Q2 2024 NetSol Technologies Inc Earnings Call
Operator: Good morning, and welcome to NETSol Technology's second quarter 2024 earnings conference call. On the call today are Najeeb Ghori, Chairman and Chief Executive Officer, Roger Allmond, Chief Financial Officer, and Patty McLaughlin, General Counsel, and Naeem Ghori, President and Founder. I would now like to turn the call over to Patty McLaughlin, 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.
Good morning, and welcome to not not all technologies second quarter 2024 earnings conference call on the call today, There are no James Gorman, Chairman and Chief Executive Officer, Roger Almond, Chief Financial Officer.
And Patti Mcglasson General counsel and named Gori, President and founder.
I would 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.
Patty McLaughlin: 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 in my 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.
Now I'll provide the necessary cautions regarding the forward looking statements made by management. During this call. Please note that all of the information discussed on today's call is covered under the Safe Harbor provisions of the private Securities Litigation Reform Act.
Patty McLaughlin: The company's discussion may include forward-looking statements reflecting management's current forecast of certain aspects of the company's future, and our actual results could differ materially from those stated or implied. These forward-looking statements are qualified by the cautionary statements contained in NetSol's press releases and SEC filings, including our annual report on Form 10-K and quarterly 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 contained the reconciliation of these non-GAAP financial results to their most comparable GAAP measures. Finally, I would like to remind everyone that this call will be recorded and made available for replay at www.NetsolTech.com and via a link available in today's press release. Now I'd like to turn the call over to Najeeb. Najeeb. Isn't Jeeb on mute?
The company's discussion may include forward looking statements, reflecting management's current forecast of certain aspects of the company's future and our actual results could differ materially from those stated or implied.
These forward looking statements are qualified by the cautionary statements contained in nutshell, Some press releases and SEC filings, including our annual report on Form 10-K, and quarterly 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 most comparable GAAP measures.
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 via a link available in today's press release now I'd like to turn the call over to Nikki Jeep.
Okay.
Okay.
Okay.
Keep on mute.
Najeeb Ghori: Thank you. Yes. Thank you, Perry, and good morning, everyone. As we began the fiscal year, our second quarter of fiscal 2024 was characterized by increases in total revenue, improved gross margins, and profitability, which demonstrates both the strength of our business model and our ability to execute on our growth strategy. Revenue grew once again in the quarter, driven by solid performance across our business. As we continue to scale our SaaS business, our hybrid license and SaaS model has become a strong catalyst for our growth in both this quarter and throughout fiscal 2022-24. We recognize substantial license fees of $3 million in this quarter as part of a new, large contract in Asia with a major automotive company. We are thrilled to have distinguished ourselves from a highly competitive pool of candidates to win this contract, which we expect to officially announce in the coming weeks. Our selection reflects both our visibility and recognition in the market, as well as the superior performance and reliability of our products, which are required by major companies operating on a global scale.
Thank you.
Yes.
Thank you Barry and good morning, everyone.
Like we began the fiscal year, our second quarter of fiscal 2024 was characterized by increases in total revenue improved gross margins and profitability, which demonstrates both the strength of our business model and our ability to execute on our growth strategy.
Revenue grew once again in the quarter driven by solid performance across our business as you continue to scale, our SaaS business, our hybrid license and SaaS model has become a strong catalyst for our growth in both this quarter and throughout the fiscal 'twenty three 'twenty four.
We recognize substantial license fees of $3 million in this quarter as part of part of a new large contract issue with the major automotive company. We are thrilled we have distinguished ourselves from a highly competitive pool of candidates to win this contract, which we expect to officially announce in the coming weeks.
Our selection and reflects both our visibility and recognition in the market as well as the superior performance and reliability of our products that is requires the major companies operating on a global scale.
Najeeb Ghori: License fees are a key part of our business, and we expect them to continue to represent a significant portion of our revenue for the foreseeable future. That said, license revenue can be a bit lumpy, and a major focus for us is to continue to build on an already robust pipeline of potential licensing and SaaS opportunities to deliver more consistent results over the long term. We achieved growth in our recurring subscription and support revenues in the quarter. At the heart of our SaaS business are products like Otto's Digital Retail Platform and our API-first marketplace, Apex Now. We are committed to the continuous innovation and improvement of these and additional SaaS offerings to meet the diverse demands of our customers, integrating leading technology such as deep learning AI algorithms to ensure that we are positioned at the forefront of our industry. During the quarter, we unveiled Autos 2.0, implementing major updates to our digital retail and mobility platform to expand on existing offerings with a phased launch planned over the next year. The Autos platform is a premier SaaS offering powering services such as MiniUSA's MiniAnywhere retail platform since June 2021.
