NTWK NetSol Technologies Inc

NETSOL Technologies, Inc. (Nasdaq: NTWK), a global business services and asset finance solutions provider, reported results for the second fiscal quarter and six months ended December 31, 2024.

Najeeb Ghauri, Co-Founder, Chief Executive Officer, and Chairman of NETSOL Technologies Inc., commented, “Our second quarter of fiscal 2025 was highlighted by strong growth in recurring revenues which have been a key strategic focus of ours. During the quarter, we also made investments in the business which better position us for long-term growth. While these investments, particularly in AI, impacted our short-term profitability, they better position us to capitalize on our established expertise as a leading provider of business services and asset financing solutions. With a strong sales pipeline and growing market presence in the US, we believe that we are well positioned to drive positive results in the full fiscal year.”

Second Quarter 2025 Financial Results

Total net revenues for the second quarter of fiscal 2025 increased 2% to $15.5 million, compared with $15.2 million in the prior year period, driven primarily by increases in subscription and support revenues and services revenues in the quarter. On a constant currency basis, total net revenues were $15.4 million.

• Total license fees were $73,000 compared with $3.0 million in the prior year period.
• Total subscription (SaaS and cloud) and support revenues increased 27% to $8.6 million compared with $6.8 million in the prior year period. Total subscription and support revenues as percentage of sales were 56%, compared with 45% in the prior year period. Included in subscription and support revenues in the quarter is a one-time catch up of approximately $1.0 million. Absent this one-time catch up, total subscription and support revenues in the quarter would have increased approximately 12% compared to the prior year period, which more accurately reflects increases in contract values. Total subscription and support revenues on a constant currency basis were $8.6 million.
• Total services revenues increased 26% to $6.8 million, compared with $5.4 million in the prior year period. Total services revenues on a constant currency basis were $6.7 million.

Gross profit for the second quarter of fiscal 2025 was $6.9 million or 45% of net revenues, compared to $7.2 million or 47% of net revenues in the second quarter of fiscal 2024. On a constant currency basis, gross profit was $6.9 million or 45% of net revenues.

Operating expenses for the second quarter of fiscal 2025 were $7.4 million or 48% of sales compared to $6.1 million or 40% of sales for the second quarter of fiscal 2024. On a constant currency basis, operating expenses were $7.3 million or 47% of sales. The increase in operating expenses is primarily related to increased sales and marketing costs as the Company continues to invest in growth opportunities.

Loss from operations for the second quarter of fiscal 2025 was $(487,000) compared to income from operations of $1.0 million in the second quarter of fiscal 2024. On a constant currency basis, loss from operations was $389,000.

GAAP net loss attributable to NETSOL for the second quarter of fiscal 2025 totaled $(1.1 million) or $(0.10) per diluted share, compared with GAAP net income of $408,000 or $0.04 per diluted share in the prior year period. Included in GAAP net loss attributable to NETSOL in the quarter was a loss on foreign currency exchange transactions of $(698,000).

Non-GAAP EBITDA for the second quarter of fiscal 2025 was a loss of $(775,000) or $(0.07) per diluted share, compared with non-GAAP EBITDA of $1.4 million or $0.12 per diluted share in the second quarter of fiscal 2024 (see note regarding “Use of Non-GAAP Financial Measures,” below for further discussion of this non-GAAP measure).

Non-GAAP adjusted EBITDA for the second quarter of fiscal 2025 was a loss of $(789,000) or $(0.07) per diluted share, compared with a non-GAAP adjusted EBITDA of $725,000 or $0.06 per diluted share in the prior year period (see note regarding “Use of Non-GAAP Financial Measures,” below for further discussion of this non-GAAP measure).

Six Months Ended December 31, 2024, Financial Results

Total net revenues for the six months ended December 31, 2024, were $30.1 million, compared to $29.5 million in the prior year period. On a constant currency basis, total net revenues were $29.8 million.

• License fees totaled $74,000 compared with $4.3 million in the prior year period. License fees on a constant currency basis were $71,000.
• Total subscription (SaaS and Cloud) and support revenues for the six months ended December 31, 2024, increased 26% to $16.8 million from $13.3 million in the prior year period. Subscription and support revenues in the six months ended December 31, 2024, included a one-time catch up of approximately $1.7 million. Absent this one-time catch up, total subscription and support revenues for the six months ended December 31, 2024 would have increased approximately 14% compared to the previous period, which more accurately reflects increases in contract values. Total subscription and support revenues on a constant currency basis were $16.7 million.
• Total services revenues increased 11% to $13.2 million from $11.9 million in the prior year period. Total services revenues on a constant currency basis were $13.0 million. The increase in total services revenues during this period is primarily related to increased implementation services in the US and the UK.

