NetSol Technologies Q2 2025 Earnings Report

NetSol Technologies EPS Results

• Actual EPS: -$0.10
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

NetSol Technologies Revenue Results

• Actual Revenue: $15.54 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

NetSol Technologies Announcement Details

• Quarter: Q2 2025
• Date: 2/13/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, February 13, 2025
• Conference Call Time: 9:00AM ET

NetSol Technologies (NASDAQ:NTWK), Inc. is a global provider of enterprise software and technology services for the asset finance and leasing industry. The company develops solutions that help banks, manufacturers, equipment lessors and other finance companies manage leasing and lending operations, including contract administration, credit and risk processes, asset management, billing, collections and reporting.

Its product portfolio includes the NFS Ascent platform, a configurable solution designed to support the full lifecycle of asset finance and leasing transactions. NetSol also provides digital and cloud-based capabilities, along with software implementation, systems integration, application development, maintenance, support and technology consulting services.

NetSol was founded in the 1990s and is headquartered in Calabasas, California. Through its international operations, the company serves customers across North America, Europe, Asia-Pacific and other global markets. Najeeb Ghauri is the company's founder and has served as its chief executive officer.

NetSol Technologies Q2 2025 Earnings Call Transcript

Key Takeaways

• Recurring revenues grew 27% year-over-year to $8.6 M, underpinning the company’s shift toward predictable subscription and support income.
• The launch of Transcend AI Labs and new AI-driven features—such as Intelligent Document Processing and an Interactive AI Assistant—highlight strategic investments in artificial intelligence.
• Netsol secured multiple high-profile agreements, including multimillion-dollar deals with BMW Group, Kubota, and expansion of its Transcend Retail platform with Mini Anywhere and other U.S. dealers.
• Investments in sales, marketing, and AI initiatives contributed to a Q2 GAAP net loss of $1.1 M (-$0.10 per share) versus net income of $408 K in the prior year period.
• The balance sheet remains solid, with $21.3 M in cash and planned buybacks at its Pakistan subsidiary increasing ownership toward 77%, supporting continued growth execution.

Presentation

[Operator]

Good morning. Welcome to NETSOL Technologies' Fiscal Second Quarter 2025 Earnings Conference Call. On the call today are Najeeb Ghauri, Co-Founder, Chief Executive Officer and Chairman; Roger Almond, Chief Financial Officer; and Erik Wagner, Chief Marketing Officer. I would now like to turn the call over to Patti McGlasson, General Counsel, who will provide the necessary cautions regarding the forward-looking statements made by the management during this call. Please proceed.

[Patti McGlasson, SVP, Legal and Corporate Affairs, and General Counsel at NETSOL Technologies]

Good morning, everyone, and thank you for joining us. Following a review of the company's business highlights and financial results, we will open the call for questions. I'll now provide the necessary cautions regarding the forward-looking statements made by management during this call. Please note that all the information discussed on today's call is covered under the safe harbor provisions of the Private Securities Litigation Reform Act. The company's discussion may include forward-looking statements reflecting management's current forecast of certain aspects of the company's future, and our 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.

[Patti McGlasson, SVP, Legal and Corporate Affairs, and General Counsel at NETSOL Technologies]

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.netsoltech.com and via link available in today's press release.

[Patti McGlasson, SVP, Legal and Corporate Affairs, and General Counsel at NETSOL Technologies]

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

[Najeeb Ghauri, Co-Founder, Chairman, and CEO at NETSOL Technologies]

Thank you, Patti, and good morning, everyone. Today, I'm happy to be dialing in from Lahore, Pakistan, NETSOL office. This quarter, we made significant progress primarily on two fronts. One, we drove considerable growth in our recurring revenues, and two, we invested strategically in our business, particularly in AI, to position us as we drive long-term sustained value for our customers and our shareholders. We achieved total net revenue growth in the second fiscal quarter of 2025, driven primarily by a double-digit percentage increase in recurring revenues and a 26% increase in services revenues when compared to the second quarter of fiscal 2024. The growth in recurring revenue is in line with a long-term strategy, and it demonstrates the continued evolution of our business model that, over time, should drive enhanced predictability and profitability for our business.

