NETSOL Technologies Reports Fiscal Third Quarter 2018 Financial Results

NETSOL Technologies Inc (NASDAQ:NTWK), a global business services and enterprise application provider reported results for the fiscal third quarter ended March 31, 2018.

The company reported quarterly cost savings of $1.8 million mostly tied to cost rationalization initiatives, bringing total savings to $6.2 million and with an anticipated reduction of at least $7 million through fiscal 2018.

As quoted in the press release:

Operational Highlights:

• Signed a contract with a top tier multi-finance company in Indonesia to implement NFS Ascent’s suite of digital apps valued at approximately $3.0 million.
• Generated close to $2.0 million through successful implementation of change requests from various customers with expected year-over-year growth of up to 15% in this area thanks to increasing customer demand for greater complexity and customization.
• Sold additional legacy licenses valued at $1.0 million to a current Chinese customer due to the increase in its business.
• Received “Auto Finance Software System Leading Enterprise Award,” which acknowledges the top software solutions company within the auto finance sector in China.

Fiscal Third Quarter 2018 Financial Results
Total net revenues for the third quarter of fiscal 2018 were $17.0 million, compared with $17.9 million in the prior year period. The decrease in total net revenues was primarily due to lower license fees of $3.1 million, which was offset by an increase in services revenue of $2.0 million.

• Total license fees were $2.6 million, compared with $5.7 million in the prior year period.
• Total maintenance fees were $3.8 million, compared with $3.6 million in the prior year period.
• Total services revenues were $10.6 million, compared with $8.6 million in the prior year period.

Gross profit for the third quarter of fiscal 2018 was $9.2 million (or 53.9% of net revenues), compared to $9.0 million (or 50.1% of net revenues) in the third quarter of fiscal 2017. The increase in gross profit as a percentage of net revenues was primarily due to a $1.1 million decrease in cost of revenues for the quarter. The decrease in cost of revenues was primarily due to a decrease in salaries and consultants, travel and depreciation.

“In the fiscal third quarter, we continued to improve our bottom line results and generated a solid amount of business through new wins as well as increased customization requests from longstanding customers,” said NETSOL Co-Founder, Chairman and Chief Executive Officer Najeeb Ghauri. “While we are working diligently to advance some of the more significant deals within our expanded pipeline, we were still able to produce our second consecutive quarter of profitability thanks greatly to the outperformance of our ongoing cost reduction initiatives, which we are now projecting to result in at least $7 million of savings in fiscal 2018 alone. These initiatives have not only optimized our cost structure, but also created more headroom and capability to scale our business, which we believe can support a significant more amount of revenue without requiring meaningful incremental investment to support it.

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