Gross profit for the six months ended December 31, 2024, was $13.5 million or 45% of net revenues, compared with $13.3 million of 45% of net revenues in the prior year period. On a constant currency basis, gross profit for the six months ended December 31, 2024, was $13.6 million or 46% of net revenues as measured on a constant currency basis.

Operating expenses for the six months ended December 31, 2024, were $14.7 million or 49% of sales, compared with $12.0 million or 41% of sales in the prior year period. On a constant currency basis, operating expenses for the six months ended December 31, 2024, were $14.4 million or 48% of sales on as measured on a constant currency basis.

GAAP net loss attributable to NETSOL for the six months ended December 31, 2024, totaled $(1.1 million) or $(0.09) per diluted share, compared with GAAP net income of $439,000 or $0.04 per diluted share in the prior year period. On a constant currency basis, GAAP net loss attributable to NETSOL for the first six months of fiscal 2025 totaled $(877,000) or $(0.08) per diluted share.

Non-GAAP EBITDA for the six months ended December 31, 2024, was a loss of $(473,000) or $(0.04) per diluted share, compared with non-GAAP EBITDA of $2.2 million or $0.19 per diluted share in the prior year period (see note regarding “Use of Non-GAAP Financial Measures,” below for further discussion of this non-GAAP measure).

Non-GAAP adjusted EBITDA for the six months ended December 31, 2024, was a loss of $(585,000) or $(0.05) per diluted share, compared with non-GAAP adjusted EBITDA of $1.2 million or $0.10 per diluted share in the prior year period (see note regarding “Use of Non-GAAP Financial Measures,” below for further discussion of this non-GAAP measure).

Balance Sheet and Capital Structure

Cash and cash equivalents was $21.3 million as of December 31, 2024, compared with $19.1 million as of June 30, 2024. Working capital was $23.0 million as of December 31, 2024, compared with $23.6 million as of June 30, 2024. Total NETSOL stockholders’ equity at December 31, 2024, was $33.9 million or $2.91 per share.

Management Commentary

Najeeb Ghauri, Co-Founder, Chief Executive Officer, and Chairman of NETSOL Technologies Inc., commented, “We’re investing in AI product development to enhance our already robust suite of asset finance and leasing solutions. Our Transcend Retail platform is gaining encouraging traction, primarily driven by our agreement with a major German auto manufacturer that continues to ramp. Internationally, we announced a multi-million dollar expansion agreement during the quarter with a longstanding customer in China, and subsequent to the quarter, we expanded an existing agreement with a leading Japanese equipment finance company that is now live with our Transcend Finance platform in their operations in New Zealand and Australia. Contracts like these demonstrate both the depth of our customer relationships, and the superior performance and reliability of our products.”

Roger Almond, Chief Financial Officer of NETSOL Technologies Inc., commented, “The growth in recurring revenues during the quarter demonstrates the continued evolution of our business model that over time should drive enhanced predictability and profitability in our business. During the quarter, the strategic investments we made in sales and marketing, coupled with the fluctuation in our licensing revenue as well as fluctuations in the foreign currency exchange rate, impacted our profitability. We are confident that the sustained growth in our recurring revenue, coupled with the investments we are making in the long-term growth of our business will translate into enhanced value for our shareholders. Importantly, our robust balance sheet with substantial cash and shareholders’ equity provides a strong financial underpinning to the business as we execute on our strategy.”

Conference Call

NETSOL Technologies management will hold a conference call on Thursday, February 13, at 9:00 a.m. Eastern Time (6:00 a.m. Pacific Time) to discuss these financial results. A question-and-answer session will follow management's presentation.

U.S. dial-in: 877-407-0789International dial-in: 201-689-8562

Please call the conference telephone number 5-10 minutes prior to the start time and provide the operator with the conference ID: NETSOL. The operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Investor Relations at 203-972-9200.

The conference call will also be broadcast live and available for replay here, along with additional replay access being provided through the company information section of NETSOL’s website.

A telephone replay of the conference call will be available approximately three hours after the call concludes through Thursday, February 27, 2024.

Toll-free replay number: 844-512-2921International replay number: 412-317-6671Replay ID: 13751199

About NETSOL TechnologiesNETSOL Technologies, Inc. (Nasdaq: NTWK) is a worldwide provider of IT and enterprise software solutions primarily serving the global leasing and finance industry. The Company’s suite of applications is backed by 40 years of domain expertise and supported by a committed team of professionals placed in ten strategically located support and delivery centers throughout the world. NETSOL’s products help companies transform their finance and leasing operations, providing a fully automated asset-based finance solution covering the complete leasing and finance lifecycle.