[Najeeb Ghauri, Co-Founder, Chairman, and CEO at NETSOL Technologies]

To drive this shift, we are investing in multiple opportunities across our diverse markets that we believe are in line with a long-term strategy. Accordingly, we recognized increased sales and marketing expenses in the quarter. While these investments have had a short-term impact on our profitability, they better position us to capitalize on the many growth opportunities in front of us. Specifically, AI or artificial intelligence continues to be an important initiative and a key strategic focus for our future growth. We have made encouraging progress advancing our AI initiatives in both the second quarter and year-to-end period, which our Chief Marketing Officer, Erik, will elaborate on after my prepared remarks.

[Najeeb Ghauri, Co-Founder, Chairman, and CEO at NETSOL Technologies]

Lastly, our existing markets are strong. We are receiving considerable interest from leading automakers, equipment providers, and financial institutions throughout the APAC region, where we have a leading market share, and Europe, where NETSOL is both a well-known and respected name. During the quarter, we announced a multi-million dollar agreement with BMW Group in the U.S., with a leading automotive financial provider in China, expanding on a long-standing relationship between NETSOL and this customer that dates back to 2009. After the close of the quarter, we also announced a go-live of an existing agreement with Kubota, a leading Japanese equipment financing company and a long-standing customer for our Transcend Finance platform to support their operations in Australia in addition to their operations in New Zealand and other parts. Agreements like these demonstrate the depth of NETSOL's customer relationships and are a validation of the superior products and service that we provide in a highly competitive market.

[Najeeb Ghauri, Co-Founder, Chairman, and CEO at NETSOL Technologies]

Demand of our Transcend platform is strong in the U.S. as well. As I have mentioned on previous calls, Transcend Retail is our fully digital omnichannel platform that seamlessly integrates into our customers' processes to manage the entire purchasing journey. It is being used by MINI Anywhere USA, an independent brand of BMW Group, to facilitate a quick and efficient purchasing journey for customers. In addition to MINI Anywhere USA, I'm excited to share with you that we are also in the process of integrating Transcend Retail with new customers BMW USA and expanding into more dealerships beyond the MINI USA network. Taking a long-term view of our business, I'm pleased with the progress we have made in this quarter, and I'm encouraged by what's to come in the later half of fiscal 2025.

[Najeeb Ghauri, Co-Founder, Chairman, and CEO at NETSOL Technologies]

We are confident that the investment we are making in this business, coupled with our shifting revenue mix to include more recurring subscription and support revenues, will translate into enhanced profitability and sustained value creation for our shareholders. Before we go over our financial results for the quarter, I'd like to turn the call over to Erik Wagner, our Chief Marketing Officer, to take a deeper dive into our AI initiatives. Erik, go ahead, please.

[Erik Wagner, CMO at NETSOL Technologies]

Thanks, Najeeb, and good morning, everyone. I'm excited to share with you today how NETSOL Technologies continues to pave the way with our AI innovations in our industry and how we are integrating AI across our products, services, and our own business operations to drive efficiency, intelligence, and transformation. Our journey with artificial intelligence began in 2019 when we began building our internal AI capabilities. In doing so, we've made several strategic investments that we believe position NETSOL as an AI-first organization. In 2024, we took a major step forward in this initiative when we launched Transcend AI Labs, our dedicated AI innovation hub. Transcend AI Labs is focused on three core areas. First, we're building out our internal capacity and understanding of AI to make sure that our team remains at the forefront of this rapidly evolving technology.

[Erik Wagner, CMO at NETSOL Technologies]

We've invested heavily in building comprehensive curriculums to educate and enhance the skills of our staff and demonstrate how to apply this transformative technology to achieve better outcomes. Second, we're leveraging our AI expertise to enhance our products. At present, we're adding major functional AI enhancements to our Transcend Retail and Transcend Finance offerings, and we're exploring additional upgrades across our entire product suite. Third, we're enhancing Transcend Consultancy's AI services to better offer expert guidance across critical areas like information security, data engineering, and cloud services. In short, we are providing specialized AI consulting and solutions to help businesses achieve their goals. Taking things a step further, in the fall of 2024, we launched the Transcend platform, our AI-driven unified product ecosystem that revolutionizes how assets are sold, financed, and leased.

