Opportunities Portend Strong Year for NetSol

 NetSol Technologies Inc. experienced incremental improvement for its global business in the fiscal second quarter, even as its stock performs well above incremental status.Shares of NetSol have increased by 71 percent over the past 52 weeks, closing at $4.22 on April 1. The stock closed at $4.41 on April 7.

Speaking during a conference call two months ago to discuss fiscal second quarter earnings, Chief Executive Officer Najeeb Ghauri said the objectives for the Calabasas software developer for the vehicle and equipment leasing markets for the remainder of the fiscal year are to maintain the conservative cost-cutting structures that have helped it maintain stability since the start of the coronavirus pandemic more than a year ago.

Gahuri said that along with Naeem Ghauri, the new president of NetSol, he is looking to focus more on higher return on investment software-as-a-service opportunities that will strengthen the company’s recurring revenue profile and significantly increase profit margins.“As we gradually refocus our attention to these newer opportunities, we are still actively committed to meeting the rising needs of our customers,” Najeeb Ghauri said during the call.

Recurring revenue during the quarter was close to $6 million. Recurring revenue is calculated on either a monthly or annual basis and comprises predictable cash flow coming into a company.NetSol reported on Feb. 16 a net loss of $242,000 (-2 cents a share) for the quarter ending Dec. 31, compared with net income of $586,000 (5 cents) in the same period a year earlier. Revenue decreased by 17 percent to $13.1 million.The company attributed the revenue drop to a decrease in total service revenues to $4.8 million, which was offset by an increase in total license fees to $2.5 million and an increase in total subscription and support revenues to $5.7 million.There are no analysts following the company.Brothers in chargeDuring the conference call, Naeem Ghauri said he was excited and pleased to be able to join the call as the president of NetSol. He was named to the position in December and in that role will be responsible for the daily operations of the company both domestically and internationally, including the profit and loss for its subsidiaries as well as developing cohesive strategy to market its core business and new innovative solutions.“I appreciate this vote of confidence from the NetSol board and leadership team, and I’m looking forward to the opportunity to increase my involvement in our global operations on all levels,” Naeem Ghauri said.As a co-founder of NetSol, Naeem Ghauri has established partnerships with Tier 1 auto companies and has helped to solidify the company’s position in the Asia Pacific region and beyond.The new president said that he and his older brother saw an opportunity in starting NetSol more than 20 years ago to provide a technology product to the growing online auto finance market.

 Now he believes they have an opportunity to do the same for the mobility economy.

He also serves as chief executive of Otoz, a startup owned by NetSol that provides software to mobility companies, ranging from carsharing and subscription products to artificial intelligence-enabled chatbots, allowing businesses to engage consumers.“In addition to the innovative work we are continuing to do at Otoz, we continue to maintain some of the strongest industry relationships with international blue-chip organizations using our core business, Naeem Ghauri said during the conference call.

“Leveraging both of these competencies will be my main focus as we build NetSol for its next phase of growth. One of my immediate targets is to continue to grow our subscription revenues, which are already emerging as our biggest growth segment,” he added.

Roger Almond, the chief financial officer, said during the call that total subscription and support revenue increased by 12 percent to $5.7 million for the second quarter from the $5.1 million in the same period of the prior year.

“The increase in subscription and support revenues was due to the start of new agreements from customers who went live with our product this quarter, as well as ongoing recurring revenue derived from prior sales of our subscription-based offerings,” Almond said.Services revenue for the quarter was $4.8 million, compared to $10 million in the prior year period. Services revenue is derived from services provided to both current and new customers as part of the software implementation process, he added.

“The decrease in total services revenue for the year was primarily due to implementation revenue associated with customers who have gone live with our products,” Almond said.