Q4 2022 NetSol Technologies Inc Earnings Call
Yeah.
Good morning, and welcome to nuts, all technologies fiscal fourth quarter and full year 2022 earnings conference call on the call today are <unk>, Chairman and Chief Executive Officer, Roger Almond, Chief Financial Officer, and Patti Mcglasson General Counsel.
I'd now like to turn the call over to Patti Mcglasson, who will 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 following a review of the company's business highlights and financial results, we will open the call for questions.
I'll now provide the necessary cautions regarding the forward looking statements made by management. During this 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 Act.
The company's discussion may include forward looking statements, reflecting management's current forecast of certain aspects of the company's future and our app.
Actual results could differ materially from those stated or implied.
These forward looking statements are qualified by the cautionary statements contained in <unk> press releases and SEC filings, including our annual report on Form 10-K, and quarterly reports on Form 10-Q.
I would I suppose I 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 most comparable GAAP measures. Additionally, the company has posted a presentation to accompany the remarks, we plan to make on today's call in the investors section of our corporate website.
Finally, I would like to remind everyone that this call will be recorded and made available for replay at www Dot that's all tech dot com and the VA via the link available in today's press release now I'd like to turn the call over to energy.
Thank you Bobby and good.
Morning, everyone.
Today, I am calling in for the next sort of Campos because all your campus in Lahore Pakistan.
I'm very pleased to state that the operations of its own to a normalcy.
Post pandemic era.
Thank you you didn't get broader return to work and increased opportunities to meet face to face with guardant and prospective clients.
And arguably during the past two and a half just good years from the literally half of Cleveland, partly through fiscal 2022, that's all face the same micro and macroeconomic challenges as the rest of the world.
So we're not immune to the adverse impact of this game changing experience without global employees, our customers and our shareholders.
We are seeing a sea change.
Move moves back to normal.
Following the removal of localized restrictions.
We were able to implement a back office working environment.
Global location, including.
Domestic delivery center in Lahore, Pakistan.
The return to the office has been positively received.
Our global employees, while we choose to exercise our pleasure with this return to normalcy, we should note that our ability and capability.
The board our deliveries to our customers was never infected by the Mod work.
The return to normalcy there.
A large T cells and delivery teams to travel the North America, Europe , and the majority of the Asia Pacific region.
There's travel.
Liberals are genes to connect with current and potential customers increasing their ability to meaningfully compete for new global opportunities.
While most of the Asia Pacific has resumed full of blame China continues to enforce strict quarantine rules.
I didnt requirement, but all the visitors golar, taking for at least seven days that impacted our ability to meet face to face with the C level executives and key decision makers, but didn't show new and existing Chinese customers.
Nonetheless, our local Chinese team has continued to build new relationships and remain connected with customers and our largest revenue market, while our global sales delivery and senior executive team continue to use alternate making tools doing it virtually.
<unk>.
This is all to achieve best outcomes.
Analyzing our revenue growth.
Have seen models most of these steady growth in the first few months of the new fiscal year, while the last half of fiscal year, two don't really do fell short of our expectation.
What was your revenue growth. This was due to delays in expected new revenue in the second half of fiscal year 2022 that was pushed out due to this current fiscal year getting pretty crazy.
However, a big positive is that annual recurring revenue or <unk>.
Our increased to almost 28% from 20% expectation a wide while our topline grew by four 2%.
What are the key dynamics facing businesses worldwide.
Overall operating expenses during the following during the falling strip this time of the pandemic.
High inflation is not only the U S but globally.
<unk> cost and on everything from salaries travel utility.
General operating expenses salary.
Salary and G&A increase is mostly due to the hiring of over 330 employees.
You saw in China, the UK and U S.
That of course is what do you mean treatment for most employees.
Except senior management.
Generally speaking hiring more employees.
Our position there so for aggressive growth in North America, China and Europe .
Additional resources required to support the new vertical investing in a new AWS professional and bidding for high value contracts for our flagship ascent offering in the U S and Canada.
Supporting the growth we see in the lead.
And for that sector.
Quality and other new there you just mentioned.
I'll now turn the call over to Roger Almond.
V of the financials there Roger.
Yeah.
Thanks, Jim.
Turning to our fiscal fourth quarter and full year 2020 to financial results for the period ended June 30th our total net revenues for the fourth quarter of fiscal 2020 to $13 5 million.
Compared with $15 4 million in the prior year period.
The decrease in total net revenues was primarily driven by a decrease in total license fees of 587000, a decrease in services at 1.8 million offset by an increase in subscription and support revenue of 523000.
For all of fiscal 2022 total net revenues were $57 3 million compared to $54 9 million in fiscal 2021.
The increase in total net revenues was primarily due to an increase in subscription and support revenues at $6 1 million.
Offset by a decrease in license revenues of $1 7 million and a decrease in services revenue of $2 1 million.
Total license fees in Q4 were 952000 compared to $1 5 million in the prior year period.
For the full year total license fees were $4 5 million compared to $6 2 million in fiscal 2021.
