NetSol Technologies Q3 2025 Earnings Call Transcript

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May 14, 2025

There are 5 speakers on the call.

Operator

Good morning, and welcome to Netsoul Technologies Fiscal Third Quarter twenty twenty five Earnings Conference Call. On the call today are Najeeb Ghauri, Founder, Chairman and Chief Executive Officer Roger Allman, Chief Financial Officer and Patty McGlasson, General Counsel, who I would like to turn the call over to in order to provide the necessary cautions regarding the forward looking statements made by management during this call. Please go ahead, Patty.

Speaker 1

Good morning, everyone, and thank you for joining us. Following our review of the company's business highlights and financial results, we will open the call for questions. Before we begin, I will 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.

Speaker 1

These forward looking statements are qualified by the cautionary statements contained in Netsal's press release and SEC filings, including our annual report on Form 10 ks and quarterly reports on Form 10 Q. I would also like to point out that we will be discussing certain non GAAP measures. The press release issued earlier today contains a reconciliation of these non GAAP financial results to their most comparable GAAP measures. Finally, I would like to remind everyone that this call will be recorded and made available for replay at www.netsoltech.com and via a link available in today's press release. Now I'll turn the call over to Najeeb Gauri, our Founder, Chairman and CEO.

Speaker 1

Najeeb?

Speaker 2

Thank you, Perry, and good morning, everyone. Today, I'm happy to be dialing in from my C Encino office in California. We delivered solid performance in the third quarter of fiscal year twenty twenty five with strong growth in our services revenue and continued momentum in our subscription business. Our results reflect the growing demand for our digital solutions for the global finance and leasing industry under our unified Transcend platform alongside the strength of our global delivery model. As we continue transitioning towards revenue generated from a recurring revenue model, we remain focused on driving innovation, operational efficiency, and long term value for our customers and shareholders.

Speaker 2

This quarter, we successfully completed a major deployment of our of our Transcend Finance platform for a financial institution in Australia, an existing customer of NetSol, further deepening our partnership and expanding the use of our technology for their operations. Following this successful implementation, Kubota, a leading Japanese powerhouse that provides products and technologies in various fields, including tractors and other agriculture machine machinery, is now using our solution for their financial operations in both Australia and New Zealand. In addition, we signed two new multimillion dollar contracts with financial services providers in both country of Oman and Indonesia. We signed an agreement with Sinbad Management SBC in Oman for the implementation of Transcend Finance. The customer is a major Muscat, which is the capital of Oman, Oman based company, which provides big ticket asset financing and leasing covering various asset types such as marine vessels, aircrafts, machinery, and other equipment alongside the vehicles in Oman and other countries.

Speaker 2

The successful implementation of this project will serve as a model for future collaborations in The Middle East, reinforcing our commitment to expanding our footprint and delivering world class technology solutions to to a region that is ripe for growth and innovation. The second multimillion dollar agreement signed during this quarter was with a Chinese leasing company known as Yulong, which is acquired by BYD, a Chinese giant, for the implementation of Transcend Finance in Indonesia. This marks the customer's expansion into the Indonesian market. The company offers a diverse range of leasing solutions across various industries with a strong focus on equipment leasing, asset financing, and commercial leasing. Our powerful technology platform combined with tailored regional customization makes us the ideal partner to support their success in the Indonesian market.

Speaker 2

These wins are a clear signal of the growing confidence our clients place in us to drive the digital transformation agendas. At a time when institutions are under pressure to modernize and differentiate, our ability to consistently deliver mission critical solutions at scale sets us apart and cements our position as a preferred technology partner for financial institutions worldwide. The go live for Kubota in Australia during this during this period plus these two major multimillion dollar signings reinforce our reputation as a trusted strategic technology partner to the global asset finance and leasing industry. These developments serve as a powerful endorsement of the products, innovation, and service excellence we deliver in an increasingly competitive marketplace. At the core of our transition to becoming an AI first organization is our commitment to redefining how technology can drive smarter, faster, and more secure decision making across the financial services ecosystem.

