NTWK Q1 2026 Earnings Call
Operator: Good morning, and welcome to the NetSol Technologies, Inc. Second Quarter and Six Months Ended December 31, 2025 Earnings Conference Call. On the call today are Founder and Chief Executive Officer of NetSol Technologies, Inc., Najeeb Ghauri, Co-Founder and President, Naeem Ghauri, Chief Financial Officer, Sadar Abubakar, and Senior Vice President, Legal and Corporate Affairs, General Counsel, and Corporate Secretary, Patti McGlasson. I will now hand the call over to Patti, who will provide the necessary disclaimers regarding forward-looking statements made during today's call. Patti, please go ahead. Good morning, everyone, and thank you for joining us today. After we review the company's business highlights and financial results for the second quarter and six months ending December 31, 2025, we will open the call for questions. Before we begin, I would like to remind you that our remarks today may include forward-looking statements within the meaning of the federal securities laws, including the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements reflect management's current expectations and are subject to risks and uncertainties, and actual results may differ materially from those expressed or implied. We encourage you to review the cautionary statements and risk factors contained in NetSol Technologies, Inc.’s press release issued earlier today, as well as in our filings with the Securities and Exchange Commission, including our most recent Form 10-Ks and quarterly reports on Form 10-Q. I would also like to note that today's discussion will include certain non-GAAP financial measures. A reconciliation of these measures to their most direct comparable GAAP figures can be found in the press release issued earlier today. Lastly, please remember that this call is being recorded and will be available for replay on our website at netsoltech.com and through a link included in today's press release. At this time, all participants are in listen-only mode. Following their prepared remarks, we will open the call for a Q&A session. I will now hand the call over to our Founder and CEO, Najeeb Ghauri. Najeeb?
Najeeb Ghauri: Thank you, Patti. Good morning, everyone, and thank you for joining NetSol Technologies, Inc.’s call to review our results for the second quarter and six months ended December 31, 2025. We delivered a strong 2026. Total net revenues increased 21% year over year to $18,500,000, driven by higher services revenues and growth in our recurring subscription and support revenues. Services revenue grew 41% primarily from new implementations from major customers. As these implementations move through go-live and expansion phases, we believe they can support recurring subscription and support revenues over time. I am pleased with a strong balance sheet. Our current ratio of 2.3 reflects strong liquidity, giving us substantial flexibility for growth initiatives. I would like to highlight the strategic progress we made during the quarter across product innovation, customer momentum, and leadership. Firstly, on product and innovation, we launched our loan origination platform, our Check, our AI-enabled credit decisioning engine. Check is designed to modernize
Operator: credit
Najeeb Ghauri: underwriting by combining deep reasoning, intelligent automation, and agentic workflows to support faster, smarter, and more consistent credit decisions. It is an important extension of our Transcend platform and reflects our focus on building high-margin products that expand long-term revenue opportunities. Second, on customer momentum. We strengthened a key relationship with a $50,000,000 four-year contract extension with a tier-one global auto captive and longstanding partner. This extension reinforces customer trust, provides meaningful revenue visibility, and validates the scalability of our platform. In addition, Transcend Retail continued to gain traction in the U.S. market, with new dealer groups and franchised dealerships signing on during the quarter. Demand for digital automotive retail solutions remains strong, and these wins support our strategy to expand recurring revenue while increasing our footprint in a high-potential growth market. Finally, we continue to strengthen our leadership team to support our next phase of growth. During the quarter, we appointed Sadar Abubakar as Chief Financial Officer, with Roger Almond transitioning to serve as Chief Accounting Officer. Together they bring deep financial expertise and will help maintain strong governance, discipline, and transparency as we continue to scale globally. Overall, these milestones reflect solid execution across innovation, customer expansion, and leadership. We remain focused on sustainable growth, deepening customer partnerships, and advancing our position as a trusted technology partner helping OEMs, dealerships, and financial institutions sell, finance, lease,
Operator: and manage
Najeeb Ghauri: assets end to end. Looking ahead, our pipeline, multiyear contracts, and recurring revenue base provide visibility into near and long-term performance. We remain focused on disciplined execution and continued progress on growth and profitability. I will now turn the call over to our President, Naeem Ghauri, who will share an update on NetSol Technologies, Inc.’s journey and latest developments with AI and how we are leveraging this transformative technology in both our products and across our operations.