License fees are a key part of our business and we expect them to continue to represent a significant portion of our revenue for the foreseeable future.
That said nascent revenues can be a bit lumpy and a major focus for us is to continue to build on an already robust pipeline of potential licensing and SaaS opportunities to deliver more consistent results over the long term.
We achieved growth in our recurring subscription and support revenues in the quarter.
At the heart of our SaaS business, our products like the autos digital retail platform and our API first marketplace Epic's now.
We are committed to the continuous innovation and improvement of DS and additional SaaS offerings to meet the diverse demands of our customers integrating leading technology such as deep learning.
Algorithms to ensure that we are positioned at the forefront of our industry.
During the quarter, we unveiled <unk> auto's, two point rule implementing major updates to our digital retail and mobility platform to expand an existing offerings with a phased launch planned over the next year.
To the platform is the premier SaaS offering powering services, such as mini U S is many anywhere retail platform.
Since June 2021.
Najeeb Ghori: Supported by Autos, Mini Anywhere enrollment has doubled over the past 12 months and is now active across nearly two-thirds of the Mini USA dealership network in the U.S., enabling a five-times increase in lead volume and vehicle sales. Also in the quarter, we expanded our relationship with one of our key automotive clients by supporting the launch of AutoNation's mobility micro-lease marketplace with Autos' back-end technology. The automotive market is witnessing a significant shift towards short-term vehicle usage options in lieu of traditional long-term leases, and the Autos 2.0 platform is ideally suited to support this new micro-lease marketplace that allows customers to navigate the entire leasing process from vehicle selection to deal configuration to finalizing each transaction.
Supported by autos, many anywhere enrollment has doubled over the past 12 months and is now active across nearly two thirds of the mini USA dealership network in the U S. Enabling a five times increase in lead volume and vehicle sales.
Also in the quarter, we expanded our relationship with one of our key automotive clients by supporting the launch of auto nation's mobility micro leaves marketplace with autos backend technology.
The automotive market is witnessing a significant shift towards short term vehicle usage options in lieu of traditional long term leases and the autos 2.0 platform is ideally suited to support this new micro leaves marketplace that allows customers to navigate the entire leasing process.
As from vehicle selection to deal configuration to finalizing each transaction.
Najeeb Ghori: Overall, we are very excited and pleased with our second quarter results. As I said before, our performance is a demonstration of both the strength of our business model and our ability to execute on our growth strategy. Moreover, we continue to strategically invest and allocate capital to further expand our presence across key high-growth markets like North America, and we are pleased to see steady progress across all three of our geographic markets, North America, Europe, and APEC.
Overall, we are very excited and pleased with our second quarter results.
As I said before our performance is a demonstration of both the strength of our business model and our ability to execute on our growth strategy.
Moreover, we continue to strategically invest and allocate capital to further expand our presence across key high growth markets like North America, and we are pleased to see steady progress across all three of geography markets North America, Europe and APAC.
Najeeb Ghori: Given our recent results and trajectory, we expect to see strong double-digit organic revenue growth and improved margins in fiscal 2024 as we move into a period of more sustainable profitability. And now, I turn the call over to Raj Arman, our CFO, to go over our financials for this quarter. Roger.
Given our recent results and trajectory.
We expect to see strong double digit organic revenue growth and improved margins in fiscal 2024, as you move into a period of more sustainability profitability.
I'll now turn the call over to Roger Almond, our CFO to go over our financials from this quarter Roger.
Roger Allmond: Thanks, Najeeb. Our total net revenues for the second quarter of fiscal 2024 were $15.2 million compared with $12.4 million in the prior year period. On a constant currency basis, total net revenues were $15.3 million. For the six months ended December 31st, 2023, total net revenues were $29.5 million compared to $25.1 million in the prior year period. On a constant currency basis, total net revenues were $29.6 million. License fees for the quarter-ended fiscal 2024 were $3 million, compared with $16,000 in the prior year period. License fees, on a constant currency basis, were $3.1 million. In the first six months of fiscal 2024, license fees were $4.3 million compared with $266,000 in the prior year period, and the same on a constant currency basis.
Thanks, Jim our total net revenues for the second quarter of fiscal 2024 were $15 2 million compared with $12 4 million in the prior year period on a constant currency basis total net revenues were $15 3 million.
Six months ended December 31, 2023, total net revenues were $29 5 million compared to $25 1 million in the prior year period on a constant currency basis total net revenues were $29 6 million.
License fee for the quarter ended fiscal 2024 were $3 million compared with 16000 in the prior year period license fees on a constant currency basis were $3 1 million.