The decrease in license fees for both the quarter and year was primarily due to the decrease in revenue being recognized from contracts to implement our NFS ascent retail platform.
Total subscription and support revenues in Q4 were $6 1 million compared to $5 6 million in the prior year period.
For the year total subscription and support revenues were $28 3 million compared to 22.2 million in the prior fiscal year.
The increase in total subscription and support revenue for the year was primarily due to the recording of approximately $3 5 million as a one time.
Cumulative catch up due to an amendment to our 10 year contract with Daimler financial services and other customers going live with our product.
Moving forward, we anticipate subscription and support revenue to gradually increase as we implement both our NFS legacy product and NFS ascent.
Total services revenue for the quarter were $6 5 million.
Compared to $8 2 million in the prior year period.
For the full year total services revenue were $24 4 million compared to $26 4 million in the prior fiscal year.
The decrease in services revenue for the quarter and the year was the result of reduced implementation services for D. F. F N B M. W. As they go live with our product.
Services revenue is derived from services provided to both current customers as well as services provided to new customers as part of the implementation process.
Yeah.
Total cost of revenues was $8 7 million for the fourth quarter, an increase of 863000.
From $7 9 million in the fourth quarter of 2021.
For fiscal year 2022 cost of revenues was $33 5 million an increase of $28 6 million in fiscal 2021, they increase in cost of sales for the quarter were primarily due to increases in salaries and consultant fees of 671000 and other costs of 256000.
The increase in cost of sales for the year were primarily due to increases in salaries and consultant fees of $3 6 million travel.
Travel expenses of 373000, and other costs of $1 1 million.
Gross profit for the fourth quarter of fiscal 2022 was $4 8 million or 35, 6% of net revenues compared to $7 5 million or 48, 8% of net revenues in the fourth quarter of fiscal 2021.
Gross profit for fiscal 2022 decreased to $23 7 million or 41, 5% of net revenues compared with $26 4 million.
Or 48% of net revenues in fiscal 2021.
The decrease in gross profit for the quarter was primary primarily due to.
The decrease in net revenues of $1 8 million and an increase in cost of sales of 863000. The decrease in gross profit for the year was primarily due to an increase in cost of sales of $4 9 million offset by an increase in revenues of $2 3 million.
Operating expenses for the fourth quarter remained flat at $6 4 million for Q4 of fiscal year 2022 and 2021.
However, as a percentage of sales increased from 41, 4% for for Q4 fiscal year 2021.
<unk> 47 per cent for the current quarter.
Operating expenses for fiscal 2022 increase at $24 8 million or 43, 4% of net revenues from $23 6 million or 43% of net revenues in fiscal 2021.
The Q4 increase in operating expenses as a percentage of revenue was due to the decrease in revenue in Q4 of 2022.
Compared to our Q4 2021.
The increase in operating expenses for the year was primarily due to an increase in selling and marketing expenses at 665000 in research and development costs of 668000.
Net loss from operations was $1 6 million for the fourth quarter compared to net income from operations of $1 1 million in Q4 last year.
Net loss from operations for the full year was $1 1 million compared to net income from operations of $2 7 million for fiscal year 2021.
Other income and expenses include significant amounts for both the fourth quarter and the fiscal year ended June 32022 for.
For Q4 of 2020 to be recognized a foreign currency exchange gain of $1 6 million.
Third a gain of 918000 for Q4 2021.
For the year ended June 32022, we recognized a foreign currency exchange gain of $4 3 million.
Compared to a loss of 597000 for 2021.
The increase in the recognized gain for both a quarter and the year was primarily due to the weakening of the Pakistan rupee compared to the U S dollar and the euro.
In Q4 2022, the share of net loss.
From equity investments was $1 7 million.
Paired to a loss of 21000 for Q4 of 2021 for.
For the year ended June 32022, the share of net loss from equity investment was 2 million compared to a loss of 254000 for the year ended June 32021.
The increase for the quarter and the year is due to the impairment charge of $1 6 million that was recorded for the investments in world three D and drive mate.
Our GAAP loss attributable to <unk>, so for the fourth quarter of fiscal 2022 totaled $2 2 million or <unk> 19 per diluted share.
This compares to GAAP net income of $1 9 million or 17 cents per diluted share in the fourth quarter of last year GAAP net loss attributable to net so for fiscal 2022 totaled 851000 or eight cents per diluted share compared to net income of $1 8 million or 15 cents per diluted share for two.
For fiscal 2021.
The decrease in GAAP net income attributable to that so for both the quarter and year was primarily due to increases in the cost of goods sold.
Moving to our non-GAAP metrics, our non-GAAP adjusted EBITDA for the fourth quarter of fiscal 2022 totaled a negative $1 4 million or negative <unk> <unk> per diluted share compared with non-GAAP adjusted EBITDA of $2 9 million.
Our 26 cents per diluted share in the fourth quarter of last year.
For the full fiscal year 2022, non-GAAP adjusted EBITDA totaled $1 8 million or 16 cents per diluted share.
Paired with $5 4 million or 40, 47 cents per diluted share in fiscal 2021.
