- Earnings call transcript Q1 2023

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Operator

Good morning and welcome to NETSOL Technologies Fiscal First Quarter 2023 Earnings Conference Call.

On the call today are Najeeb Ghauri, Chairman and Chief Executive Officer; Roger Almond, Chief Financial Officer; and Patti McGlasson, General Counsel. 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.

Patti McGlasson

Good morning, everyone and thank you for joining us.

the the highlights call of we financial review open will for a company's and business results, Following questions. this I'll regarding now during the cautions call. forward-looking statements provide made by the necessary management Safe discussed that note call under the Reform all Securities information Harbor Please on of provisions the is today's covered Litigation Act. Private the may could statements of reflecting discussion future and differ company's or the from our current stated forecast company's The results management's include forward-looking actual materially those aspects of certain implied. by qualified releases are Form statements cautionary including statements Annual press forward-looking These Form on NETSOL's in the quarterly and our contained XX-Q. reports filings, SEC XX-K Report on and I would will measures. we that to also point out non-GAAP be discussing certain like most today a non-GAAP issued of release earlier press The contains GAAP comparable measures. to reconciliation the these financial results

that and link via available will remind would recorded be I release. made the www.netsoltech.com to like press for Finally, at today's this call replay in everyone available and

call turn Najeeb? over to Najeeb. like I'd the Now, to

Najeeb Ghauri

we the important of and Patti look the Few you, Thank the impact at the key many constant course an company, in companies, takeaways the on built quarter. quarter. past the like quarter, good results the saw we of year. international from swings everyone. it In strong a momentum as over One currency first Though capitalized morning the on to currency basis.

in revenue. to our XX.X% invest constant we Three, For consolidated in been revenue growth Two, long-term a basis. currency our bit a support. growth. key people our a This a SaaS the faster of recurring on the and grew drove has drive quarter, increase revenues, and we in focus ours XX.X% than quarter specifically

value. much Number sure shareholder to we continue contracts. best business making of for quarter. we our for in people costs. motivated is that We able profitability. also long-term business our exciting to get this. reasons to scale, we our people many be said, critical SG&A to into. Inflation is Over should upon increase people But four, growth continues the in need of importantly, time, the that will of That one business we key investing build as the considerable saw We the are added aspect happen. and initiatives the make our this long-term is And very as drive to have

mix ability is MINI of is -- economic our asset particularly the that months. to our contracts, position retail capital a early pipeline, cash us been sheet success. drive view uncertainly, this partnership Anywhere for forward, digital more have a Looking continued focused the We of giving has not a us in Even business. make and liquidity five, our in core platform, long-term Otoz position, position. a balance of Within recurring pipeline additional have the our enabled and large do in contract very encouraging operations, revenues, our put over capital real business, venture coming a And our with with rollout and strong confidence resounding European cash take competitive and coupled the to Within signings on long-term need strong American us. a our a opportunities North pipeline front. to with remains -- our robust and robust, in us growth markets, for

in monthly after $XXX,XXX. our providing as additional platform, as confidence XX XX this validates success this states. close subscription XX revenue in the subscribed dealerships, with Now, of This of US quarter, SaaS QX approximately well

vertical the office have a services ongoing by and increase Otoz sales the both the fulfill current in and contract mobility only professional In has Pakistan, opportunities signed company, success, Tier in needs US, our growth we office and and of opening efforts, subscriptions. footprint as vehicles operations to as expanded automotive in the to not hired China and we addition support a this expand have with to new company customers. Across Tianjin, a to solution X to China. our the delivery but back China, new in US early operations, In implementation for well manage our for delivery

now We Roger? of made to that sales call walk will completed, through in investments are the that will and efforts our technology, I over we bear Almond, leadership, confident who Roger CFO, our financial the results have workflows, quarter. expanded overview With fruit. the you will hand