And the first six months of physical 2020 for license fees were $4 3 million compared with 266000 in the prior year period and the same on a constant currency basis.
Roger Allmond: Recurring revenues, or subscription and support revenues, for the second quarter of fiscal 2024 were $6.8 million, compared with $6.5 million in the prior year period and the same on a constant currency basis. Recurring revenues for the first six months of fiscal 2024 were $13.3 million, compared to $12.5 million in the prior year period. Total services revenue for the second quarter of fiscal 2024 were $5.4 million compared to $5.9 million in the prior year period and the same on a constant currency basis. Total services revenues for the first six months of fiscal 2024 were $11.9 million compared to $12.3 million in the prior year period and the same amount of cost and currency. Total cost of revenues was $8.1 million for the second quarter of fiscal 2024 compared to $9.2 million in the second quarter of fiscal year 2023. On a constant currency basis, total cost of revenues was $9.4 million.
Recurring revenues are subscription and support revenues for the second quarter of fiscal 2024 were $6 8 million compared with $6 5 million in the prior year period, and the same on a constant currency basis.
Revenues for the first six months of fiscal 2024 were $13 3 million compared to $12 5 million in the prior year period, and the same on a constant currency basis.
Total services revenue for the second quarter of fiscal 2024, or 5.4 million compared to $5 9 million in the prior year period and the same on a constant currency basis total.
Total services revenues for the first six months of fiscal 2024 were $11 9 million compared to $12 3 million in the prior year period, and the same on a constant currency basis.
Total cost of revenues were $8 1 million for the second quarter of fiscal 2024 compared to $9 2 million in the second quarter fiscal year 2023 on a constant currency basis total cost of revenues was $9 4 million.
Gross profit for the second quarter of fiscal 2024 was $7 2 million or 47% of net revenues compared with $2 1 million or 25% of net revenues in the prior year period.
On a constant currency basis gross profit was $5 9 million.
Profit for the six months of fiscal 2024 was $13 3 million or 45% of net revenues compared with $7 4 million or 29% of net revenues in the prior year period.
Roger Allmond: Gross profit for the second quarter of fiscal 2024 was $7.2 million, or 47% of net revenues compared with $3.1 million, or 25% of net revenues in the prior year period. On a constant currency basis, gross profit was $5.9 million. Gross profit for the six months of fiscal 2024 was $13.3 million, or 45% of net revenues, compared to $7.4 million, or 29% of net revenues in the prior year period. On a constant currency basis, gross profit for the six months ending December 31, 2023 was $10.6 million. Operating expenses for the second quarter of fiscal 2024 were $6.1 million, or 40% of sales compared to $6.2 million, or 50% of sales in the same period last year. On a constant currency basis, operating expenses for the second quarter were $6.7 million, or 44% of sales. Operating expenses for the six months ended December 31st, 2023 were $12 million, or 41% of sales, compared with $12.3 million, or 49% of sales, in the prior year period. On a constant currency basis, operating expenses for the first six months of fiscal 2024 were $13.1 million, or 44% of sales.
On a constant currency basis gross profit for the six months ended December 31st 2023 was $10 6 million.
Operating expenses for the second quarter of fiscal 2024 were $6 1 million or 40% of sales compared to $6 2 million or 50% of itself in the same period last year.
On a constant currency basis operating expenses for the second quarter were $6 7 million or 44% of sales.
Operating expenses for the six months ended December 31, 2023 were $12 million or 41% of sales compared with $12 3 million or 49% of sales in the prior year period on a constant currency basis operating expenses for the first six months of fiscal 2024 with $13 one.
Or 44% of sales.
Turning to our profitability metrics GAAP net income attributable to net solved for the second quarter of fiscal 2024 totaled 408000 or four cents per diluted share.
Paired with a net a GAAP net loss of $2 1 million or loss of 19 cents per diluted share in the second quarter of fiscal 2023.
GAAP net income attributable to net salt for the first six months of fiscal 2024 totaled 439000 or four cents per diluted share compared with a GAAP net loss of $2 7 million or a loss of 24 cents per diluted share in the prior year period.
Included in our net income this quarter was a loss of 15000 on foreign currency exchange transactions.
Paired to a gain of 657000 in the second quarter fiscal 2023 on a constant currency basis, we realized a loss of 23000 on foreign currency exchange transactions.
Included in our net income for the six months ended December 31, 2023 was a loss of 149000 on foreign currency exchange transactions.
To a gain of $2 million in the prior year period on a constant currency basis, we realized a loss of 197000 on foreign currency exchange transactions.
