Earnings call transcript Q2 2023

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning. Welcome to NetSol Technologies Second 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. Please note, this call is being recorded.

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 the management during this call. proceed. Please

Patti McGlasson

and joining everyone, you thank morning, us. for Good

the company's and call safe Reform the during financial a cautions questions. review information we this the highlights on the of regarding necessary that the Securities the Private Act. Following call. results, Please by all under business will of today's now Litigation call provide harbor statements covered note provisions forward-looking made I'll the management for discussed open is

forward-looking include aspects are may or reports on report discussion filings, reflecting future management's our contained certain company's and The forward-looking XX-K could qualified Form stated and forecast statements cautionary SEC statements including from in of and our statements Form current the implied. on quarterly XX-Q. These those company's NETSOL's annual the by and differ press actual results materially releases

also I financial GAAP certain press measures. The like out be reconciliation measures. will these point earlier a discussing would most that comparable non-GAAP to contains the of issued to release we today results non-GAAP

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

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

Najeeb Ghauri

were of reasons of were good and our where We've There morning, control results you, some look Thank and we outside Patti, this be. made strategic a wanted this, to various quarter, to with not control. everyone. second within you. financial our some quarter lot sharing progress them forward I which for our That said,

contract, impacted due on $X.X in we to our million revenue comparisons. the onetime First, second which it's large quarter had that catch-up important onetime a cumulative year, to in understand last

third to the below revenue and quarter. expectations. and $X fiscal profitability margin that was the were With to realize we Second, delayed, in it lower million our this realize in in revenue, expected we expect our quarter approximately

reprioritize it drive opportunity structure but with of As business revenue not greatest to in the most align attractive growth better parts cost only also profitability. today's to our such, we sustained capital have revenue, our to the and reexamined allocation with our

expect be to We business of will company cash least of by In more better we million cut cost shareholders. in a the to flow focused the fiscal return short, to positioned the at our achieve year. for positive end $X

higher Before we get Number details mind. quarter, a a grow for business few margin and one, hard portion front is do at share in and Europe the to some into fought market we have there's our the in position keep of let's the clients. unique of market-leading three, better. a we well, opportunity U.S. the things revenue growing our Number recurring in of in Asia, a most innovative are the technology end for the doing opportunity two, it of to And

cash generation. were the strong sheet customer a competitive and AI ahead to good For laser-focused on balance integrating rock are a learning our built of our curve old-fashioned on products from advantage this position And example, four, and machine customers. with cash of we into solid is our delivering

have plan intention to back clear there. have and to every We cash to generation get positive get a

We is are which market. our U.S., most presence in expanding American market, in particularly the focused on North our vibrant the

we We our are services about this very in and excited region. opportunities are the seeing for products

a range as customers. continue product our and develop and and this mobile, AI Otoz to example, machine specifically solution target market, very in attractive or we product learning-based North For has emerged to American evolve

help North consultant, tech through system integrators with Amazon American our to that Services a also and our partners, growing and operations. including Otoz Web company Tier further X partnership We're automotive will scale

we XXth our states. XX with live now went we have in quarter, this dealer, During and dealers

in are long these we pursuing. particularly The quarter. deals remained some to of our in the million be $XXX for an to sales at many of pipeline second sales very enhancing compete the we the for but positioning larger larger deals, business, opportunities quite are increase our and cycles some strong of about Our can optimistic

provide overview Almond, like quarter. I business, walk a of our financials over to for through who the turn call CFO, first I'd our more Roger. Before our you in-depth Roger ahead, Go will the to

Roger Almond

Thanks, Najeeb.