Roger Almond

Najeeb. Thanks,

customers, The Ascent were the our with increase in gross $X.X basis. or of $XXX,XXX year first current depreciation both as the constant increase XXXX. of the of Operating and quarter period. total the a or increase in increases $X.X revenues Product $X.X the for sales new devaluation for basis increase $XXX,XXX, with constant $X.X for fiscal administrative in for year cost to revenues on constant XXXX the million prior of and XX.X% million. to and $X.X customers' million revenue implementation quarter Services other revenues first of due million increase was for of XXXX as revenue quarter Turning in compared in of financial revenues constant license On in net September currency constant to China. foreign year first support an sales provided $X in marketing The by And or an gross revenues operating in provided first basis, $X results currency of The million, fiscal primarily was increase US same support of and profit of was revenue in in compared primarily both and The net subscription increase a and our a basis, XXth, cost sales We services for currency of a in were driven constant million the increase an were for on on salaries period. an due part XX.X% increases XX.X% $X.X on due of well in was the gradually quarter revenues subscription revenue basis, an services $X.X service support to subscription the operating period first an basis Total currencies implement $X.X of on from in in of currency selling revenue were who $XX.X $XXX,XXX. currency constant on of by our revenues XXXX. $X.X were compared The was ended in million. to to revenues fiscal XXXX million the offset a XX.X% derived customers and XX.X% quarter increase revenue million $XXX,XXX; increase first the revenues our revenues revenues to XX.X% in revenues increase $XXX,XXX; quarter product a currency period. year customers million. in million in of subscription with of million million of basis million, $XXX,XXX; constant several compared expenses quarter increased decrease for NFS ongoing live expenses of of expense compared $X.X million $X.X dollar. million costs was the basis, to $X currency research last quarter $XXX,XXX. of service million. year. we total revenues quarter, grew Gross currency of of basis cost On or quarter services primarily the expenses cost $X.X $XX.X increase in fees period currency currency process. of was NFS the fiscal to for went compared On $XX.X revenues or for the increase expenses Product. to $XX.X was and profit On million development and implementation The the decrease driven a total $X.X of and revenue travel basis, to a increases a first an $X.X fiscal to net prior the XXXX. on general total constant of costs a as the a $XXX,XXX. and constant $X.X the the anticipate a net this costs in profit support fees were basis Recurring $X.X of quarter million; was a basis, constant due in sales. The a is services Legacy prior by for $XXX,XXX; was as million first to currency million currency million million or Total in result our from consultant to XX.X% and net of on or constant

we a constant quarter operations in profitability the basis on XXXX, our for metrics, net to of $XXX,XXX QX loss from to had loss a first Turning a fiscal year. $X.X and $X.X last net of of million of million, loss compared net currency

in and cost share. first NetSol Our of basis in for decrease XXXX per the net $X.XX a constant revenues. $XXX,XXX with share to fiscal rate net quarter was $X.XX first totaled for This or last or to GAAP GAAP quarter net $XXX,XXX diluted to compares than $XXX,XXX, a per of or revenues net attributable or at quarter income the on in loss NetSol of of the loss increases $X.XX attributable result per greater diluted share diluted currency The income GAAP year. support increasing primarily totaled

significant last other additional quarter mentioned on on previous business geographical it US compared expansion, monitor included million US accordingly also million than in in while currency denominated dollar We portion plan this value currency other dollar foreign continuing rates, but basis our $X.X of loss decrease by expenses the million dollar. revenues, foreign in expenses areas to a rates deploying but currencies to of of $X.X as constant US to than other reduces revenues, of regions, exchange affected dollar. on relative to of was than it a operate increases the has US dollar. As exchange QX currency our our compared exchange to in Similarly, that in A out also business a to we net Because several resources our increasing reduce a US gain expenditures. transactions to of important currency I the our year. strength denominated and in tends developing $X.X conducted is overall by the gain point the a currencies foreign generally in gain -- calls, currencies our it's our

of economic target our markets. the uncertainties Given

Moving non-GAAP metrics. our to

$X.X first share $XXX,XXX negative at with and or first Our quarter non-GAAP see and non-GAAP the release or adjusted last compared our the for in quarter $XXX,XXX XXth, earnings EBITDA per quarters the or share EBITDA of year. calculations a $X.XX per currency contained in for $X.XX on totaled fiscal for per of share diluted revised basis ended negative reconciliation XXXX constant schedules XXXX of Please EBITDA the diluted adjusted XXXX. $XX,XXX adjusted a diluted September

sheet, approximately my prepared overview $X.XX Turning of at balance cash XXXX I'll remarks. to and now $X.XX turn Najeeb Najeeb? cash per at XX, stockholders' over the Total diluted end, approximately or million your update. back call per business September an NetSol for share. we equity equivalents million or was share. our quarter of concludes $XX $XX.X to had common That