Roger Allmond: Turning to our profitability metrics, gap net income attributable to NetSol for the second quarter of fiscal 2024 totaled $408,000, or $0.04 per diluted share, compared with a gap net loss of $2.1 million, or a loss of $0.19 per diluted share, in the second quarter of fiscal 2023. Gap net income attributable to NetSol for the first six months of fiscal 2024 totaled $439,000, or $0.04 per diluted share, compared with a gap net loss of $2.7 million, or a loss of $0.24 per diluted share in the prior year period. Included in our net income this quarter was a loss of $15,000 on foreign currency exchange transactions, compared to a gain of $657,000 in the second quarter of fiscal 2023. On a constant currency basis, we realized a loss of $23,000 on foreign currency exchange transactions. Included in our net income for the six months ending December 31st, 2023, was a loss of $149,000 on foreign currency exchange transactions, compared to a gain of $2 million in the prior year period. On a constant currency basis, we realized a loss of $197,000 on foreign currency exchange transactions.
Because we operate in several geographical regions a significant portion of our business is conducted in currencies other than the U S. Dollar.
The decrease in the value of the U S dollar compared to foreign currency exchange rates generally has the effect of increasing our revenues.
Also increases our expenses denominated in currencies other than the U S dollar.
Similarly, as the U S dollar gained strength relative to foreign currency exchange rate it tends to reduce our revenues, but it also reduces our expenses denominated in currencies other than the U S dollar.
Moving to our non-GAAP metrics, our non-GAAP adjusted EBITDA for the second quarter fiscal 2024 was 725000 or <unk> <unk> per diluted share.
Compared with a non-GAAP adjusted EBITDA loss of $1 3 million or 12 cents per diluted share in the second quarter of the previous fiscal year.
non-GAAP adjusted EBITDA for the first six months of fiscal 2024 was $1 2 million or <unk>.
<unk> per diluted share compared with a non-GAAP adjusted EBITDA loss of $1 4 million or 12 cents per diluted share in the second quarter of the prior fiscal year.
Please see the reconciliation schedules contained in our earnings release for our revised calculations of adjusted EBITDA for the quarters ended December 31, 2023 and 2022.
Turning to our balance sheet at quarter end, we had cash and cash equivalents of approximately $15 7 million or approximately $1 38 per diluted common share totaled.
Total net stockholders equity at December 31, 2023 was $34 5 million or three Dallas and three cents per share.
Roger Allmond: Because we operate in several geographical regions, a significant portion of our business is conducted in currencies other than the U.S. dollar. A decrease in the value of the U.S. dollar compared to foreign currency exchange rates generally has the effect of increasing our revenues, but it also increases our expenses denominated in currencies other than the U.S. dollar. Similarly, as the U.S. dollar gains strength relative to foreign currency exchange rates, it tends to reduce our revenues, but it also reduces our expenses denominated in currencies other than the U.S. dollar. Moving to our non-gap metrics, our non-gap adjusted EBITDA for the second quarter of fiscal 2024 was $725,000, or $0.06 per diluted share, compared with a non-GAAP-a Non-GAAP-adjusted EBITDA for the first six months of fiscal 2024 was $1.2 million, or $0.10 per diluted share, compared with a non-GAAP-adjusted EBITDA loss of $1.4 million, or $0.12 per diluted share, in the second quarter of the prior fiscal year.
That concludes my prepared remarks, I'll now turn the call back over to <unk>.
Thank you Roger.
This was an excellent quarter for net so we're excited by our progress and our very optimistic for the journey ahead.
We believe that we are well positioned on impact towards growth and sustainable profitability and we look forward to driving value for our shareholders. As you continue to execute on our growth strategy in the later half of 2024.
With that I'd like now turn the call over to Alberto for your questions.
Operator.
She there.
Roger.
Yeah I'm here in Belgium.
Who is the operator.
I'm sure John is following up with them.
Yeah, I don't know.
John you there.
It's got to be some glitch somewhere.
Okay.
And what else please.
Yeah.
Yes.
Yeah.
Okay.
If someone could just bring them in line again with.
And reconnect to the operator.
Okay.
Sure.
Yes, I'm sorry, returning Hilton.
Yes.
Okay.
The government predicting glad this is a it's never happened before.
Yeah.
Calling Jon Peddie.
Yes, I'm sorry, Rob we're handling this on the chat hopefully we can get her attention in a moment. So please hold.
Ladies and gentlemen, I apologize for the inconvenience, please standby will resume momentarily.
Ladies and gentlemen, once again, we thank you for your patience, we will now be conducting our question and answer session. If you would like to ask a question at this time.