prior $XX.X to $XX,XXX fiscal period. million. currency period revenues quarter financial million XX, XXXX XXXX fees our were currency constant basis, compared On compared constant total Turning were the million were basis. second revenues December were our a net License year fiscal $XX.X the for net of the second results quarter for year prior ended on $XX.X million and a XXXX, the with period $X.X in $XX,XXX with in

of our to cumulative revenues normalized $X.X due GAAP the due of and the were quarter second catch-up the Daimler Financial in a actually to support revenue for for million $X.X both revenue On our a a amendment contract same quarter approximately support XXXX we primarily excluding year year, decrease period. compared an and onetime subscription and in total saw on subscription XX-year million catch-up the the last of quarter support and quarter constant subscription the currency prior in our Services. to a basis. with basis, cumulative onetime with increase in revenues second total of was as in $X.X million Recurring or XXXX recording the The

quarter, the revenues year provided Services million. services million in current with for second revenues services revenues was derived $XX.X year On $X.X XXXX. well prior million customers were million currency were of from compared was services fiscal of Total cost total customers revenues $X.X to the both as services new total from basis, provided a of million the cost On currency $X.X to $X.X as revenues basis, period. as a constant constant part the quarter Total implementation of process. million. second an increase of $X.X

expenses second a million. basis, Operating revenues profit of second Gross was the year. last were quarter for million net were of sales. second currency On fiscal million the of second currency quarter sales $X.X was quarter million XX.X% a of XXXX. million XX.X% the XX.X% $X.X $X.X constant $X.X in of compared On expenses period to revenues profit or $X XXXX XX% or gross to of or same the for sales for basis, of quarter $X.X operating fiscal or compared XX.X% million net the or constant in

Turning profitability to our metrics.

we a For was net the loss to period. the the compared fiscal second of net from in operations $X.X million quarter of loss currency from had from XXXX, of year basis, $X.X a million On constant prior million. $X operations net operations income

diluted our of $X.XX $X.X for GAAP with quarter constant $X.X last of share per to compared in income million million totaled fiscal Our of the attributable the $X.XX share. year. quarter GAAP million totaled net diluted loss to loss or currency net XXXX or per net second NetSol NetSol $X.XX attributable a $X.X per basis, or diluted second On share

out compared net $XXX,XXX a important loss in was currency this that we operate on it's we of point a On in revenues, foreign decrease it but other denominated portion basis, geographical compared our last of currencies dollar. dollar. included of quarter than business always, increases year. dollar in the exchange to U.S. QX gain transactions realized other to U.S. in also effect than expenses foreign transactions. a currency Because generally $XXX,XXX gain the foreign currency several U.S. in rates gain on significant in regions, exchange exchange the a the of is A of increasing constant currency our conducted our currencies has of value As to our the $XXX,XXX a of

other to it dollar relative continuing our foreign by uncertainties monitor business tends U.S. our reduce our given the expenditures, rates, than We currency exchange accordingly to the in expansion dollar. to resources overall as it to of currencies target also plan deploying the reduces markets. denominated economic of additional U.S. strength gains our areas revenues, but Similarly, our while expenses

was second our Moving to Non-GAAP diluted revised adjusted or quarter a the XX, per reconciliation metrics. second of earnings in per December EBITDA quarters the EBITDA or year. the and loss schedules compared $X.X $X.XX million for see share of for non-GAAP adjusted adjusted for million last quarter EBITDA Please in the of XXXX diluted calculations $X.XX XXXX ended of our non-GAAP contained of XXXX. $X.X with fiscal our release share

quarter NetSol cash of diluted or $X.XX $XX balance we equivalents $X.XX share. approximately million approximately per sheet. Turning the share. stockholders' per equity and $XX.X end, The million December XXXX, at our to had common cash or was At XX,

concludes prepared my That remarks.

I the turn time Najeeb our an Now of overview will back for Najeeb? business over to updates.