Forward-Looking StatementsThis 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.

Use of Non-GAAP Financial MeasuresThe reconciliation of Adjusted EBITDA to net income, the most comparable financial measure based upon GAAP, as well as a further explanation of adjusted EBITDA, is included in the financial tables in Schedule 4 of this press release.

Investor Relations Contact:

IMS Investor Relationsnetsol@imsinvestorrelations.com+1 203-972-9200

	NETSOL Technologies, Inc. and Subsidiaries1: Consolidated Balance Sheets
	ASSETS		December 31, 2024				June 30, 2024
Current assets:
	Cash and cash equivalents		$	21,270,642			$	19,127,165
	Accounts receivable, net of allowance of $17,028 and $398,809			7,829,823				13,049,614
	Revenues in excess of billings, net of allowance of $595,875 and $116,148			10,661,549				12,684,518
	Other current assets			3,191,378				2,600,786
		Total current assets		42,953,392				47,462,083
Revenues in excess of billings, net - long term				777,428				954,029
Property and equipment, net				4,934,498				5,106,842
Right of use assets - operating leases				1,069,948				1,328,624
Other assets				32,339				32,340
Intangible assets, net				-				-
Goodwill				9,302,524				9,302,524
		Total assets	$	59,070,129			$	64,186,442
	LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable and accrued expenses		$	7,332,560			$	8,232,342
	Current portion of loans and obligations under finance leases			8,784,232				6,276,125
	Current portion of operating lease obligations			518,075				608,202
	Unearned revenue			3,320,286				8,752,153
		Total current liabilities		19,955,153				23,868,822
Loans and obligations under finance leases; less current maturities				86,951				95,771
Operating lease obligations; less current maturities				512,062				688,749
		Total liabilities		20,554,166				24,653,342
Stockholders' equity:
	Preferred stock, $.01 par value; 500,000 shares authorized;			-				-
	Common stock, $.01 par value; 14,500,000 shares authorized;
		12,589,046 shares issued and 11,650,015 outstanding as of December 31, 2024 ,
		12,359,922 shares issued and 11,420,891 outstanding as of June 30, 2024		125,894				123,602
	Additional paid-in-capital			129,194,697				128,783,865
	Treasury stock (at cost, 939,031 shares
	as of December 31, 2024 and June 30, 2024)			(3,920,856	)			(3,920,856	)
	Accumulated deficit			(45,288,560	)			(44,212,313	)
	Other comprehensive loss			(46,187,766	)			(45,935,616	)
		Total NetSol stockholders' equity		33,923,409				34,838,682
	Non-controlling interest			4,592,554				4,694,418
		Total stockholders' equity		38,515,963				39,533,100
		Total liabilities and stockholders' equity	$	59,070,129			$	64,186,442

NETSOL Technologies, Inc. and SubsidiariesSchedule 2: Consolidated Statement of Operations
			For the Three Months								For the Six Months
			Ended December 31,								Ended December 31,
				2024				2023				2024				2023
Net Revenues:
	License fees		$	72,688			$	2,990,453			$	73,917			$	4,270,902
	Subscription and support			8,642,629				6,827,781				16,835,100				13,340,024
	Services			6,821,344				5,419,707				13,226,142				11,869,196
		Total net revenues		15,536,661				15,237,941				30,135,159				29,480,122
Cost of revenues				8,616,320				8,062,204				16,650,706				16,142,368
Gross profit				6,920,341				7,175,737				13,484,453				13,337,754
Operating expenses:
	Selling, general and administrative			7,073,622				5,807,494				14,037,943				11,240,463
	Research and development cost			333,669				341,411				693,618				719,830
		Total operating expenses		7,407,291				6,148,905				14,731,561				11,960,293
Income (loss) from operations				(486,950	)			1,026,832				(1,247,108	)			1,377,461
Other income and (expenses)
	Interest expense			(236,386	)			(290,322	)			(494,605	)			(566,339	)
	Interest income			529,072				468,280				1,298,939				882,998
	Gain (loss) on foreign currency exchange transactions			(698,392	)			(14,617	)			(155,847	)			(148,870	)
	Other income			38,064				(57,305	)			191,555				576
		Total other income (expenses)		(367,642	)			106,036				840,042				168,365
Net income before income taxes				(854,592	)			1,132,868				(407,066	)			1,545,826
Income tax provision				(331,614	)			(150,053	)			(561,431	)			(271,948	)
Net income				(1,186,206	)			982,815				(968,497	)			1,273,878
	Non-controlling interest			39,164				(574,499	)			(107,750	)			(834,672	)
Net income attributable to NetSol			$	(1,147,042	)		$	408,316			$	(1,076,247	)		$	439,206
Net income per share:
	Net income per common share
		Basic	$	(0.10	)		$	0.04			$	(0.09	)		$	0.04
		Diluted	$	(0.10	)		$	0.04			$	(0.09	)		$	0.04
Weighted average number of shares outstanding
	Basic			11,484,298				11,372,819				11,456,996				11,359,338
	Diluted			11,484,298				11,372,819				11,456,996				11,359,338