Najeeb Ghori: Please see the reconciliation schedules contained in our earnings release for our revised calculations of adjusted EBITDA for the quarters ended December 31st, 2023, and 2022. Turning to our balance sheet, at quarter end, we had cash and cash equivalents of approximately $15.7 million, or approximately $1.38 per diluted common share. Total NetSol stockholders' equity at December 31, 2023 was $34.5 million, or $3.03 per share. That concludes my prepared remarks. I'll now turn the call back over to Najeeb. Najeeb.
Please press star one on your telephone keypad, the confirmation tone will indicate that your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys, one moment, please I'll be poll for questions.
Thank you. Our first question is coming from the line of Eric Green with Buttress management. Please proceed with your question.
Hey, guys. Thanks for taking the question.
You mentioned integrating deep learning AI algorithms into your technology could.
Could you elaborate a little more on those algorithms and how you're kind of leveraging that AI.
Najeeb Ghori: Thank you, Roger. This was an excellent quarter for NetSol. We're excited by our progress and are very optimistic about the journey ahead. We believe that we are well-positioned on a path towards growth and sustainable profitability, and we look forward to driving value for our shareholders as we continue to execute on our growth strategy in the latter half of 2024. With that, I'd like to now turn the call over to the operator for questions. Operator, is she there? Roger. Yeah, I'm here. Ways are better.
To handle product offerings.
Thank you for the question, namely you want to jump in.
Yes, sure sure energy.
So what we do is that we have.
Access to.
A lot of data and we actually build.
If you like a warehouse of metadata and than we are.
Ron.
Our algorithms based on that data, that's coming from cousins of dealers and.
Our installations are across the globe coming from different markets, what we are able to determine our behavior and trends and patterns.
For example, what type of products are sold in one market as opposed to another.
Unidentified Speaker: I'm sure John is following up. Yeah, I don't know. John, are you there? There's gotta be some glitch somewhere.
Credit risk credit underwriting.
Residual values on cars, how they're moving so that data is.
Unidentified Speaker: And we're done. Thank you, www.tessolTechnology.com. Someone should just ring the main line and reconnect to the operator.
Really a treasure trove and trumps all.
If you like we run about $300 billion worth of assets.
Assets on our portfolios across the globe. So you can imagine the amount of data that we get in on that data we can build large.
Unidentified Speaker: He said, "sorry, we're trying. Hold on. There's got to be some technical glitch; this is a, it's never happened before. Are you calling John Parrish?"
Language models, which is.
Hi, Maggie can be used for.
In a generative AI.
And then that is how we actually buildup algorithms based on data they can generate a two way.
Unidentified Speaker: Yes, I'm sorry; we're handling this on the chat. Hopefully, we can get her attention in a moment. So please hold on. Ladies and gentlemen, I apologize for the inconvenience.
Conversation.
But with any consumer green directly on our platforms as well as our dealers.
Operator: Please stand by; we will resume momentarily. Ladies and gentlemen, once again, we thank you for your patience. We will now be conducting our question and answer session. If you would like to ask a question at this time, please press star one on your telephone keypad. The confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue.
We're accessing systems able to understand somebody's credit risk pretty quickly based on you know.
How that data presents itself so it really weird.
Actually at the tip of the iceberg.
In terms of.
Clothing, and manipulating the data to just.
So much more value into our tech stack.
And going forward, you'll be hearing a lot more about <unk>.
More specialized modules and more discrete modules.
Eric Green: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. Thank you. Our first question is coming from the line of Eric Green with Buttress Management. Please proceed with your question. Hey guys, thanks for taking the time to answer the question. You mentioned integrating deep learning AI algorithms into your technology. Could you elaborate a little more on those algorithms and how you're kind of leveraging that AI to enhance your product? Thank you for the question. Naeem, would you want to jump in?
That we can deploy it just for AI based on the amount of data we have.
How much.
Information, we have on behavioral patterns credit risk.
In fact out to even what type of cargo being sold Duncan.
Duncan what color with rich market.
Really it's a very exciting time.
For us in terms of <unk>.
Getting into the eye.
She like generation.
<unk>.
Iteration to now building more use cases out of the data at the rehab.
Hopefully that answers your question.
Absolutely absolutely yeah understood. Thank you that's all from me.
Naeem Ghori: Yes, sure, sure, Najeeb. So what we do is that we have access to a lot of data, and we should build, if you like, a warehouse of metadata. And then we run our algorithms based on that data that's coming from thousands of dealers, and our installations are across the globe coming from different markets. So what we are able to determine is behavior and trends and patterns on, for example, what type of products are sold in one market as opposed to another, credit risk, credit underwriting, residual values on cars, how they're moving.
Thank you.
Thank you as a reminder, ladies and gentlemen, if you would like to ask a question at this time. Please press star one on your telephone keypad. Our next question is coming from the line of Todd felt with agent financial. Please proceed with your question.