Operator: Naeem, Najeeb.
Naeem Ghauri: And good morning, everyone. I would like to share a brief update on our AI strategy and progress. Over the past year, our focus has been to embed AI into the Transcend platform and our internal operations horizontally, not as a stand-alone feature, but as workflow capabilities that drive measurable outcomes for our customers. We have built a shared AI layer with reusable components and governance built in, so we can deploy AI consistently across products while maintaining reliability, auditability, and human oversight. Our teams work closely with customers to integrate AI into real-world workloads, so we can adapt general models into domain-specific capabilities tied to ROI and operational
Operator: impact.
Naeem Ghauri: AI at NetSol Technologies, Inc. is now integrated into our product development lifecycle, supported by dedicated teams, shared tooling, and an integrated roadmap that helps us scale AI in a repeatable way, with evaluation and monitoring designed in from the start. A good example, as Najeeb mentioned,
Operator: is Check.
Naeem Ghauri: Our AI-enabled credit decisioning capability within our loan origination product. It combines reasoning, automation, and agentic workflows to help underwriting teams move faster with greater precision while keeping humans in the loop. In parallel, we are applying AI internally, horizontally, to streamline delivery and improve productivity. We are also exploring value-based pricing approaches for select AI-enabled capabilities. Overall, we believe this strengthens differentiation, supports operating leverage, and positions us to scale AI value responsibly across our business. With that, I will turn the call over to our CFO, Sadar Abubakar, to review the financial results. Abu? Thanks. Thank you, Naeem, and good morning, everyone. I will begin with our financial results for 2026, followed by results for the six months ended December 31, 2025. For 2026, total net revenues increased 21.1% to $18,800,000 compared with $15,500,000 in the prior-year period, driven primarily by higher services revenues and higher subscription and support revenues. On a constant currency basis, total net revenues were also $18,800,000. Subscription and support revenues increased approximately 5.1% to $9,100,000 compared with $8,600,000 in the prior-year period. On a constant currency basis, subscription and support revenues were $9,200,000. Service revenues increased 40.9% to $9,600,000 compared with $6,800,000 in the prior-year period. Total service revenues on a constant currency basis were $9,600,000. Gross profit was $9,000,000, or 48% of net revenues. On a constant currency basis, gross profit was $9,000,000, or 47.8% of net revenues. Cost of sales was $9,800,000, or 52% of net revenues, compared with $8,600,000, or 55.5% of net revenues in 2025. On a constant currency basis, cost of sales was $9,800,000, or 52.2% of net revenues. The increase primarily reflected increased salaries and travel costs, even though the margin has improved. Income from operations was $1,300,000 compared with a loss from operations of $500,000 in 2025. On a constant currency basis, income from operations was $1,300,000.
Operator: Dollars. Foreign currency movements contributed a gain
Sadar Abubakar: of $50,000 in the quarter, compared with a $700,000 loss for the prior-year period. Moving to non-GAAP, EBITDA for the quarter was $1,700,000 compared with a loss of $800,000 in 2025.
Eric Wagner: Overall, the quarter reflected strong top-line growth driven by implementation activity, along with continued subscription and support performance. We also delivered meaningful profitability improvement versus the prior year, supported by gross margin expansion and improved operating leverage. Turning now to the six months ended December 31, 2025, total net revenues were $33,800,000 compared with $30,100,000 in the prior-year period. On a constant currency basis, total net revenues were $33,500,000. Recurring subscription and support revenues increased 7.2% to $18,000,000 compared with $16,800,000 in the prior-year period. On a constant currency basis, recurring subscription and support revenues were $17,900,000. Service revenues increased 17.9% to $15,600,000 compared with $13,200,000 in the prior-year period. On a constant currency basis, services revenues were $15,500,000. Gross profit was $14,900,000, or 44.2% of net revenues, compared with $13,500,000, or 44.8% of net revenues in the prior-year period. On a constant currency basis, gross profit was $14,600,000, or 43.5% of net revenues. Cost of sales was $18,900,000, or 55.8% of net revenues, compared with $16,700,000, or 55.3% of net revenues in the prior-year period. On a constant currency basis, cost of sales was $18,900,000, or 56.5% of net revenues. GAAP net loss attributable to NetSol Technologies, Inc. for the six months totaled $2,100,000, or $0.18 per diluted share, compared with a GAAP net loss of $1,100,000, or $0.09 per diluted share in the prior-year period. On a constant currency basis, GAAP net loss attributable to NetSol Technologies, Inc. was $2,500,000, or $0.21 per diluted share. Non-GAAP EBITDA for the six months ended December 31, 2025, was a loss of $100,000 compared with a non-GAAP EBITDA loss of $500,000 for the prior-year period. Turning to the balance sheet, cash and cash equivalents were $18,100,000 at December 31, 2025, compared with $17,400,000 at June 30, 2025. Working capital was $26,400,000 compared with $26,600,000, and NetSol Technologies, Inc. stockholders' equity was $35,900,000, or $3.04 per share. For 2026, we delivered continued revenue growth across both recurring and services businesses while maintaining a solid balance sheet and liquidity position. I will now hand over the call back to Najeeb.
