Q4 2020 NetSol Technologies Inc Earnings Call
off
Thursday
good morning. Welcome to nets all Technologies fiscal fourth-quarter and full-year 2020 earnings conference call on the call today are in the Jeep Gary chairman and chief executive officer Robert. Almond Chief Financial Officer Patty mcglasson general counsel name Gary CEO of Otis and Assad Global head of sales. I would now like to turn the box over to Patty mcglasson who provide the necessary cautions regarding the forward-looking statements made by management during this call, please proceed.
Good morning, everyone and thank you for joining us a review of the companies and financial results. We will open up the call for questions before we begin. I would like to address the office which was originally scheduled for Thursday, September 24th, 2020 as stated in a press release issued last week. The delay was a result of additional time being needed by our auditor the school year ended June Thirty 2020 was the first annual auditing. Reviewed by our new firm via foragers through this process additional and first time reviews were conducted which ultimately necessitated an extension office. Allocated that said, we're pleased to report that after a comprehensive audit process. Our financial statements were found to be satisfactory and no material changes were required.
I will now yes, I'm sorry not provide the necessary caution regarding forward-looking statements made by management during the call. Please note that all the information discussed on today's call is covered under the Safe Harbor provisions of the private Securities litigation reform at the company's discussion may include forward-looking statements reflecting Management's current forecast of certain aspects of the companies featured and our actual to differ materially from those stated or implied. These forward-looking statements are qualified by the cautionary statements contained in this house, press release and SEC filings, including our annual report on form 10-K and off the reports on form 10-q. I would also like to point out that we will be discussing certain non-gaap measures. The press release issued earlier today contains a Reconciliation of these non-gaap Financial results to their mom possible get measures finally. I would like to remind everyone that this call will be recorded and made available for replay on our website at ww.w available.
Today's press release now. I would like to turn the call over to the Jeep the Jeep.
Thank you Patty and good morning everyone as you can see from the press release this morning. We're continuing to work our way through a Corvette impacted environment or we still facing a number of industry and macroeconomic headwinds during the fiscal fourth-quarter. We recorded meaningful sales Milestones drove incrementally improved results and were able to generate another year of profitability. Most notably our Revenue gross profit operating income and EPS all improved sequentially over Q3, which is driven by a mildly improved sales environment as well as cost control structures. We implemented in response to the pandemic
As many of you listening this morning will remember.
We entered for school 2020 coming off a record top and bottom-line performance and the strongest position in our history of 2019 results at the exact same time reducing multi-pronged growth strategy design during regular economic conditions to diversify and expand our total and recurring revenue streams. Ultimately propelling that's all to its next phase of commercial prosperity.
However over the past few months. We like most businesses globally or forced to adapt to a radically different working environment than we had planned out as an international organization that's directly witness the influence of covid-19 as quickly spread through many of our operations around the world impact of families other employees communities and the global economy.
During this period of increased uncertainty we have closely monitored evolving situation through all available information channels, including the latest news reports as well as updates from the CDC the World Health Organization and other regulatory authorities.
Our operations in the second half of this year were meaningfully impacted by the global slowdown occurring in many of the verticals reserved including the greater leasing office and Automotive Industries, despite these unfavorable conditions. We have continued to forge a path ahead. And in the meantime have taken decisive action to reduce costs. You also build up a strong cash position over the years which gives us additional backing going forward on the sales and implementation side of things down a month. We also went live with the first North American customer in Canada for our subscription cloud-based NFS Ascent offering which we expect to walk toward additional agreements in the future at the same time. Our European operations are also continuing to perform nicely from a total contract size perspective some wage.
Five value opportunities are currently coming out of our national European region. Furthermore Nashville North America or Nestle European Regional combine now represent a larger pipeline a contract opportunities compared to a asia-pacific region, which is a major achievement in a short amount of time overall with several covert driven purchasing delays began to move slowly ahead. We also have line of sight into a significant pipeline of opportunities in the coming year. It continues to be a tough Market but the ice seems to be thoughts so to speak but the rest of today's discussion are provided high-level recap of the past quarter and more recent updates before spending the rest of our discussion on our current market Outlook through the lens of our three prong growth strategy.
Tried to do that. I will hand the call over to our CFO almond.