NETSOL Technologies, Inc. and SubsidiariesSchedule 3: Consolidated Statement of Cash Flows
				For the Six Months
				Ended December 31,
					2024				2023
Cash flows from operating activities:
	Net income (loss)			$	(968,497	)		$	1,273,878
	Adjustments to reconcile net income (loss) to net cash
		provided by operating activities:
	Depreciation and amortization				738,582				959,949
	Provision (reversal) for bad debts				475,172				29,191
	Gain on sale of assets				(25,084	)			(98	)
	Stock based compensation				95,134				111,787
	Changes in operating assets and liabilities:
		Accounts receivable			4,405,610				5,722,791
		Revenues in excess of billing			2,688,774				(4,239,762	)
		Other current assets			(170,856	)			329,171
		Accounts payable and accrued expenses			(878,148	)			72,501
		Unearned revenue			(5,990,971	)			(3,654,724	)
	Net cash provided by operating activities				369,716				604,684
Cash flows from investing activities:
	Purchases of property and equipment				(568,134	)			(570,584	)
	Sales of property and equipment				45,535				1,248
	Purchase of subsidiary shares				(8,878	)			-
	Net cash used in investing activities				(531,477	)			(569,336	)
Cash flows from financing activities:
	Proceeds from the exercise of stock options and warrants				430,000				-
	Dividend paid by subsidiary to non-controlling interest				(306,799	)			-
	Proceeds from bank loans				2,676,932				135,123
	Payments on finance lease obligations and loans - net				(162,370	)			(162,482	)
	Net cash provided by (used in) financing activities				2,637,763				(27,359	)
Effect of exchange rate changes					(332,525	)			118,273
Net increase (decrease) in cash and cash equivalents					2,143,477				126,262
Cash and cash equivalents at beginning of the period					19,127,165				15,533,254
Cash and cash equivalents at end of period				$	21,270,642			$	15,659,516

NETSOL Technologies, Inc. and SubsidiariesSchedule 4: Reconciliation to GAAP
	For the Three Months								For the Six Months
	Ended December 31,								Ended December 31,
		2024				2023				2024				2023
Net Income (loss) attributable to NetSol	$	(1,147,042	)		$	408,316			$	(1,076,247	)		$	439,206
Non-controlling interest		(39,164	)			574,499				107,750				834,672
Income taxes		331,614				150,053				561,431				271,948
Depreciation and amortization		372,585				429,163				738,582				959,949
Interest expense		236,386				290,322				494,605				566,339
Interest (income)		(529,072	)			(468,280	)			(1,298,939	)			(882,998	)
EBITDA	$	(774,693	)		$	1,384,073			$	(472,818	)		$	2,189,116
Add back:
Non-cash stock-based compensation		47,355				51,433				95,134				111,787
Adjusted EBITDA, gross	$	(727,338	)		$	1,435,506			$	(377,684	)		$	2,300,903
Less non-controlling interest (a)		(61,529	)			(710,171	)			(207,310	)			(1,109,611	)
Adjusted EBITDA, net	$	(788,867	)		$	725,335			$	(584,994	)		$	1,191,292
Weighted Average number of shares outstanding
Basic		11,484,298				11,372,819				11,456,996				11,359,338
Diluted		11,484,298				11,372,819				11,456,996				11,359,338
Basic adjusted EBITDA	$	(0.07	)		$	0.06			$	(0.05	)		$	0.10
Diluted adjusted EBITDA	$	(0.07	)		$	0.06			$	(0.05	)		$	0.10
(a)The reconciliation of adjusted EBITDA of non-controlling interest
to net income attributable to non-controlling interest is as follows
Net Income (loss) attributable to non-controlling interest	$	(39,164	)		$	574,499			$	107,750			$	834,672
Income Taxes		102,414				75,407				173,001				111,784
Depreciation and amortization		92,546				109,765				181,681				251,116
Interest expense		68,636				91,295				147,828				177,184
Interest (income)		(165,365	)			(144,578	)			(408,012	)			(272,669	)
EBITDA	$	59,067			$	706,388			$	202,248			$	1,102,087
Add back:
Non-cash stock-based compensation		2,462				3,783				5,062				7,524
Adjusted EBITDA of non-controlling interest	$	61,529			$	710,171			$	207,310			$	1,109,611