Najeeb Ghauri

the I'll now take our growth updates within major provide Roger. minute of strategy. you, to Thank components a

business sales activity. seeing are expenses a related return in increase support increased growth with to We a our to

to as opportunities including cash remains in in providing our well Lab. return Otoz the long-term high core Innovation work Our resources additional investment our position business, healthy, strategic support as

economic second are SaaS With world. in We facing We to recurring hope of but and basis, provide better constant position a services. are challenges overall our and macro a cautiously annual growth micro announce we we cognizant and guidance the quarter to the anticipate double-digit growth in be optimistic on when revenue support some said, currency that of financial continuous XXXX. for revenue

offering To other own. to Innovation across organizations XX powered of Retailing Otoz Moving has adopted XX second include program, technology Anywhere take Suite be QX. XX At brief a now NetSol's by The innovation. by provide and revenue which benefit Otoz's are the and on the update excellent major commitment dealers which monthly time XX with the end Q,X innovating reaches to grew MINI can post end, component enrollments been Digital and MINI our our has the looking to of monthly as approximately states, areas like revenue personnel, some to within with well create $XX,XXX the Recent subscription dealers of over to dealership through on validation SaaS as with partnerships this provided in today, a in services Lab. $XXX,XXX. just recurring and enrollment traction progress live new platform XX we our on additional the I Otoz our to strategy, US

continued MINI Anywhere the convert for the inventory sale. dealership every USA is One identified in of is e-commerce adoption we're is MINI the and lead through five of main catalysts for one ratio shortages, purchases recent those This for for one that will platform, blended buy despite to to the has that vehicle opportunities, a consumers. and big the five next-generation conversion of meaning achieved, leads proof a necessity from ticket

In directly user of dealer and research. sales structures the chat more communicate dealers digital upselling for interviews, Another were added a products, success and factor most to to platform's enhance been driven needs points negotiation update, we and sales recommended customers from enhancements and of physical has deal data interactions terms. in-app analytics, transact dynamic blend continuous together surveys, features is personalized addition tools, customer key touch allowing the customers deep that market features through dealers or as facilitates and and several add-on enablement that the understanding by of vehicles allowing including links recent capability, to to cater forums, to and unseamlessly. new primarily send The deal derive

with lenders, front of continue As We the MINI enrollments behavior, technology nation, the alternate at mobility progress flexibility, they also dealer digital assets, purchase such the new seeks shift not Otoz we a models. center models industry only to started because options, use of assets. be models. and to to receive tools the our and vision responded we for to of of platform way forward formed offering as in backbone OEMs, provide in Consumer USA. and the car the and beginnings with consumer saw other fit proud convenience. We month. And these scale subscriptions. across very the And multiple We and industry's change types to are and launch continuing sharing, enrolling way partners we and but the journey look we by usage technology car fundamental every retailers sustainably sales affordability, a to new they

we've vehicles we Otoz a US subscription to As reference X signed further months. in forward to new validation agreement share manage in winning their with Undoubtedly, will that business. success automotive a for operations to vision, the which was over company MINI excited partnerships office that back look platform, evolving our the Tier a in our strong Mobility I'm this coming And both contract. to provide

solution, FinTech marketplace API under Looking products launch taking calculation the can newly providing engine with ahead, precise a calculation one-stop and use of our implemented products, types. out-of-the-box commitments umbrella most at building that calculation innovation, our steps with guarantees are is organization's and that instant next be through ready Appex engine an an to formed in to in integration ecosystem. services [Indiscernible] contract of SaaS starting an the an Flex, stages lifecycle our various calculations Flex all we the of recent base, cloud-based