Najeeb Ghauri: Thank you, Abubakar. Looking ahead, we remain confident in our ability to capitalize on opportunities across our markets. We will continue investing in our product portfolio, including AI-enabled capabilities across the Transcend platform, while expanding our global footprint and enhancing our solutions to meet evolving client needs. Our focus on long-term customer relationships, supported by a strong pipeline of recurring and services engagements, positions us well for continued progress. With that context, we have increased our full-year fiscal 2026 revenue growth guidance to nearly $73,000,000 or better, supported by our current pipeline and continued investment in go-to-market initiatives and our unified AI-enabled Transcend platform. While macroeconomic and currency dynamics remain a consideration, our diversified business model, execution discipline, and resilient customer base provide a solid foundation for the remainder of the fiscal year. Overall, our first-half performance reinforces our view that NetSol Technologies, Inc. is well positioned to achieve our full-year objectives and continue creating value for our customers and shareholders. With that, operator, please open the line for question and answer. Thank you. We will now be conducting a question and answer
Operator: session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we poll for questions. Thank you. Our first question comes from the line of Todd Felte with Stonex Group. Please proceed with your question.
Najeeb Ghauri: Hey, congratulations on a great quarter. I think the $18,800,000 may be an all-time record for quarterly revenues, so
Todd Felte: that is great to see. I wanted to ask about your margins. You had some recent hires and some travel expenses. But as those new hires get up to speed, do you expect continued margin improvement, and where do you think your margins will stabilize?
Najeeb Ghauri: Thank you, Todd. Absolutely. We are anticipating improving margins in the coming quarters and the next fiscal year. As you said rightly, we are continuously investing in our growth strategy. It means travel, new employees, building new platforms, and so forth. So I think the gross margin will improve, absolutely. And I think I can have your name, and Naeem will jump in to add further. Yeah. I will just add a little bit more color. So, essentially, the new hirings are primarily in the AI teams at heart, and we see that continuing for a period. We are also incurring some expense on cross training. What we have is a very aggressive plan to cross train our existing workforce.
Eric Wagner: Across horizontally in every department from HR to
Najeeb Ghauri: software engineering and testing, accounting, and admin. So, literally, we are touching every single business segment. So, internally, we are very, very confident that within the next six months, we will have a major transformation, phase one, completed. We will go on to more advanced training as we go forward in the rest of the calendar year. That will help?
Operator: Yep. Yeah. If I could just add that
Todd Felte: yeah. While I have you, I was also wanting to ask about the noncontrolling interest and how that is computed. I know that took a big chunk out of our earnings per share this quarter.
Najeeb Ghauri: You want to answer about just talking about the Pakistan subsidiary, right? Minorities
Todd Felte: just yeah.