Najeeb Ghauri

you, Thank Roger.

efficiency mentioned implementing earlier, I and better that believe reduction are resources. drive will our align initiatives As we cost we

exciting We exit expect bet modernization million accelerate market. Perhaps $X in digitization American the will will for to North growth which our and component expansion business, in fiscal growth that strategy at coronavirus the our add our -- next our right represents as profitability. particularly at most the and least the is now year EBITDA a least in our the to market efficiency return accelerated created we robust demand for opportunity industry. into pandemic, measures in This

to entry and Specifically, financial certainly we shifted financial services are to a to demand digital to employees services point that customers work and required provide seeing who customers. remote their are ability provider digitally related acquired to the

needs. institutions, adapt result, changes customers, dealers automotive our suited their infrastructure products their to are OEMs IT and realize a meet and ideally that core financial and these our As equipment to automotive needed to

we power include states, XX Services last see end, growing healthy capture continue modernizing to platform United presence SaaS which U.S. Moreover, new in excellent both that To our increased to offerings the the in Otoz the this has and customers infrastructures. and their division support Otoz illustrates Cloud Since demand share the increased innovation. demand of its region. for dealers expanded positioned cloud-based and market in as AI-based commitment services to has traction showcasing NETSOL to States, the across NetSol's existing for quarter, XX IT

dollar in Mobility will entered multimillion the XXXX, with new in of Additionally, United for which subscriptions. a States, second and X license quarter Solution Otoz operations company to our vehicle into agreement automotive the implement fiscal a back-office we manage Tier

been accelerating in we AWS, our to or consultants, system with Web the became growth partnerships our this an and we gateway market, penetration technology second in Services, delivery U.S. in were our and with by partnership further expansion partners. Amazon other and quarter, has catalyst expand an integrators excellent partner. investing for pleased In our Otoz API the are

by interfaces service scale. expand providing partnership any to this publish, fully secure application with developers We NETSOL capabilities cloud managed expect with position us and maintain, our monitor to a at create, to programming

in we're This in becoming establishing the delivery support accommodate making Austin, tech for coming accommodate and U.S. sales people and progress, which center is quickly location to the in planned a a months. which expected is businesses will staff, Texas, a Finally, hotspot support of system good number a

talk Europe Now region. about let me about talk and APAC -- finally

stable provide reliable APAC, our to Our European revenues. quarter to XXXX. business and of Pacific the second in continue compared Asia and markets the revenues decreased In

However, and on this is in we to that with our the our we this are positive we multi-country largest market roadmap, and multiyear, make progress confident most results positioned implementation sustainable for region. are continue that established

are with market. we as provider a Our the European compared to software growth already to our us finance traction where operations SaaS established European APAC, leading continue in as provide offering the region, cloud-based opportunities more and gain of in leading

Contributing base recurring attractive support which revenues, NETSOL forward. and going believe to a opportunity for we represent our subscription very

in bank year in a positioned the implementation offering across revenues Ascent SaaS of of period. combination slightly we results. NFS countries improved increased for prior and compared the Scandinavian the quarter second deliver through cloud-based We to X that European anticipate are our and well a to Our XXXX, major market

second results we quarter where are were value-driving about to wanted we underway. be, initiatives our not while the summary, In enthusiastic

executing grow strategy We progress to are our the in significant making U.S.

plan as will reduction while out million $X over areas are We the impacting cost U.S. that a business not such of cut growth the initiating key

sheet, Our And a to foundation market finally, offerings very we strong and strong to and technology balance technology a we have share continue build upon which on. partnerships with grow. healthy wish

the call we And questions. Operator? with that, for can open

Operator

[Operator Instructions].

Services. AGES Our first question comes Financial Felte from Todd line of from the

Todd Felte

your of Europe, Pacific kind referred to you in the region your position Asia I A estimate North if you was of of Europe. few wondering share market percentage could the give during and in America. an call, us market-leading times