Who would walk us through the financial results for the quarter and year Rodger?
Thanks to Jeep turning to our fiscal fourth-quarter and full-year 2020 Financial results for the period ended June thirtieth. Our total revenues for the fourth quarter were thirteen point six months compared to Seventeen point three million in the prior year. The decrease in total net revenues was primarily due to a decrease in total license fees at two point three million in a decrease in Social Services revenue of 1.8 billion, which is offset by an increase in total maintenance fees of $312,000 for all of fiscal 2020 total net revenues were 56.4 month compared to sixty seven point eight million in fiscal 2019. The decrease in total net revenues was primarily due to a decrease in total license fees of 12.2 million decrease in total Services these a 2.7 million which was all set by an increase in total maintenance fee to 3.4 million total licensees in Q4 were 1.2 million compared wage.
Two point five million in the prior year. For the full year total license fees were four point six million compared to 16.8 million in fiscal 2019, the decreasing license fees for both the quarter and year was primarily due to the absence of meaningful contribution from ar12 country hundred ten million dollar contract as well as other contracts to implement our NFS December that form which had a more pronounced contribution in the prior-year.
Total maintenance fees in Q4 were four point seven million compared to four point four million in the prior year. For the year total maintenance fees were $19 million compared to Fifteen point five million in the prior fiscal year the increase in total maintenance fees for the year was due to the start of new maintenance agreements or customers who went live with our products during fiscal 2028 anticipate maintenance fees to gradually increases and Implement both our NFS Legacy product and NFS ascent.
Total Services revenue for the quarter or seven point seven million compared to nine point four million in the prior year. For the full year total Services revenue or thirty two point nine million compared to thirty five point five million in the prior fiscal year the decrease in total Services revenue for the year as primary primarily due to a decrease in revenues associated with new implementations and change requests Services name is derived from Services provided to both current customers as well as Services provided a new customers as part of the implementation process total cost of revenues with 6.6 million for the fourth quarter wage increase 1.8 million from eight point four million in the fourth quarter of 2019 for fiscal year two thousand twenty cost of revenues was twenty nine point four million a decrease of 11% and 32.9 million is for 2019 the decrease in cost of revenues for the year was predominantly driven by decreasing salaries travel and depreciation and amortization.
gross profit
Fourth quarter of fiscal 2020 with 7 million or 51.8% of net revenues compared to eight point nine million or 51.5% of net revenues in the fourth quarter of fiscal 2019 gross profit for fiscal 2020 decreased to twenty seven billion or 47.8% of net revenues compared with thirty four point nine million or 51.4% of net revenues fiscal 2018 the decrease in gross profit for both the quarter and year was primarily due to a greater rate of decrease in total net revenues compared to the related costs of Revenue agent.
Operating expenses for the fourth quarter decreased 26.4% the 5.9 million or 43.2% of net revenues from 8 million months or 46% of net revenues in the same period last year operating expenses for fiscal 2020 decreased 7.7% to 25.9 million or 45.5% of net revenues from 2128.1 million or 41.4% of that revenues in fiscal 2019 the decrease in operating expenses for the year was primarily due to decreases in a marketing expenses salaries and wages and research and development costs offset by an increase in general and administrative expenses turning to our profitability metrics our net income from operations wage point two million for the fourth quarter and increased on the net income from operations and 946000. Thank you for last year that income from operations for the full year was 1.1 Million Dead.
A decrease in net income from operations of 6.8 million in fiscal year 2019 our gaap net income attributable to net so for the fourth quarter of fiscal 2028 total 1.2 million or ten cents per diluted share this Compares with net income of 3.5 million or Thirty cents per diluted share in the fourth quarter of last year. Income attributable to Mexico for fiscal two thousand twenty till nine hundred thirty seven thousand or eight cents per diluted share compared to net income of eight point six million or 74% off here for fiscal 2019. The decreasing gaap net income attributable to Nets or for both the quarter nearest primarily due to the decrease in revenues previously mentioned at a greater rate than related wage to support those revenues as I mentioned on previous calls. It's important to point out that included in our net income. This quarter was a gain of $327,000 on foreign currency exchange transactions compact.
To gain a 3.8 million in Q4 of last year.