Najeeb Ghauri: Yeah. Yeah. Sure. So if I could, Todd, just go back to your previous question
Eric Wagner: first, and then we will come back to this one, just to add some color. So to take on what Najeeb and Naeem said, we will continue to invest in the right areas that will propel our future growth. But margin improvement, both at a gross and at a net level, is going to be important for our profitability story and our journey going forward. You probably will see just very quickly that our GP percentage of revenues this quarter versus the preceding quarter was up 48% as compared to 44.5%. Cost of sales was down. Similarly, this quarter is 55.5% compared to the equivalent quarter of 52%. And then EBITDA, which is an important metric, of course, clocked at about a 9% margin compared to a loss in the equivalent quarter last period. I think what gives me confidence, Todd, in addition to that, is that our liquidity position is solid. The current ratio, but also our debt to equity, gives us an opportunity to continue to invest in exciting growth markets. And I think we are at the intersection of both software, financial services, and mobility. Now, coming to your second question on minority interest, noncontrolling. If I understood that question, you were saying how is that computed? That is correct. Just mention that again. Yeah. Yeah. Yeah. Just how is it computed? I know that there was a nice
Todd Felte: profit for the Pakistani subsidiary. I saw you took a $715,000 loss on that noncontrolling interest.
Eric Wagner: Yeah. We follow the standard definitions applied in GAAP for noncontrolling interest. So the Pakistani subsidiary is owned majority, but there is a 30% minority interest, and we follow the standard definitions as per calculation for GAAP. Roger, if you want to add to that, you can feel free to add if I have missed anything.
Todd Felte: No. I think you have that correct. So, Todd, if you look at our Pakistani entity there, we own
Roger Almond: almost 70%. Thirty percent is held by noncontrolling interests. So as they have, you know, recorded a very nice profit for the quarter, or for the six months, then 30% of their profit would then get allocated to the noncontrolling interest piece. Based on the consolidation, all of their revenues would be included up in our revenues and costs into our costs, etc. And then the noncontrolling interest is then calculated down at one number in the bottom. So that is, and we follow the GAAP process as Abu had mentioned.
Todd Felte: Okay. That is helpful. So, basically, the better that the subsidiary does, it will add to your revenues, but if it is really profitable, you know, a third of that will have to be written off in the noncontrolling interest
Roger Almond: Correct.
Eric Wagner: So, Todd, yes. So as a subsidiary and not an affiliate, we will consolidate all revenues and costs, but from the profit share, you are right. Any earnings are split on a 70/30 basis between the parent and minority interests.
Todd Felte: Okay. That is helpful. And then finally, to allude to your comments about the strong financial position the company is in. As a shareholder, we see the stock still, you know, trading just barely above book value. Have you thought about allocating some of that $18,000,000 in cash, you know, a small amount to either a stock buyback or maybe a small dividend?
Roger Almond: I think, Todd, thank you for—go ahead. Go ahead. Sorry.
Najeeb Ghauri: Todd, thank you for asking the question. We did that a couple of years ago, and we are always open to the same approach. But as soon as we can decide within the board, we will get back to you accordingly.
Roger Almond: Yeah. I mean, we would definitely like to see some of the ops.
Operator: Yeah.
Najeeb Ghauri: But, Todd, I want to thank you especially for taking time to visit us a few months ago. It shows your commitment and belief in our company. So thank you very much for your long-term view.
Todd Felte: Yeah. It was great to visit you, and I will jump back in the queue. Thank you so much.
Najeeb Ghauri: Thanks, Todd.
Operator: As a reminder, if you would like to ask a question, press 1 on your telephone keypad. One moment, please, while we re-poll for any additional questions. We have no further questions at this time. Mr. Ghauri, I would like to turn the floor back over to you for closing comments.
Najeeb Ghauri: Thank you for joining today’s call. Sorry. Todd, do you want to come back? Yeah. Todd wanted to come back. He is going back in the queue. Is he in the queue, Alberto?
Operator: Todd, if you want to hit star one again.
Najeeb Ghauri: No. I think it is okay. It is fine. Okay. Yep.
Operator: Well, thank you for us back today. No. I am sorry. He did jump back in.
Najeeb Ghauri: Let me get—okay. Todd, your line is live.
Todd Felte: Okay. I am good with that. Again, congratulations on a great quarter, and I look forward to future success.
Najeeb Ghauri: And do come back again to Encino, California, Todd. Thank you for joining us today and for your ongoing interest in NetSol Technologies, Inc. We look forward to updating you on our continued progress in the coming quarters. Have a nice day.
Roger Almond: Ladies and gentlemen, this does conclude today’s
Operator: teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.
Najeeb Ghauri: Thank you, operator.