Do you see the reconciliation schedules contained in our earnings release for our revised calculations of adjusted EBITDA for the fiscal year ended June 32022.
Turning to our balance sheet at quarter end, we had cash and cash equivalents of approximately $24 million or approximately $2.13 per diluted common share.
Which was down from $33 7 million or approximately $2.93 per diluted common share at June 32021.
That concludes my prepared remarks, I'll now turn the call back over to energy.
Sure.
Thank you Roger.
From a high level I'd like to outline the fundamental components of our growth strategy.
First after two years of top line decline, we grew by four 2% in fiscal year 2022, as compared with fiscal year 2021.
Second we have continued.
To focus on organic growth within the core business subscription and support revenue reached <unk> 3 million for fiscal 2022 nearly 28% increase.
The prior year.
Due in large part to a one time catch up.
$305 million on Daimler contract.
With the $24 million plus the run rate of recurring subscription and support revenue projected over the coming 12 months.
With each new customer, we signed we add to our recurring.
Revenue, which drive both the top and bottom line.
Layer on post contract support through larger traditional enterprise contract.
And in <unk>, our SaaS based footprint, we expect to build this base over time, which provides more predictable revenues with a more attractive margin profile.
Finally, we are cautiously optimistic about fiscal two don't really three revenues and we have several high really new opportunities for our flagship ascent solution in discussion stages with the few North American based tier one captive finance companies.
Let me provide a little more information on a geographic regions, starting with the U S and Canada, yes.
Publishing a few in new verticals, such as AWS certified partners and professional services.
These are the building new growth area for us hopefully, resulting in a new revenue flow in the U S.
The U S and Canada sales executives to build this segment.
We remain optimistic about the scent in North America after encouraging progress with multiple new major auto captive finance companies.
Also although many any of the adoption has grown to over 24 mini dealerships.
In the U S. As of June 32022, there's approximately six more adoption since then.
Any positive sign of our platform acceptance in the retail site.
This has provided a new market opportunity in the auto dealership segment for which we are expecting over $1 billion of new revenue in the U S in fiscal 2023.
We are committed to and excited about the overall market opportunities in North America, and that's true and that's all score, but the food offerings.
These include a thin potential operators for all of our legacy product to us and as well as new implementation on legacy product for the new for new customers.
To achieve this.
To achieve this we continue to invest in new local talent to broaden our sales and marketing effort and to build stronger businesses offering in North America.
Markets.
In all we remain committed to the U S, which is the most attractive and busy market from that so we did record strong pipeline.
In Europe .
We've added a few new clients in the fourth quarter of fiscal 2022.
Major and a very large European retail business, we have completed the discovery phase and are proceeding with the implementation phase of this agreement from multiple countries.
Our European team is a very tightly run operation and we are participating in several new rfps for our core offerings.
The pipeline is healthy and ROE both encouraging and includes continued interest in the cloud version of offense.
In Asia Pacific region.
Overall stability has returned to most of our markets such as Thailand, Australia, New Zealand, Japan and others.
Mentioned earlier Janet continues to experience local challenges, both convert religious and its economy overall.
These challenges we are happy to report our clients appear to continue to be stable and actively engaged with nestle.
Our newly established hyper localized Chinese team is positioned to unlock new and local Chinese market.
And truck sectors.
Howard will remain the self quarantine period of religious in China necessarily restricting face to face meeting with senior management of new prospect. However, we are optimistic that the efforts of our president of our Chinese subsidiary.
And then delete will lead to better results didn't just following fiscal years.
Channel demand are the largest revenue region with very satisfied long term clients such as Daimler BMW Ford Fiat Volvo and you hit some of them go to name a few.
Our core business.
And the underlying technology that drives it.
Not change.
What has changed though.
The underlying industry dynamics.
Finding new ways to future proof, our business and adopt next generation digital strategy and one of those is by accelerating our transition to the cloud.
We continue to note the automotive industry is a significant push towards digital transformation in the retail space.
By various one thousands of newly formed part form partnerships, maybe that condition and E. Commerce pilots stakeholder there really seemed to me because consumers are evolving expectation, but online shopping option, including for traditionally and person big ticket items.
In summary, we are welcoming the return to normalcy and have developed a comprehensive strategy globally to target high value customers in key geographies.
In new formats.
After the challenging figures, we are entering fiscal 2003 focus on our return to growth with a plan to get there.
And that is that I'd like to open the call for questions operator.
Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question can you.
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I think we've given enough time that he I think he can just end the call right. Thank you at this time. This concludes our question and answer says.
Shane.
If you have any other questions that were not addressed please contact <unk> investor relations team by E mailing them at investors at Nassau attack Dot com or by calling them at 888182229195, I'll now turn the floor back to Mr. Barry for any closing comments.
Yeah.
Thank you for joining us today, I, especially want to thank our investors for their continued support our loyal customers and dedicated employees for their ongoing contribution.
Look forward to see you on the next call. Thank you and good day.
Thank you. Thank you for joining us today for <unk> fiscal fourth quarter and full year 2022 earnings call. You may now disconnect your lines.
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