[Erik Wagner, CMO at NETSOL Technologies]

This quarter, we are rolling out several major AI advancements, and I want to highlight two key enhancements that will have an impact immediately. The first enhancement is intelligent document processing, or IDP. This AI-powered solution transforms multi-document verification, data extraction, and classification, handling bank statements, financial records, contracts, and ID cards with OCR and NLP technology. IDP not only reduces manual intervention but also integrates advanced analytics to assess cash flows, credit history, and risk factors, improving credit underwriting and real-time decision-making. Automated compliance validation ensures extracted data meets regulatory and internal standards, reducing operational risk. With automated invoice and contract processing, businesses can accelerate approvals, minimize errors, and optimize risk assessments, delivering a faster, more efficient financing experience.

[Erik Wagner, CMO at NETSOL Technologies]

Second, we have our interactive AI assistant, which provides real-time support throughout the asset finance lifecycle, assisting both customers and internal teams with instant responses, process guidance, and intelligent recommendations. This enhancement is designed to increase operational efficiency, improve customer interactions, and create a more intuitive and responsive experience. At NETSOL, AI is not just a tool; it is a core part of our strategy. By integrating AI across the Transcend platform, we are enhancing efficiency, improving customer experiences, and future-proofing our business. As we continue expanding Transcend's capabilities, we look forward to sharing more about how AI is driving transformation and unlocking new growth opportunities for NETSOL.

[Erik Wagner, CMO at NETSOL Technologies]

That concludes my remarks. I will now turn the call over to Roger Almond, Chief Financial Officer of NETSOL, to go over our fiscal second quarter 2025 results. Roger?

[Roger Almond, CFO at NETSOL Technologies]

Thanks, Erik. Our total net revenues for the second quarter of fiscal 2025 were $15.5 million, compared with $15.2 million in the prior year period. License fees for the second quarter of fiscal 2025 were $73,000, compared with $3 million in the prior year period. Recurring revenues, or subscription and support revenues, for the second quarter of fiscal 2025 were $8.6 million, compared with $6.8 million in the prior year period, representing an increase of 27%. Included in our recurring revenues this quarter was a one-time catch-up of approximately $1 million. These one-time catch-ups are a normal part of our business operations and occur during any of our reporting periods. Absent this one-time catch-up, our recurring revenue in the quarter would have been approximately $7.6 million, or a 12% increase over the prior year period, which more accurately reflects the increases in contract values for this segment.

[Roger Almond, CFO at NETSOL Technologies]

As Najeeb stated in his prepared remarks, we are confident that this growth in recurring revenues over time will benefit our business in the long term by driving more predictable and reliable results that generate sustainable profitability. Total services revenue for the second quarter of fiscal 2025 was $6.8 million, compared with $5.4 million in the prior year period, or a 26% increase. Total cost of revenues was $8.6 million for the second quarter of fiscal 2025, compared to $8.1 million in the second quarter of fiscal year 2024. Gross profit for the second quarter of fiscal 2025 was $6.9 million, or 45% of net revenues, compared with $7.2 million, or 47% of net revenues in the prior year period. Operating expenses for the second quarter of fiscal 2025 were $7.4 million, or 48% of sales, compared to $6.1 million, or 40% of sales in the same period last year.

[Roger Almond, CFO at NETSOL Technologies]

Loss from operations for the second quarter of fiscal 2025 was $487,000, compared to income from operations of $1 million in the second quarter of fiscal 2024. Turning to our profitability metrics, GAAP net loss attributable to NETSOL for the second quarter of fiscal 2025 totaled $1.1 million, or a loss of $0.10 per diluted share, compared with a GAAP net income of $408,000, or $0.04 per diluted share in the second quarter of fiscal 2024. Included in our GAAP net loss in the quarter was a loss on foreign currency exchange transactions of $698,000, compared with a loss of approximately $14,000 in the prior year period. Because we operate in several geographical regions, a significant portion of our business is conducted in currencies other than the U.S. dollar.

[Roger Almond, CFO at NETSOL Technologies]

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. Likewise, 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-GAAP metrics, non-GAAP EBITDA for the second quarter of fiscal 2025 was a loss of $775,000, or $0.07 per diluted share, compared with non-GAAP EBITDA of $1.4 million, or $0.12 per diluted share in the prior year period.

[Roger Almond, CFO at NETSOL Technologies]

Non-GAAP adjusted EBITDA for the second quarter of fiscal 2025 was a loss of $789,000, or $0.07 per diluted share, compared with the non-GAAP adjusted EBITDA loss of $725,000, or $0.06 per diluted share in the second quarter of the previous 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, 2024, and 2023. Turning to our balance sheet, we increased our cash and cash equivalents to approximately $21.3 million at December 31, 2024, compared with $19.1 million at June 30, 2024. Working capital totaled $23 million as of December 31, 2024, compared with $23.6 million at June 30, 2024. Total NETSOL stockholders' equity at December 31, 2024, was $33.9 million, or $2.91 per share.

