NetSol Technologies (NASDAQ:NTWK) Posts Quarterly Earnings Results

Key Points

• NetSol Technologies reported EPS of $0.01, in line with analyst estimates, while revenue grew 9.3% to $16.4 million. Gross margin increased to 50.5% and operating income turned positive, though management cautioned that one-time factors contributed to the improvement.
• Operating cash flow fell to negative $5.6 million from positive $5.3 million a year earlier, and cash declined to $19.7 million. Management attributed much of the drop to working-capital timing and expects some reversal, depending on customer payments and milestones.
• Customer momentum included BMO’s migration to NetSol’s Transcend Finance platform and new Transcend Retail launches; management cited a strong North American pipeline but warned that lengthy sales cycles make near-term wins uncertain.

NetSol Technologies (NASDAQ:NTWK - Get Free Report) issued its quarterly earnings data on Thursday. The software maker reported $0.01 earnings per share (EPS) for the quarter, hitting analysts' consensus estimates of $0.01, Zacks reports. NetSol Technologies had a return on equity of 6.79% and a net margin of 4.02%.

Here are the key takeaways from NetSol Technologies' conference call:

• NetSol reported 9.3% revenue growth to $16.4 million, with gross margin rising to 50.5% from 39.4% and operating income turning positive. Management cautioned that the margin improvement also reflected about $1 million in capitalized development costs, lower headcount, and salary-revision timing, so one quarter should not be extrapolated.
• Customer and product momentum included BMO’s migration from LeasePak to Transcend Finance, Mercedes-Benz USA’s approval of NetSol as a digital retail provider, and two new U.S. Transcend Retail dealer launches. Management estimated that a typical legacy-to-Transcend migration could represent about $10 million of upside over five years.
• The Americas grew 25.5% year over year, outpacing the company overall, and management described the North American pipeline as strong. It also emphasized that core sales cycles are lengthy and that pipeline interest is not a guarantee of near-term wins.
• Operating cash flow was negative $5.6 million, compared with positive $5.3 million a year earlier, and cash fell to $19.7 million from $27.1 million. Management attributed the decline mainly to working-capital timing and expects a meaningful portion to reverse, but the timing depends on customer milestones and payments.
• Management is reviewing strategic options for Virtual Lease Services, including a possible sale or wind-down; no decision has been approved, and any outcome could involve disposal treatment or exit costs. It also said it is targeting a leaner organization, with a potential headcount reduction of at least 20% over the coming months and years, while stressing that the figure is illustrative and resources may be redirected to growth areas.

NetSol Technologies Trading Down 18.5%

NASDAQ NTWK traded down $1.27 during trading on Thursday, hitting $5.62. The company had a trading volume of 147,514 shares, compared to its average volume of 55,169. The company has a market cap of $67.12 million, a price-to-earnings ratio of 22.46 and a beta of 0.91. The company's fifty day moving average is $5.88 and its 200-day moving average is $4.42. NetSol Technologies has a one year low of $2.80 and a one year high of $8.46.

Wall Street Analysts Forecast Growth

Several analysts have issued reports on NTWK shares. Weiss Ratings upgraded shares of NetSol Technologies from a "hold (c+)" rating to a "buy (b-)" rating in a research note on Wednesday, October 14th. Zacks Research upgraded NetSol Technologies to a "hold" rating in a research report on Thursday, October 22nd. Wall Street Zen raised shares of NetSol Technologies to a "strong-buy" rating in a research note on Saturday, October 31st. Finally, Noble Financial started coverage on shares of NetSol Technologies in a research report on Wednesday, October 21st. They issued an "outperform" rating and a $9.00 target price on the stock. Two analysts have rated the stock with a Buy rating and one has assigned a Hold rating to the company. According to MarketBeat, the stock currently has a consensus rating of "Moderate Buy" and an average target price of $9.00.

NetSol Technologies Company Profile

NetSol Technologies, Inc. is a global provider of enterprise software and information technology services, with a primary focus on the asset finance and leasing industry. The company serves vehicle manufacturers, banks, financial institutions, equipment lessors and other organizations that manage commercial lending, leasing and financing operations. Its software offerings are designed to support the full lifecycle of financing transactions, including origination, credit and contract management, billing, accounting, asset management, collections and portfolio administration.

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