Hey, guys. Congratulations on a great quarter, there are nice to see the improvement.
Just had a few quick questions here on the.
Deals with mini Cooper and Autonation I think if I remember correctly were in 50 or 60 dealerships now can you quantify as to how much you know revenue that produces on a yearly basis for you guys.
Naeem Ghori: So that data is really a treasure trove in terms of, if you like, we run about $300 billion worth of assets in our portfolios across the globe. So you can imagine the amount of data that we get. And on that data, we can build large language models, which can be used primarily for generative AI.
Thank you for this question Todd I, both Roger and named prohibit this is almost 60 plus dealerships are that we have on boarded so far Rodriguez specific numbers right for the annual revenue.
Naeem Ghori: And then that is how we actually build our algorithms based on data that can generate a two-way conversation, with any consumer going directly on our platforms, as well as our dealers, who are accessing systems are able to understand somebody's credit risk pretty quickly based on how that data presents itself. So really, we are literally at the tip of the iceberg, if you like, in terms of exploiting and manipulating that data to just add so much more value to our tech stack, and going forward, you'll be hearing a lot more about more specialized modules and more discrete modules that we can deploy just for AI based on the amount of data we have and how much information we have on behavior patterns to credit risk. And in fact, down to even what type of cars are being sold, down to what color, in which markets. So really, it's a very exciting time for us in terms of getting into the AI, if you like, generation and iteration to now building more use cases out of the data that we have. Hopefully, that answers your question. Absolutely, absolutely.
Yeah. Currently we have as <unk> said 60 dealers and it brings in about 100000, a year with the 60 dealers so that no.
100000 of about 300000, a month, which is $1.2 million a year currently with a 60 dealers.
Okay, that's great to hear and on the Autonation I know you're growing really fast there how much revenue was autonation contributing now and what would you project for the current fiscal year.
Jim you want to jump in name of the champion of Autonation and mobility products gardening I can pick that up so Todd. This is a different use case too. Many for many of you are doing digital retail.
For Autonation, we do eat subscription.
And what they've done is that they had launched a subscription product that did a soft launch.
But in terms of the revenue we have generated already is just over $1 billion in terms of implementation.
And just tailoring the platform for their use.
Eric Green: Yeah, I understand. Thank you. That's all.
Their use case.
Going forward, we believe if they hit their targets this could be big or as big at least if not bigger than what we're doing with many subject to them hitting targets because it's subscription based on a certain tiers. If they hit those tiers in terms of usage then the revenue starts to grow so we use an exciting.
Operator: As a reminder, ladies and gentlemen, if you would like to ask a question at this time, please press star 1 on your telephone keypad.
Todd Feltz: Our next question is coming from the line of Todd Feltz with Aegis Financial. Please proceed with your question. Hey guys, congratulations on a great quarter there. Nice to see the improvement. I just had a few quick questions here.
Model, because it's a win win United States grow when they grow we grow with them and it could do there is no upper limit or ceiling to where the revenue could grow if the if they do grow the product with the right marketing.
And planning.
Unidentified Speaker: On the deals with Mini Cooper and AutoNation, I think, if I remember correctly, we're in 50 or 60 dealerships now. Can you quantify as to how much revenue that generates on a yearly basis for you guys? Thank you for this question, Todd.
Okay, that's great to hear and I assume that since it set up the the margins on that Autonation business now that everything is set up are extremely high for you.
I'm sorry, what's the question.
Roger Allmond: Both Raja and Nain can help, but this is almost 60 plus dealerships that we have onboarded so far. Raja, you have specific numbers, right, for the annual revenue? Yeah, currently, we have, as Najeeb said, 60 dealers, and it brings in about $100,000 a year with the 60 dealers. $100,000 a month, which is $1.2 million a year currently with the 60 dealers.
Yeah, Yeah. So the margins should be very high on that Autonation continues to grow.
Well what happens is that you know there is a setup costs.
I wish the client pays for and our product is deployed on the cloud and is very very scalable. So it's a slight we could grow the autos revenue by five fold five X.
Naeem Ghori: Okay, that's great to hear. And on AutoNation, I know you're growing really fast there. How much revenue is AutoNation contributing now and what would you project for the current fiscal year? Then you want to jump in? Name is a champion of automation and mobility products. Go ahead, name.
Not having a major impact from cost so it really is the adoption the.
Faster or bigger the adoption.
The better the margins because we do have a fixed amount of cost to run the platform and we are already in profit in terms of what we bring from many an autonation. So we already in the black however, as they scale and to grow and we get.