We have early the Merchant European subscribers already with Bank Flex to fourth traction seen becoming solution.

two and from leading digital coming marketplace. quarter. under now completed, places this companies our to US and provider the now early we and Otoz to market of announced are of Benz will with I in positioned Flex large SaaS disruptive, our US product market the XX-country like million in trusting complementing $XXX Over we get With our Flex, global previously first already months, credit with build offerings asset the products the to into continue solutions, this leading more Appex flex industry flagship automotive operational contract play pure platform will Starting APAC globally. and and a our be updates With the mobility. innovative, Mercedes traction

report roadmap. happy expected I'm to we be are to We At program. Taiwan continuing XX% multi-year the and today Australia, along Korea, our have in the multi-country implementations of Japan, you ongoing make implementation now completed that have that successfully to XXXX. moment, are considerable within delivered progress

our move China BMW second continue we Ascent anticipating are saw automotive services $XX will implementation over A million. forward. consideration, to contract flagship in Finally, Based XXXX a on currently services global go-live. largest additional company

earned with $XXX With from lines as of rise the continues the renegotiations additional across APAC recent our lines. revenues on execution lines globe. services that additional Demand of new APAC customers customization I'm of following year to quarter underway different excess support the has SOWs also are expected started existing to Existence in additional from to services happy report our witness from growing services vertical account nicely. to delivered professional services up these in go the APAC and alone. revenue for

continues Looking APAC grow. region of opportunities ahead, pipeline the within our to

largest the ongoing the are of a of be operations. across to we return quality are We encouraged emblematic by to our believe this core opportunities our and seeing work recovery global in larger region in market

operations, growth to North or next new for our NTE. Europe remain and European exciting Moving America NetSol. areas

marketing which We in SaaS-based are to contributing cloud revenues subscription these strategically offering, specifically regions, are earlier. the and our support noted growing and

we potential events the in opportunities months. Europe, several deals a have cycle. momentum, can't our control deals, combined of their the current Well, get they're believe signed, bodes making way some when critical for these we through with well coming mass We of some specifically, with sales future

of bank simultaneously Ascent to sales the July Motorcycle select entire in our announced first Group be their During the anticipate of and lease by vehicle the or Finishing the to continue their official consumers and and we across plan North as go-live deploy our omnipoint operations, can with sale qualified implementations. flagship through go-live moto advisors. and and dealers market work of system version these sale to European their an Motorcycle our loan of powersports is leasing. operations market, with for previously XXXX. cloud-based NFS for the and implement February US full process Group in to management We support quarter, NTA, Project applicants XXXX. presents enable to generated retail the through agreement maximize contract to prequalify American expected from to with platform including we country consisting motorcycle their we event lease loan began with and NFS lending offers motorcycles move for and major implementation moto Scandinavian this a for new considerable

Going to breakthrough forward, prospective North we be American looking will throughout the to this leverage demand market. clients

Our current the region had greatest opportunity the growth for a year. In summary, pipeline remains of opportunities to in strong this we start our near-term business.

We all sustainable can -- the are that, growth the that And are recovery our future. support will today seeing we Operator? open regions, operations for investments with call and healthy in operating making for questions.

Operator

from comes Thank you. question-and-answer first session. [Operator of Carl Our We'll your now conducting question line Capital with Phillips the [ph]. proceed Please be Union Instructions] Street with a question.

Unidentified Analyst

my Hey, thanks for taking questions.

looking my in the just be I about to some if you're business go know, is, potentially I margins first as growth? think the how want just saw not this? you guidance, for to invested So, and continue revenue over to think to this about where clear, drive I bit thinking you understand could you're I'm about had able mid a business I you pressure. But inflation how to long-term, that quarter question should know the

Najeeb Ghauri

you. Thank

XX% can sign remarks, pivoted way have SaaS future you I we in margins I course, growth have in the as a again, naturally fiscal revenue years, very as positive time, beginning substantial in range I adversely basis. to on think margins. -- think at -- in sustained this the historically, impacted But growth. and impact see said the And side more in year. in know, been XXXX of least grow this this the -- as SaaS model but in in revenues to also, impressively, past believe, very has in we so like business, and the revenue will the eventually, on strong, healthy two XX% the my last peak revenue operating margins growth both prepared contracts, margins, I those we we or gross that as XX%

think pretty So, will go improve in will that sustainable and will confident I'm the the the margin I it revenue long-term. grow,