For the full year we experience again at $399,000 compared to 6.3 million for all of 2019 because we operate in several geographical regions a significant portion of our business is conducted in currencies other than the US dollar a decrease in the value of the US dollar compared to Port currency exchange rates generally has the effect of increasing our revenues but it also increases our expenses denomination currencies other than the US dollar similarly as a u.s. Dollar gained strength relative to foreign currency exchange rate. They tend to reduce our revenues but it also takes reduces our expenses denominated in currencies other than the US dollar we plan our business accordingly by deploying additional resources areas of expansion while continuing to monitor our overall expenditures given a economic uncertainties of our Target markets when we turn on get metrics are non-gaap adjusted ebitda for the fourth quarter of fiscal 2020 total 2 million or $0.17 per diluted. Yes.
Are compared with net compared?
With non-gaap adjusted ebitda, 4.4 million or $0.38 per diluted share in the fourth quarter of last year for the full fiscal year 2029 Gap adjusted ebitda total 4.5 million or $0.37 per diluted share compared with twelve point nine million or a dollar $11 per diluted share in fiscal 2019. Please see the reconciliation schedules contains earnings release for a revised calculations of adjusted ebitda for fiscal year ended June thirty two thousand twenty turning to our balance sheet at the quarter-end. We had cash and cash equivalents of approximately 8.2 million or approximately $1. Seventy one. Ending on December 24th, 2020. The planned repurchase program will also be subject.
For an additional six month extension at the discretion of management, although no shares or repurchase during the fiscal year subsequent to the fiscal year end. We've purchased 147000 and 52 shares. I didn't average price of $3 and $16 per share under the program the company May repurchase its common stock in the open market from time to time and amount have prices and wage times as we deem appropriate subject to market conditions and federal and state laws governing sets of transactions. That's all expects to fund the repurchase with its existing cash balance in cash generated from operations. That concludes my prepared remarks. I'll now turn the call back over to the Jeep the Jeep additionally on maintenance and support staff has been operating on a full schedule for all International customers with our team are still very busy in conducting.
Virtual demos presentations and negotiations. However, in the unpredictable environment, we currently find ourselves. They have been understandable delays in decision-making potential new customers both for our Flagship. And if it offends and Autos Mobility additionally despite the fact we are a technology first organization wage does not mean there isn't a human element to a sales process and our operations as an industry leader with two degrees plus of domain expertise many contracts. We have one in five years. I have helped us to win additional business or renew contracts later on is still an important consideration for the future remains uncertain we are cautiously optimistic. We are returning to some sort of normalcy.
An example with offices where I've spent a great deal of time because the employees have started to coming back to work right now we have about 15% of 1400 is not operating in of on a rotational basis, and we hope you gradually increase those numbers from there.
One other note on the current sales Outlook as one might imagine with a number of the projects. We've been working on many of which we had anticipated going live around this time sometime have been pushed out for good reasons. Our implementation teams are working around the clock to stay on schedule. But we have seen two specific inputs. They have extended our delivery versus the obvious. Well, we are being able to adopt your remote work environment. It has understandably Place demands on our customers that have necessitated longer turnaround time for our requests. The reason the other reason is that we have seen an increase in the size and scope of the overall work being added in many big-ticket Mark projects.
The positive to this wrinkle is that we are continuing to recognize larger contract values based on the greater scope of work change requests are continuing to provide a material positive impact to our existing operations for many other organizations handling these additional requests in the current environment would be crippling to Nestle. We have pre-owned know what that means or ability to adapt even in the toughest of time.
Now is that all you finish I'll get into some updates from our main operations operating reasons starting asia-pacific with our previously announced drug country larger than a value contract with the financial services. We continue to make considerable progress along multi multi year multi-country implementation roadmap home of the challenges associated with completing an implementation amid, covid-19. That's phenomenal delivery team in Lahore first time remotely when life or or in Malaysia wage, which was a major accomplishment for our team.
Moving forward the most near-term go live events. Do come will be in Singapore and Thailand. We had hoped for go live events at both of these locations by now. I am outside circumstances very similar to the scenarios. I just described have pushed out the timelines most specifically in the process of working through an additional scope of work off. The quest that said we are in the final stretch in both implementations and I'm looking forward to making the official go live announcements in the coming weeks.