Speaker 2

In q three, we announced the launch of Transcend AI Labs, our dedicated innovation hub focused on developing cutting edge AI solutions tailored primarily for the asset retail, finance, and leasing sectors. Transcend AI Labs brings together our deep domain expertise with advanced machine learning and generative AI capabilities, enabling us to create next generation solution for our clients that unlock real business value, whether through intelligent automation, hyper personalized personalized experiences, or predictive analytics analytics that empower risk decisions and overall operations. As part of our ongoing AI initiatives, we appointed Dario Marelli as our new vice president artificial intelligence in this quarter. Dario is a proven business leader and AI strategist within over fifth with over fifteen years of experience spanning data analytics and AI. His vision and leadership will be instrumental in scaling our AI capabilities and embedding intelligence across every layer of our product portfolio.

Speaker 2

Vidario at the helm and the launch of Transcend AI Labs, we are well positioned to lead our industry into the AI future power future. Further, a quick update, our BMW USA retail platform rollout in three fifty dealership in The US is on track. Looking at our business through a long term lens, I'm pleased with the progress we have achieved this quarter, and I'm optimistic about the momentum carrying into the final quarter of fiscal two thousand twenty five and beyond. I'm confident that our strategic investments, especially in AI, and the ongoing evolution of our revenue mix will drive stronger profitability and deliver lasting value for our shareholders. I now like to turn the call over to our CFO, Roger Ahmad, who will go through the financial for Q3 of fiscal year twenty twenty five.

Speaker 2

Over to you, Roger.

Speaker 3

Thanks, Najeeb. Good morning, everyone, and thank you for joining us to review NetSol's financial results for the third quarter fiscal year twenty twenty five. I'll take you through our key financial metrics and provide some context on our performance drivers. We delivered solid top line growth in the third quarter driven by continued strength in our services business and stable subscription revenue performance. Total net revenues for Q3 fiscal year twenty twenty five increased 13% to $17,500,000 compared to $15,500,000 in the third quarter of fiscal twenty twenty four.

Speaker 3

This increase was primarily fueled by significant growth in services revenue. Services revenue increased 24 to $9,700,000 compared to $7,800,000 in Q3 of last year. The increase was primarily driven by cumulative catch up of approximately 2,300,000.0 related to a contract amendment for an ongoing implementation project. Total subscription, SaaS and cloud and support revenues increased 10% to 7,900,000.0 compared to 7,100,000.0 in the prior year period. Gross profit for the quarter was 8,700,000.0 or 50% of total revenues compared with 7,500,000.0 or 48% in Q3 fiscal year twenty twenty four.

Speaker 3

Operating expenses for the quarter totaled $7,200,000 or 41% of sales compared to $6,200,000 or 40% of sales in Q3 of fiscal year twenty twenty four. This increase aligns with our ongoing investment in growth areas including customer delivery, marketing, R and D and employee development. GAAP net income attributable to NetSol was $1,400,000 or $0.12 per diluted share compared to $328,000 or $03 per diluted share in Q3 of fiscal year twenty twenty four. Included in our GAAP net income in the quarter was a foreign currency exchange gain of 322,000 compared to a foreign currency exchange loss of 964,000 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 US dollar.

Speaker 3

A decrease in the value of the US dollar compared to foreign currency exchange rates generally has effective increasing our revenues, but it also increases our expenses denominated in currencies other than the US dollar. Similarly, as the US 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 third quarter of fiscal twenty twenty five was 2,200,000.0 or $0.19 per diluted share compared with non GAAP EBITDA of $767,000 or $07 per diluted share in the prior year period.

Speaker 3

Non GAAP adjusted EBITDA for the third quarter of fiscal twenty twenty five was $1,800,000 or $0.15 per diluted share compared with a non GAAP adjusted EBITDA of $810,000 or $07 per diluted share in the third 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 March 2024. Turning to our balance sheet, as of 03/31/2025, we held 18,800,000 in cash and cash equivalents compared to 19,100,000.0 at 06/30/2024. Our working capital was 23,700,000.0 as of 03/31/2025 compared to 23,600,000.0 at 06/30/2024. In summary, Q3 of fiscal year twenty twenty five was a strong quarter across the board comprising of double digit revenue growth, increased gross margins and a significantly improved net income.