Naeem Ghori: I can pick that up. So, Todd, this is a different use case than Mini. For Mini, we're doing digital retail. For automation, we're doing subscriptions. And what they did is that they would launch the subscription product. They did a soft launch.
Additional customers that we have a pipeline of new customers.
You'll be at EMCORE.
As that happens you know with scale the profit margins that grow.
Quite rapidly.
Naeem Ghori: But in terms of the revenue we've generated already, it's just over a million dollars in terms of implementation and just tailoring the platform for their use case. Going forward, we believe if they hit their targets, this could be big or, at least, as big, if not bigger, than what we're doing with MINI, subject to them hitting targets. The subscription is based on certain tiers. If they hit those tiers in terms of usage, then the revenue starts to grow. So it's an exciting model because it's a win-win. If they grow, when they grow, we grow with them.
That's great to hear and I know your license agreement can be lumpy and I know that are you know currency exchanges.
Or the currency gains and losses can affect your net income, but have you reached the point, yet where you're able to project you know positive operating income every quarter going forward or are you comfortable thinking that will happen.
I just modeled it then I will leave it up John.
Gordon I'll bifurcate it might take taught is that.
Ultimately the future for us is best.
And but we are operating on a hybrid model, where licenses is still very attractive and although it's lumpy. Good news is that from where we were three four years ago, we depending completely your license now we're offsetting a dodge.
Naeem Ghori: And there's no upper limit or ceiling to where the revenue can grow if they do grow the product with the right marketing and planning. Okay, that's great to hear, and I assume that since it's set up, the margins on that automation business now that everything is set up are extremely high for you. I'm sorry, what's the question? It's all set up, yeah.
A portion of our revenue.
Within a our RV annual recurring revenue as opposed to lumpy license revenue. So even if we don't get.
A big Dices.
You know revenue Oh, she like a win.
Naeem Ghori: Yeah, so the margins should be very high on that automation business as it continues. Well, what happens is that, you know, there is a setup cost which the client pays for. And the product is deployed on the cloud, and it's very, very scalable. So it's like we could grow the auto's revenue by fivefold, 5x, without having a major impact on cost. So really, it's the adoption, the faster or bigger the adoption, the better the margins, because we do have a fixed amount of cost to run the platform, and we are already in profit in terms of what we bring from Mini and Automation. So we're already in the black. However, as they scale and grow, and we get additional customers, so we have a pipeline of new customers we are bidding for, and as that happens, you know, with scale, the profit margins will grow quite rapidly.
We continue to grow our SaaS revenue.
At a decent pace so that at some point, we will have a tipping point, where we will get to <unk>.
Position, where even without any loss of income we have pockets of his company.
Also recognized one let me add one more point to add to name the beauty of our model is that like namely the hybrid model that we do have a pretty good demand for our flagship ascent in all three markets, yes, if a much longer sales cycle than go through a lot of us think duration, but.
Combination of amazing with the license revenue.
And of course, as a SaaS, which is a growing trajectory for us. So all in all I believe we are in a good position. If you look at the competitor I didn't really see a company, which has such a amazing history for license sales in all of these 25 years now be managing both sides guardrail effectively and we believe eventually.
Naeem Ghori: That's great to hear. I know your license agreement can be lumpy, and I know that, you know, currency changes or the currency gains and losses can affect your net income, but have you all reached the point yet where you're able to project, you know, positive operating income every quarter going forward? Are you comfortable thinking that will happen? I'll just give my take, then I'll leave it up to others to comment. My take, Todd, is that, you know, ultimately the future for us is SaaS, and but we are operating on a hybrid model where license is still very attractive and although it's lumpy good news is that you know from where we were three four years ago we're depending completely on license now we are offsetting a large portion of our revenue within ARR which is annual recurring revenue as opposed to lumpy license revenue so even if we don't get a big license you know revenue or actually like a win we continue to grow our SaaS revenue at a decent pace so that at some point we'll have a tipping point where we will get to a position where even without any license income we are profitable as a company. Let me add one more point, Todd, to Naeem.
As I said in my prepared remarks, and that the growth is quite a positive coming quarters and hopefully will continue in the following year. So I think overall the high revenue whether its a license or of course says it just affects all the way to the gross margin and net income in companies and a good job to be more efficient.
And I've been more leaner that will impact on our metrics in the coming quarters.
That's great and that tipping point that named spoke about where you won't even need licensing agreements to achieve an operating.
Yes would you expect that to happen this year or next year or is there any any sort I believe has been on I believe next year is more probably because we are still building the sales trajectory here. So I think they next via the better way to look at it but to your to your question specifically on the margins.
Okay.
In terms of when that.
