   36  (8,987)  4  (16,706)
Total other income (expenses)  766,287  (63,629)  539,741  (534,103)
Net income (loss) before income taxes  3,685,935  1,152,875  4,961,335  (144,040)
Income taxes  2,548  (7,005)  (11,448)  (31,539)
Net income (loss) after tax  3,688,483  1,145,870  4,949,887  (175,579)
Non-controlling interest  (1,465,500)  (826,303)  (1,797,779)  (963,561)
Net income (loss) attributable to NetSol  2,222,983  319,567  3,152,108  (1,139,140)
         
Other comprehensive income (loss):        
Translation adjustment  (1,394,216)  (1,039,343)  (2,163,011)  (2,013,541)
Comprehensive income (loss)  828,767  (719,776)  989,097  (3,152,681)
Comprehensive loss attributable to non controlling interest   (399,096)  (437,533)  (631,652)  (854,892)
Comprehensive income (loss) attributable to NetSol  1,227,863  (282,243)  1,620,749  (2,297,789)
         
Net income (loss) per share:        
Basic  $ 0.28  $ 0.06  $ 0.41  $ (0.20)
Diluted  $ 0.28  $ 0.06  $ 0.40  $ (0.20)
Weighted average number of shares outstanding        
Basic  7,957,521  5,665,562  7,774,719  5,626,944
Diluted  7,968,598  5,726,155  7,785,796  5,626,944
         
Amounts attributable to NetSol common shareholders        
Net income / (loss)  $ 2,222,983  $ 319,567  $ 3,152,108  $ (1,139,140)
 
 
NetSol Technologies, Inc. and Subsidiaries
Consolidated Statement of Cash Flows
     
   For the Six Months 
   Ended December 31, 
  2012 2011
Cash flows from operating activities:     
Net income (loss)   $ 4,949,887  $ (175,580)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:     
Depreciation and amortization   2,657,594  2,082,319
Provision for bad debts   54,889  192,250
Share of net (income) loss from investment under equity method   (484,487)  100,000
(Gain) loss on sale of assets   (14,021)  3,274
Stock issued for interest on notes payable   211,111  --
Stock issued for services   29,670  155,500
Fair market value of warrants and stock options granted   320,021  256,479
Beneficial conversion feature   442,128  74,247
Changes in operating assets and liabilities:     
(Increase) decrease in accounts receivable   (1,864,153)  3,322,973
Decrease (increase) in other current assets   1,217,728  (2,042,183)
Increase (decrease) in accounts payable and accrued expenses   1,908,178  (11,801)
Net cash provided by operating activities   9,428,545  3,957,478
Cash flows from investing activities:     
Purchases of property and equipment   (3,537,918)  (2,832,212)
Sales of property and equipment   59,350  73,048
Purchase of treasury stock   --  (19,417)
Investment under equity method   --  (100,000)
Purchase of non-controlling interest in subsidiaries   (621,563)  --
Acquisition, net of cash acquired   --  (253,192)
Increase in intangible assets   (2,132,595)  (3,713,090)
Net cash used in investing activities   (6,232,726)  (6,844,863)
Cash flows from financing activities:     
Proceeds from the exercise of stock options and warrants   612,650  368,000
Payment to common shareholders against fractional shares   (194)  --
Proceeds from sale of subsidiary stock to non-controlling interest   3,031  --
Proceeds from convertible notes payable   --  4,000,000
Payments on convertible notes payable   --  (2,758,330)
Restricted cash   (2,257,428)  2,996,382
Proceeds from bank loans   2,049,698  3,866,758
Payments on capital lease obligations & loans - net   (723,936)  (5,123,981)
Net cash (used) provided by financing activities   (316,179)  3,348,829
Effect of exchange rate changes in cash   (899,554)  89,120
Net increase in cash and cash equivalents   1,980,086  550,564
Cash and cash equivalents, beginning of year   7,599,607  4,172,802
Cash and cash equivalents, end of year   $ 9,579,693  $ 4,723,366
 
 
NetSol Technologies, Inc. and Subsidiaries
Reconciliation to GAAP
         
  Three Months Three Months Six Months Six Months
  Ended Ended Ended Ended
  December 31, 2012 December 31, 2011 December 31, 2012 December 31, 2011
         
 Net Income (loss) before preferred dividend, per GAAP   $ 2,222,983  $ 319,567  $ 3,152,108  $ (1,139,141)
 Income Taxes   (2,548)  7,005  11,448  31,539
 Depreciation and amortization   1,357,442  1,101,540  2,657,594  2,082,319
 Interest expense   179,932  158,957  472,321  419,164
 Interest (income)   (31,617)  (7,264)  (55,784)  (40,069)
 EBITDA   $ 3,726,192  $ 1,579,805  $ 6,237,687  $ 1,353,813
         
 Weighted Average number of shares outstanding         
 Basic   7,957,521  5,665,562  7,774,719  5,626,944
 Diluted   7,968,598  5,726,155  7,785,796  5,687,537
         
 Basic EBITDA   $ 0.47  $ 0.28  $ 0.80  $ 0.24
 Diluted EBITDA   $ 0.47  $ 0.28  $ 0.80  $ 0.24

Although the net EBITDA income is a non-GAAP measure of performance, we are providing it because we believe it to be an important supplemental measure of our performance that is commonly used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry. It should not be considered as an alternative to net income, operating income or any other financial measures calculated and presented, nor as an alternative to cash flow from operating activities as a measure of our liquidity. It may not be indicative of the Company's historical operating results nor is it intended to be predictive of potential future results.
Investor Contacts:
 
PondelWilkinson
Roger Pondel | Matt Sheldon
investors@netsoltech.com
(310) 279-5980
 
Media Contacts:
 
PondelWilkinson
George Medici | gmedici@pondel.com
(310) 279-5968

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