We also have more.
July Events further on the horizon areas that we are currently partially operational but we expect those announcements to be made in subsequent calendar years in all the contributing to proceed under budget and on schedule.
Moving next to a European operation or a big push in this region as well as North America has been a cloud-based offerings late in 2019 and something else introduction of a new subscription-based pricing option for all its cloud-based products and services.
Which is meant to work as a substitute, but not a replacement to the traditional license model.
Along with other other value-based factors built into the model. The new pricing plan is intended to decrease initial buying it costs the new customers and provide alternative to current customers seeking lower software usage and maintenance costs subscription-based pricing is being offered on a monthly quarterly or annual basis Europe and North America are major areas of focus for us in the next fiscal year and you believe this new more flexible pricing like in the option would be a great way for us to expand our initial footprint.
As an example in April is under contract with the leading Bank in the UK for a cloud implementation of our retail platform, which included a point of sale solution and CMS disagreement Mark our second sale of a scent in the region and while still early we are seeing continued interest in our service offering which should hopefully materialize into new deals in fiscal 2021 with the two contracts in hand. We are continuing to make progress on gas station and a working through a handful of additional requests as previously mentioned.
Finishing without North American operations on warranty a 1st in August. We announced the appointment of potential our new executive vice-president of EA month a role. They responsible for the entire portion of network business operations as part of his duties beautiful also work closely with the company's Global field organization organization or delivery teams. We are very excited to have Peter come on board. He bring over three decades of international experience in the financial services industry. And then with a rep accomplished background at Major Blue Chips Enterprises with specific expertise in the auto finance space prior to joining their soul Peter help pack leadership roles with the number of financial services most recently serving the Director of Finance or operations, but I am Africa and Asia Pacific Division where he managed,
Leaving and so on and so forth.
Oh fourteen of 250 across 11 different markets.
Before coming on full-time. You don't have been performing any Consulting capacity for Nashville as well. So the transition has been a smooth want to say the least.
Cuz I just mentioned North America represent in nature extension opportunity for Nestle and we believe Peter has arrived at a human to lead our team to new heights in a new growth Market his hands-on experience in many areas of Business Development different operating and Licensing models as well as International Financial controls off and they'll prepare to bring in new business through our differentiated offerings including ourselves and cloud-based deployment options as well as generate are on sales from our other major customers in or other International markets.
His appointment after coming from various leadership position at a major customer is also a welcome tested endorsement for our standing in the auto finance Community am moving to sales more recently in August. We announced the successful go live with our NFS percent of ring marking the marking the first official go lie for a scent in North America implementation was performed for FCI leasing this car it canadian-based National Automotive leasing company and also represented the first Cloud incest base Dreamin sent in this region. The deployment was achieved in the record eight months in a largely remote work environment, which is a testament to the worth of our team as well as the flexibility. We now have any cloud-based deployment.
I'll provide some brief updates on our progress within our three-pronged growth strategy.
As a reminder, these are the three key areas when they stole is focusing where we believe we can generate outside results and Propel our business to its next phase of growth for a continued focus on the organic growth of our current course business second innovating in new areas and looking to create Partnerships where our technology and Personnel can be major can be a major benefit to other organizations as well as our own and third exploring inorganic growth opportunities where it makes sense. So beginning with the first prong power core business and I mentioned in my opening remarks our business along with the rest of the leasing finance and Automotive Industries largely being put on pause as customers delay major purchasing decision in the face of an uncertain economic environment. However, I also noted that length dead.
We are experiencing increased interest.
Not go solution from some new one captives in North America and Europe and have also seen an increase in the overall company pipeline as we come to the office and the VIN number of Paul's a prolonged sales cycle.
At this point I'll now hand the call over to name Gary see your photos to walk us through our additional growth failed both areas as well as to provide an outlook on our business in the near-term and the name will need to the Cure session name.
Thank you.
I'll start with autos for those of you who are less familiar Autos are nexo subsidiary and the digital platform that helps auto manufacturers or the captive bead owners and startups and launched orchestrate and scale Mobility businesses.
The artist back from is built on a cutting-edge technology stack which comprises of cloud-native architecture microservices AI machine learning and blockchain.
To date a team has grown to over four individuals across seven nationalities.