[Roger Almond, CFO at NETSOL Technologies]

Our strong balance sheet provides substantial cash and shareholders' equity, reinforcing our business as we execute our strategy for future growth. Also, on January 3, 2025, our subsidiary NETSOL Pakistan approved the buyback of 10 million shares through June 29, 2025. If all 10 million shares are repurchased, this would increase NETSOL Technologies' ownership of NETSOL Pakistan by approximately 10%. At the time of this call, NETSOL Pakistan has repurchased approximately 2.4 million shares at a value of approximately $1.3 million.

[Roger Almond, CFO at NETSOL Technologies]

That concludes my prepared remarks. I'll now turn the call back over to Najeeb.

[Najeeb Ghauri, Co-Founder, Chairman, and CEO at NETSOL Technologies]

Thank you, Roger and Erik. As I said before, I'm very pleased with the progress that we made in the second quarter. We are hard at work innovating and investing in our products and services, and we are encouraged by the many opportunities that we are seeing in the markets. As always, we are taking a long-term approach to our business strategy and goals, and we believe that we are positioning NETSOL for solid growth in the later half of fiscal 2024, 2025, and beyond.

[Najeeb Ghauri, Co-Founder, Chairman, and CEO at NETSOL Technologies]

With that, I'd like to now open the call for questions, operator.

[Operator]

Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press Star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press Star 2 if you would like to remove your questions from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the Star keys. One moment, please, while we poll for questions. The first question comes from the line of Todd Felte with StoneX Wealth Management. Please go ahead.

[Todd Felte, Analyst at StoneX Wealth Management]

Appreciate you taking my questions. Can you give a quick breakdown of the geography of your revenues as far as North America, Europe, Asia? Do you have that available?

[Najeeb Ghauri, Co-Founder, Chairman, and CEO at NETSOL Technologies]

I think Roger should be able to do that. Roger, go ahead.

[Roger Almond, CFO at NETSOL Technologies]

Yeah. It depends on each quarter, but this quarter we had probably 70%, usually 70%-75% is coming out of the APAC region, with about 12.5% coming from Europe and the Americas. In this quarter, we actually had a higher percentage due to BMW here in the U.S., to where we had a higher percentage coming out of the U.S. market, which reduced a little bit of the percentage out of the APAC market.

[Todd Felte, Analyst at StoneX Wealth Management]

Okay. I appreciate that. Where do you expect your growth to come from in the future, if you could kind of pick a market?

[Najeeb Ghauri, Co-Founder, Chairman, and CEO at NETSOL Technologies]

Yes. I think, Todd, thank you for asking this question. We are really very committed and doing a lot of new things in North America, especially. There is a lot of effort going on. We have been hiring some new talents in the Austin office. I believe North America is going to be performing better in percentage growth region-wise, while other markets are pretty solid, as you heard about China and Europe. They are pretty steady. We believe that we are hoping that we will do a lot better in North America going forward.

[Todd Felte, Analyst at StoneX Wealth Management]

Okay. That's great to hear. You have a pretty impressive client list: AutoNation, BMW, MINI Cooper, Yamaha North America. I'm looking at some of these large companies. AutoNation, just two days ago, reported over $26 billion in revenue, and they originated over $1.1 billion in new loans last year. Can you maybe give us some details about your contract with them? I mean, is it just a flat software subscription fee they're paying? I mean, if AutoNation was to grow to $50 billion in revenue, would you be receiving millions of dollars from them, or is it just a straight subscription contract?

[Najeeb Ghauri, Co-Founder, Chairman, and CEO at NETSOL Technologies]

I think we have actually generated sizable income in the last since we signed this contract about nine, ten months ago. Now, at this stage, there's an integration going on. I think the overall, if you look at the total number, I think we reported about $18 million, something like that, if I remember the number, Roger. More importantly, Todd, because of this BMW deal, we have very good interest from our pipeline is pretty healthy in this digital retail market in the U.S., especially. We have seen interest has risen since we announced this BMW contract last year. That created more opportunities. I can't share the name because we're still in negotiations in some cases. It is a very promising, I think, achievement for the company in the U.S., where we had this largest contract for the first time.