Najeeb Ghauri

Okay. this asking Thank question, you Todd. for

a of progress And other regions. is I a Scandinavian recently are As this in in sizable Europe, it, market our to to what market Europe there XXXX [indiscernible] or exactly announced in as the the the are invited operating very companies there's the any of We've the -- at market bids you opportunities no, know, lot and see like been different is because of are fragmented market. difficult with the since engaged in monitoring bank. and can is position. X all this very in new been we look share see been European Horsham we all in have This new think, of a kind one in have there. account, way we new we contracts we we office area. Nevertheless, most the a we bought we've team many a believe securing I in growing competitor, participating and RFPs, number it's in

contracts China, are in we leading way regulatory which have Beijing, at of leading been leasing we have. maintaining in a CBRC, position. APAC, our company still authority the with it to we the multinationals finance in look is company, The OEM, you companies, the number leadership according and a China,

leading in APAC, say Australia, it's and a the position. Japan, New position still in by the what in we So is a -- is hard to but we're are we our in strong percentage can in in markets very Again, Zealand Overall, in other APAC China. very China, still we believe in far, strong. very in position

whether which Chinese professional auto Chinese XX exactly for in they're on has pretty we we're the that whatever, to to us comments, about vertical which have in go this promote a and China the of to sector new employees mentioned sector added Chinese Li new opportunity as ramp continue bullish a the means it call to in up in offering, impressive the new hired comfortable. or or local program our we X because a XX, months, very Amanda grow plan very companies services. market, towards truck in cater So local last And professional market -- all And there's local China to our we operation, daily rate. in my will head to a services I

into What as exciting the us flagship major couple a this Now about is not the North of business, others. core most this, is seen on America. one mobility, in We Minshall years, Peter months including name because, reality But the your of coming very happening are have the and noticing executives senior here, I'll in which contract. We thing AutoNation, few Ascent brought our over market, the Ascent, now question quarter. simply ago. are to a results we just we household and North name. share have that is for signed and announced we this America we yes, X.X few

In RFPs. are major addition to in that, It's sales much billion States. pretty United we pipeline. in the all opportunities we mentioned the a mostly

the U.S. the other in strategy by the and We're despite the China. economies in APAC market, U.S., investment investing Now to don't that now in a invest design. much strong. we than is is want because realized still time are onetime enough done too more this fact we other U.S. struggling, But is we've economy

market. customers the in values very office our Texas. and pretty a investing U.S. last But be is Austin, same U.S. the the activities sales for also for long. XX So yes, we're the believe new cycle I attractive. at time, months, That hub in are will given

good believe will second that we can lumpy So And business know, you I and half, confident this you guarantee there you results. progress. the cannot pretty the we're timeline. our give as be is

couple are the We opportunities, a in maybe of top now. X leading major candidates

excited. we're So

this believe this is market, years. fully quarters company we will the committed the change coming and are coming total about and landscape the of which U.S. the We market, in

market, is So investing right to the we're we believe this in and thing do. this

Todd Felte

we've XX,XXX-foot view, look I mean few see quarters. when in over last I employees that on the hired at XXX I Okay. the

was decreased gone, I our under has few million. has sales $XXX pipeline last quarters. Our it But remember, revenue

Now $XXX we're million. at

when the consultant a breakthrough, grown that from that little is $XX million, see finally you to can now given -- this million? have $XX Are it's $XX jump have to frustrating having do XX% we do revenue. over So of going and it's just revenues start our occur, expect we million? we And $XXX salaries to pipeline when this expenses quarters, million

speak, employees so was So add on, we kind of jump kind we've And some hoping could these in got revenues. the see that. hoping breaks, to all that new you to of and dam I we're and color this

Najeeb Ghauri

your really Todd, look, ROI to you, impressive think but see I'll an the frustration. the on investors, all understand they were real me the recognize they just And I period, in really people, results things The could have I tough. and of not eventually at color some I should that categories. really X point. COVID the And think hiring you give I the you

a pandemic. now we long grow was the don't are a is, key story. Everybody additional Ascent. to done added over areas year we there want And new field the we same We a COVID have what going X verticals completely revenue. beyond You It depend know as way the on to to the are And cycle. thing. that flagship is

into want opportunities, sales platform, some You more to where you more have higher digital more go volumes. mobility sales