Unidentified Analyst

it. Got

Okay. this grew And we then wondering, revenue your to was that this revenue quarter that faster consolidated and than just expect your can a sustain? recurring is I trend

Najeeb Ghauri

in signs Well, region, confident and business about a pretty mean, we I opportunities and America, leadership openly the revenue, believe we are I very technology about and along in on in taking Europe, revenue I've And I the positive look, encouraging. very consistent I'm our growing. a have Activities sign, grow is an and North think overall. We are we our I the growing are faced faster talked are whole pipeline. know the impressive And on we are Asia-Pacific, healthy -- sustainable time, this basis. see see challenges CAGR very with is it in can these to believe. but based think a simply because revenue people we why I investing every world space signs encouraging

Unidentified Analyst

Got it.

Okay. That's for me. Thank it you.

Najeeb Ghauri

you. Thank

Operator

you. Thank

the Our comes question. next [Indiscernible] Robert Partners. Please question with of Greene your proceed with line from

Unidentified Analyst

for Thanks taking guys. my as questions well. Hey

does affect business? off, cars uncertainty concerning new First your

Najeeb Ghauri

you. lost we Hello. sorry, Hello,

Unidentified Analyst

me? Hello. Can you hear

Najeeb Ghauri

you again. start Yes, please Yes. over can

it. miss we Sorry,

Unidentified Analyst

worries. No

concerning uncertainty new business? does cars your affect So,

Najeeb Ghauri

I in fronts. noticeable supply believe I worldwide. is chain, or of the North no, activity and believe, yes, think American the I We're course, shortage resilient particularly quite there's market strong. both seeing

sign few is than have that a strong. is ever We solution. And US demand the our all opportunities last our business, product, more in of and before. still our That's it healthy for months market

US. encouraged pretty in the So, with opportunities I'm

design. I see any any of So, further kind don't threat deterioration

Unidentified Analyst

North America like quarter. well, you. Got it just it. did Got it. then second, Thank And this looks

new strategy? on into for Just America a fits of Could how global you expand kind North you. market relatively your

Najeeb Ghauri

is a us. This for good new -- actually not market Well, question.

contribute a the and readiness the and product, really other on We lot market, whole captured have in region. in heavily from needed We also China we that's APAC, especially the where focus in region. the more a to by have tend team, which experience terms design, of always the in majority And markets because that region. APAC position, been in share other

we So, big success the of replicate market; have biggest what strategy this market. of the the in same This all market customers, the large the we the Tier doing to especially other what you in US have in is we a X is try China, regions. is were

So, new we are right strategy as core positioning not well ourselves business. team. with Right and as verticals, the our

So, see years decided by we believe And in in years, market I think two customers, unlock active US to is way the able to people where the bring NetSol focus has current our engaging customers, years. in now that biggest That place coming very impressive on successes to the year. this a last the be coming and we with we'll in many Europe. been new right around is APAC very for choice, and

So, is the for we can months. us really US, exciting this some in contracts coming in and sign the we hope

Unidentified Analyst

all That's me. you. Great, Thank great. for

Najeeb Ghauri

Thank you.

Operator

this Instructions] question-and-answer [Operator time, concludes At session. this our you. Thank

I'd contact session, Investor call If at your for question was calling at the to closing remarks. investors@netsoltech.com Q&A to by addressed Relations turn not XXX-XXX-XXXX. his them Mr. or them during please over the NetSol's back emailing like Ghauri by team

Najeeb Ghauri

We look want joining support, contribution. Operator? Thank call. today. for ongoing employees I our you meeting for to customers, our their next for thank loyal investors us our and their forward to our especially dedicated you continued

Operator

call. earnings Thank NetSol's today first you XXXX for joining quarter us for fiscal

disconnect. now may You

NetSol (NTWK) 10 Nov 222023 Q1 Earnings call transcript