Speaker 3

These results reinforce the strength of our operating model. As we continue to execute our strategy, we remain committed to sustainable growth, product innovation and delivering long term value to our shareholders. Back to you, Najeeb.

Speaker 2

Thank you, Roger. Much appreciated. Before I hand the call over for questions, let me take this opportunity to remind our shareholders that our annual meeting is scheduled for 06/24/2025. We encourage all shareholders to please vote at this meeting and ask that you vote yes for each of the proposals approved by the board of directors. Finally, as mentioned earlier, I'm very pleased with the progress we achieved in the third quarter of fiscal two thousand twenty five.

Speaker 2

We continue to focus on innovation and are actively investing in our products and services under our Transcend platform. We're also encouraged by the growing number of opportunities we are seeing across the diverse markets we operate in. As always, we remain committed to a long term strategic approach, and we believe we are well positioned for continued growth the final quarter of fiscal twenty twenty five and into the future. With that, I now turn the call over to operator for questions. Operator?

Operator

Thank you. We will now be conducting the question and answer segment. You. Our first question comes from the line of Todd Felty with Stonix Wealth Management. Please proceed with your question.

Speaker 4

Hey, guys. Thank you for taking my questions. Congratulations on an outstanding quarter. It's nice to see the subscription and support revenue grow to $7,900,000 for the quarter. Do you expect that to be at least a baseline that continues to grow moving forward?

Speaker 2

Thank you for your comments, Todd. Yes, I think we do because our SaaS revenue is in a very positive growing side and there's numerous things happening in the retail front. So I believe this trend will continue.

Speaker 4

Okay. And now that we're moving more towards a stable profitability, I hope you anticipate for the next fiscal year possibly giving out a revenue and earnings guidance?

Speaker 2

I think we will do that, absolutely, as we close the year and next couple months. So, but we are pretty optimistic, Todd, because one thing I wanna address here or say it, company initiated a few months back and I was driving this whole exercise in the company to look at all the areas of productivity and efficiency improvement. And at the same time, look at the headcount. So I think we made good progress and I am enjoying the results. And this is to me just a start and we will maintain the same, the way we have managed this company in this last nine months.

Speaker 2

So I think the future is quite bright for the company, both from the revenue and from the bottom line.

Speaker 4

Sure. And a final question, you know, the results today are outstanding and and and it seems like the future looks very promising. Do you plan on kind of letting the investor community know? Are you planning on engaging another IR company or getting analyst coverage?

Speaker 2

Well, I think let us deliver the year end first, and we'll weigh in carefully. One of the advantage we've seen by using our in house is that they have a lot more knowledge, understanding of the business in the technical terms. So for now I'm enjoying the in house service, but we'll see how we plan in the next fiscal year budget if we can bring back an eye from, but we'll decide at the time. Right now I'm happy with what they're doing, but we'll see. We'll definitely weigh in and pay attention to your suggestion.

Speaker 4

Okay. Thank you for taking my questions, and congratulations again.

Speaker 2

Thank you, Todd, again.

Operator

Thank you. This concludes our question and answer segment. If your question was not addressed during the Q and A session, please contact Netsol's Investor Relations team by e mailing them at investorsnetsoltech dot com or by calling them at (818) 222-9195. I would now like to turn the call back over to Mr. Vari for closing comments.

Speaker 2

Thank you, operator, and thank you for joining us today for our fiscal third quarter twenty twenty five earnings call. We appreciate the time you have taken to join us today and look forward to providing further updates on our next earnings call. Until then, we wish you a pleasant day. Thank you all.

Operator

Thank you for joining us today for NetSol's fiscal third quarter two thousand twenty five earnings conference call. You may now disconnect.

Speaker 2

Thank you, everyone.

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NetSol Technologies Q3 2025
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