what, one hired in X months. or the last And in XX and there's opening Now, area. AWS investment X almost, XX months. people or And and is doors up. like training We investing their X certification that's them within brand-new we're the

a see lot And on. we and hope to of activity results so some there's going

is the -- to local in. where time, services. our different invested the linked invest growing business Second this it now in to specialized What is we a invested which I does professional believe, Chinese services. or and that key the FinTechs team business. in is is area We've verticals, in core the is really professional the right sales so never in China force much

and people bring from So we And local. continue across in investing. our of another we're place course, U.S., globally to company China hire will is the

a the Services. projects we to These We for market in the multimillion have particularly the are the and in bid Chinese China, given it implementations because to of like and much we market Financial the reference XX believe size top-notch What market. Ascent, on Asia the You better Daimler now U.S. BMW is large does point OEMs has position can these us with local it the and U.S. ability Pacific magnitude of dollar because ourselves in a some reason enough of we now names. are great to have Europe. position markets the late in ourselves experience And are and customers. imagine

position business to mobility. revenues, core to not ourselves cloud the on we're trying our In pipeline we're this SaaS building just addition that is, where

this can so opportunity AWS the and the opportunity like and forth. that and action lot our from bank not added and I FinTech, a we of weeks. have believe you're of at an a to ability before we the given new the bench. more had weeks as and to in started time, there's just company history front So people. see our to is actually in now same is show new to in And a can good out the job our more We the we experience last exercise to X is numbers, earlier mentioned, these ways that a had lot in But new lot reach professional productive. right is larger simply Lahore the put find you services And right, -- just ended to XXX verticals. I'm we I strongly exercise we leaner, main we to this customers market, few now the have XXX efficient quarter be because more about of U.S. numbers to be build are but business, the ever mean, company, opportunistic this we that largest a this be do reason really IT them

very the and the income. least My It's EBITDA our tough. bottom efficient more million net So just hiring. is of are numbers least in watch the and I watch now We $X in out at these headcount to I a our line XX% We cash process the to goal take company. think The mentioned. in at improved we're aggressively driven. carefully. And investment

hard are these tough they decision. So but a are decisions,

inflation issue environment there's everywhere. are we the Given in, there's everywhere,

to and to sure world high suffering. we make lose is, other that the this offices a mentioned -- the class everybody them middle in don't Lahore You least rightly at around core our maintain of is we is that have because team inflation,

people So in takes our build to we not do fresh lose whatever future investment employees, bring new good the it the for to U.S.

the for profitable that only sure the the grow think data the right income. also we become to make I and us coming in points So quarters very all these are not revenue but profit net point gross

Todd Felte

this you $XX Or to given optimistic? a cycle to just I the in opportunities If are out, discussed, $XX $XXX million year a be going million quarter? is all given sales be... also mean Or is backlog, that Okay. was exciting and I million the given hoping the doing to long the trying growth too from to now, revenue we model

Najeeb Ghauri

It's not optimistic. too

business. how You're goals about X. of them And I all to right field not the too those now in double and how know familiar shortlisting the you sure optimistic. has the not example. is from of money, it's our customers generic where achieve ready sign. to much look, narrowing to company -- I months want we giving these think understand high you're our and could cycle shell own It when make pipeline, weeks, is I'm Lahore, actually don't which a on spend long to wish you XX And numbers. X to talk X just days, now some to which the kind We're these visit I'm

X about, deals X number deals these or confident. I'm of One these in that pretty hit talking the next can of the months you're

these with agreements. the excitement go But and can based are big day working that is real million we in deal One QX. you legal obviously deal the follows is stable. we is at this timeline is customers least recognize the through in and signed way the these Patti this the QX all Because at current Australia and pretty the didn't because night. but to through not I detailed I and revenue in growth, and quarter, was think look see could recognize any $X we mean our

sitting So from these and at side. XX in globe. people that our the with or U.S. the and XX, across doing Lahore side means calls night other customers, that day a time