Our entry into the new smart Mobility space is a result of a strategy that we Embark upon eighteen months ago, and it comes at a defining moment for the automotive industry Global but also specifically for the US.
We have witnessed a shift in order ownership in the 20 to 29 year-old demographic. These are younger people more and more of whom are becoming part of the gig economy and a load to longer-term Commitment surrounding full ownership of cars.
We have seen similar trends of accelerated adoption with the music and entertainment industry for download and streaming services have completely disrupted ownership of DVDs and CDs.
Car ownership comes with a much bigger sticker price and broccoli maintenance over many years while being a very fast depreciating asset.
This model is ripe for disruption in adoption of on-demand and prescription products that provide the consumer the flexibility to use the car as needed without the responsibility of full ownership.
Every Trent and in this study on the future of car ownership indicates not only a surgeon adoption of on-demand mobility and flexible ownership around projects such as monthly subscription, but also that car ownership heading the same direction as have recently been minted. On in music and entertainment.
Otto's this position itself firmly in this quickly evolving space as a white level technology platform that enables Mobility operators deployed fast are the Box fully cloud-native solution without the need for heavy upfront licensing and customizing Investments. It is sold purely as a fast product that page this company of any size to be in business rapid deployment and low upfront cost.
essential
The order is a Mobility orchestration system. It is a match-making platform that connects providers of cars beat car dealers manufacturer finance companies or Fleet operator.
Which consumers Mobility who are looking to use a car for an hour a day week month or years?
Otto's is able to function as a dynamic ecosystem of bringing providers and consumers Mobility Services in one unified and seamless super app.
Consider it the engine that would help build new businesses that would provide cars or Mobility as a service rather than a product across the globe of house operators that are getting into the space.
When did you want the man or is the service is the fastest growing segment in the auto space globally today?
It's disruptive Road in Industry similar to the disruption of the internal combustion engine as a result of EV innovation.
We are now entering into sales opportunities with a number of organizations that are evaluating the auto platform which has been fully live with our first line that marked off in Thailand in June twenty twenties.
We see some of these opportunities starting into agreement and look forward to making further announcements soon.
Would that overview photos cannot discuss briefly our remaining growth areas as well as provide a brief outlook for a business.
What would you rather have a second growth area? Did you Partnerships? Well, I can't you any specific details in that area on today's call what I can share currently is that we are working with some of our existing large customers in an effort to align strategically for Mobility related offering.
But third and final Grill. We are continuing to evaluate opportunities in the marketplace that makes sense in being highly creative and complementary to our business office time. We have no updates to report.
Looking ahead to fiscal 2021 we have many reasons for cautious optimism. We've made in charging progress and expanding our sales footprint in North America and Europe driving year-over-year growth respectively and also make key leadership additions to head up our head up for treason.
As a global operations conservatively pick back up. We will look to regain the momentum and resume our plans for Diversified Progressive growth strategy. That's all remains digital first and focus organization and will continue to lead with our technology to deliver Innovative way to help our customers improve their life since today and prepare for the many disruptive challenges of the new Mobility economy.
finally
I'd like to take this time to publicly thank our employees Partners customers investors and other key stakeholders for the continued support of that solo through this very difficult.
Where everyone listening today? I hope you and your family remain safe and healthy during this challenging time with that. I'll open the call for question operator.
Thank you at this time will be conducting a question-and-answer session. If you'd like to ask a question, please press star one on your telephone keypad or confirmation tone will indicate your home. You may press start to if you'd like to remove your question from the Q4 participants using speaker equipment. It may be necessary to pick up your handset before pressing the star key. One moment, please while we pull for questions.
Once again, ladies and gentlemen, it is star one to ask a question at this time.
Thank you at this time. This concludes our question-and-answer session. If your question was not addressed during the Q&A session, or you have another question. Please contact us by emailing them at investors or by calling them. Now. Let's return the call back over to mr. Gary for his closing remarks.
Thank you for joining us today. I especially want to thank our investors for their continued support our loyal customers and are dedicated employees for the ongoing contribution. I look forward to be updating you on our next call in November for q1. Thank you, and have a good day after thank you. Thank you for joining us for about a year 2020 earnings call. You may now disconnect your lines. Thank you.