Tipping point is.
I don't think we could.
Najeeb Ghori: The beauty of our model is that, like Naeem said, it's a hybrid model, and we do have pretty good demand for our flagship Ascent in all three markets. Yes, it's a much longer sales cycle and goes through a lot of, I think, iteration. But the combination is amazing with the license revenue and, of course, the SaaS, which is a growing revenue stream for us. So, all in all, I believe we are in a good position. If you look at the competitor, I think, really, you see a company which has such an amazing history for license sales over all these 25 years. Now we're managing both sides quite well, effectively, and we believe, eventually, as I said in my prepared remarks, and the growth is quite positive for the coming quarters and hopefully will continue in the following years. So I think, overall, the high revenue, whether it's licenses or, of course, SaaS, affects all the way to gross margin and net income. And the company's done a good job of being more efficient and a bit leaner. That will impact all our metrics in the coming quarters.
Predict that but I think its imminent.
If you see a growth in ex U C. How subscription revenue has grown from you know as in a single digit millions to where we are in a relatively short time.
We are reaching that point very soon I cant put a.
If you like Oh.
Flag on exactly which quarter, which month, but I think we'd all far off.
Okay. That's great to hear and then my final question is I know in the past you've had several.
Share buybacks go on that you know you look at the stock now I think we're right around $3 a share and book value and we're doing you know over $5 a share and sales.
Do you have any share buybacks are going on now or do you plan to announce any in the near future.
Well at this stage, we don't have any plan immediately in the short run simply because as I mentioned, we are investing in key markets with North America, and some other region and there's lots of activities in the new business opportunities in new markets also.
Naeem Ghori: That's great, and that tipping point that Neem spoke about where you won't even need licensing agreements to achieve an operating profit, would you expect that to happen this year or next year, or is there? I believe next year will be more public because we're still building the sales trajectory here. So I think next year is a better way to look at it, in terms of when that tipping point is, I don't think we could predict that, but I think it's imminent. If you see growth and if you see how subscription revenue has grown from single-digit millions to where we are in a relatively short time, I think we're reaching that point very soon. I can't put a finger on exactly which quarter, which month, but I think we're not far off.
<unk> will share with the market in the appropriate time. So obviously, we have done by bags, a few times in the past and you're right. It is very attractive price.
To do that but the way they open about it but we have not made that decision at this point.
Okay, well I really appreciate you all taking my questions and congratulations on a fantastic quarter.
Thank you Todd.
Okay.
Thank you we have reached the end of our question and answer session. So I'd like to pass the floor back to management for any additional closing remarks.
Thank you for joining us today, and I do apologize for as little glitch in the beginning of the Q&A I, especially want to thank all of our investors our for their continued support our loyal customers and our most dedicated employees worldwide for their ongoing contributions and I look forward to our bidding you on our next call. Thank you.
Todd Feltz: Okay, that's great to hear. Then my final question is, I know in the past you've had several share buybacks going on. If you look at the stock now, I think we're right around $3 a share in book value, and we're doing over $5 a share in sales. Do you have any share buybacks going on now, or do you plan to announce any in the near future? Well, at this stage, we don't have any share buybacks planned immediately, in the short run, simply because, as I mentioned, we are investing in key markets, whether it So, obviously, we have done buybacks a few times in the past, and you're right, it is a very attractive price to do that. But we are very open about it, but we have not made that decision yet.
Ladies and gentlemen, this does conclude today's teleconference. Once again, we thank you for your participation and you may disconnect your lines at this time.
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Najeeb Ghori: Okay, well I really appreciate you all taking my questions and congratulations on a fantastic show. Thank you. Thank you, Todd. Thank you. We have reached the end of our question and answer session, so I'd like to pass the floor back to management for an additional closing comment. Thank you for joining us today, and I do apologize for this little glitch in the beginning of the Q&A. I especially want to thank all of our investors for their continued support, our loyal customers, and our most dedicated employees worldwide for their ongoing contributions, and we look forward to updating you on our next call. Thank you. Ladies and gentlemen, this does conclude today's teleconference. Once again, we thank you for your participation, and you may disconnect your lines at this time, www.subsedit.com. This has been Borderlands 3, www.subsedit.com. I'm not going to go home because I need to take a piss. I need to take a bowel movement.
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Najeeb Ghori: I need to take, www.mssoltech.com www.subsedit.com This video has an Auto Sliding Doesn't Control your Viewport Language. Your Speaker should be selected in the Center, www.subsedit.com www. TessolTech.com, Thank you for watching, www.mssoltech.com www.mssoltech.com www.theBusinessProfessor.com, Thank you for watching, www. Multi-Media-Forum.com
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