So it Lahore office very here, see I'm and very, is a can now. that. I active right in

good you we turn we But So -- you, corner. then we mean admit that. to not sometimes some need I know have But your lot market. And excite control you and something like also. we -- best make luck have going think a and of the you're it the or to called not any then and it's we're I do to missing we don't we going opportunity. you and disappointed to get delayed happen.

very are our have we So will confident, numbers coming new will that the in we months dramatically. some change contracts

Todd Felte

hear answering potential in, some questions. taken on for Okay. to and I you hope I the contracts Well, and informed get I'll enough call. that's of keep announce you time as off these your the revenue and great growth. us of upcoming thank and come all they revenue the I've

Najeeb Ghauri

Todd. always a and Thank have You welcome, day. are you good

Operator

Instructions]. [Operator

of line Our next the question comes from [indiscernible].

Unidentified Analyst

just a of this be little you or could of of $X in the the year? implemented Will the the reductions? timing cost one, more over immediate million First the provide implementation balance insight concerning

Najeeb Ghauri

implement the weeks progress division with in started or the it have been department and the and our to targets these giving really of each few -- head ago and across HR have departments process work their their the We our a companies.

by some real, now. X be all quarters time from tangible in beginning timeline, if benefit will have in third -- value think not timeline which in think, I quarter and severances see you happened. some the fourth of fiscal that I So But the the you'll the XXXX, value the the about XX, is is

Unidentified Analyst

Got it.

understanding. to sure then And make Okay. I'm just

mostly in efficiency are they the strategic will other your So focused Or on parts measures the investment impact your business? U.S.? of

Najeeb Ghauri

is U.S. one actually. we're investing the No.

to We very are instead offices U.S. also very my corporate lean, North investing our North operation NTA, Actually, and lean. is bit of it. a our downsizing business of team leaner both U.S. side the we're more in America, in in corporate

and travel in investing will be forth. we infrastructure, in back Now people,

is the that more team is bullish struggling. I is and very Despite what opportunity where are the U.S. we U.S. a And better, of know struggling it but U.S. only already everybody I because This China simply So the and U.S. lot very, put energy see that ability my to the control best of the board. for see financial and working some U.S. I really all big in this market I'm the knows believe to is results our years. the can in get and the a European many control we'll they in market. market. is us, parts for Europe, than the this has inflation, in the inflation happening investment we've many, more bit feel market other that, real talent, penetration been on and place in APAC is and

in the the investment will continue. U.S. The nothing U.S. reflect continue to be will as investing and

Unidentified Analyst

question. last Okay. Great. just my then And

you machine in learning AI offerings. your mentioned and So

wondering implemented if technology is could around you how into more color little this your a Just provide solutions.

Najeeb Ghauri

our popular modules. Well, are know, benefiting as AI is worldwide, in you different customers our from very business,

into we of offerings So on implemented the need on customers. AI basis, learning depending machine a the in case-by-case

on risk are the during for we the people end, and Our data process application so or identifying or bank loan. And lease to algorithm of that specific to our train provided financing capable by forth. valuation companies is and able

hottest there's developing on sector. tool new going of that right the technology is tool becoming in now So think all in I one and this lots the

and the build I what altogether many a model customers product efficient. more confident into our in in and And a to do it's So of create that the course, this force to make is am many, ways different is product quick help will leading company. be to AI supposed

we are benefit big we playing some couple PhDs, going this and our in our aggressively for because in facility of a building Lahore, very So basis. hired to them customers MIT are and they're it. in to customer brought part We've

happening thing company. for good the very a it's So

Operator

Thank you. concludes session. time, At question-and-answer our this this

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

Najeeb Ghauri

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

Operator

Thank Earnings for Quarter Call. you for joining Fiscal Second NETSOL's today us XXXX

lines. may You disconnect your now

NetSol (NTWK) 14 Feb 232023 Q2 Earnings call transcript