[Najeeb Ghauri, Co-Founder, Chairman, and CEO at NETSOL Technologies]

That means it just opened more doors, whether it's AutoNation, more business, or other similar companies in this space in the U.S.. We are pretty excited about the opportunities in the retail, digital retail side in the U.S.. Erik, you may want to add because you are pretty expert in this area. Go ahead, Erik.

[Erik Wagner, CMO at NETSOL Technologies]

Yes. Agreed on that front. I mean, I think that we're definitely seeing some excellent growth within the Transcend Retail. The pipeline is very strong. Just on that note, I think we're seeing some very encouraging activity on the RFP front. I think we've been invited to more RFPs over the past six months to a year than we've ever been before. Definitely some strong growth potential.

[Todd Felte, Analyst at StoneX Wealth Management]

Okay. That's great. The recurring revenue is also very nice to see the growth in that. With your new investments into AI and all these new features coming about, are you going to be able to raise prices to your customers? What kind of pricing power do you have? Do you think this can bring more value and revenue to you?

[Najeeb Ghauri, Co-Founder, Chairman, and CEO at NETSOL Technologies]

It is a valid comment, Todd. It is also a very sensitive matter because we obviously will make sure that we make sure our customers who are long-term with us. In some cases, I can talk about two cases where things are happening in China, for example, large customer, and our team is working to do just that, exactly what you are saying. Good possibility that we will get what we want for the renewal. These are premium name blue-chip customers. For us to maintain our strong relationship and find many other ways to grow revenue from within the customer is quite more possibility. Whether we raise prices, I think it is also always discussed periodically. In some cases, we are working on that. Our team is doing exactly what you are saying in some cases.

[Todd Felte, Analyst at StoneX Wealth Management]

Okay. Thank you. My last question just has to do with your subsidiary in NETSOL Pakistan. I know you have a lot of talented engineers there that are much cheaper than hiring U.S.-based engineers. With your ownership, I think, was 67%. With the recent buybacks, you may be in the 70s now. Is there a long-term goal of acquiring all of NETSOL Pakistan, or is that going to just continue to be a separate entity, or is there any plans you can share about your increase in ownership there?

[Najeeb Ghauri, Co-Founder, Chairman, and CEO at NETSOL Technologies]

I think we started this buyback in Pakistan a few months ago. The whole idea is to really NTI owns more. Right now, with the buyback, we probably will end up 10% more ownership once we complete this buyback. That will take us close to 77%, which is a 10% jump. We have that goal in mind that we can try to maximize ownership by doing buyback, or that's the only best challenge. I think the goal is to really strengthen the parent company's financial and balance sheet and so forth. It is a good opportunity because NETSOL Pakistan's stock was at the peak PKR 300, and now it is at about PKR 150, I believe. It is a good buy time, and we continue this plan that we implemented a couple of months ago.

[Todd Felte, Analyst at StoneX Wealth Management]

Okay. Thank you so much for taking my questions, and I look forward to your strong quarters. Thank you.

[Najeeb Ghauri, Co-Founder, Chairman, and CEO at NETSOL Technologies]

Thank you, Todd.

[Operator]

Thank you. A reminder to all the participants that you may press Star and 1 to ask a question. Once again, a reminder to all the participants that you may press Star and 1 to ask a question. Thank you. At this time, this concludes our question-and-answer session. If your question was not addressed during the Q&A session, please contact NETSOL's investor relations team by emailing them at netsol@imsinvestorrelations.com or by calling them at 949-574-3860. I would now like to turn the call back over to Mr. Ghauri for closing remarks.

[Najeeb Ghauri, Co-Founder, Chairman, and CEO at NETSOL Technologies]

Thank you for joining us today. We look forward to updating you on our next call. Thank you and have a good day.

[Operator]

Thank you for joining us today for NETSOL's fiscal third quarter 2025 earnings call. You may now disconnect.

Participants

Executives

• Najeeb Ghauri, Co-Founder, Chairman, and CEO

Analysts

• Roger Almond, CFO at NETSOL Technologies
• Patti McGlasson, SVP, Legal and Corporate Affairs, and General Counsel at NETSOL Technologies
• Todd Felte, Analyst at StoneX Wealth Management
• Erik Wagner, CMO at NETSOL Technologies