NetSol Technologies, Inc. (NTWK) Reports Strong Q3 FY 2010 Financial Results

NetSol Technologies, Inc., a U.S. corporation providing global business services and enterprise application solutions to private and public sector organizations worldwide, this morning reported its consolidated financial results for the third quarter ended March 31, 2010. The results included an remarkable increase in sales and a return to profitability.

The company highlighted the following results:

•Revenues for the fiscal year 2010 third quarter totaled $8.9 million, an increase of $3.9 million, or 77.8%, over the same period a year earlier.

•Net income per share totaled $0.02 versus a loss ($0.19) for the same period a year ago.

•Net revenues from license fees totaled $3.64 million, an increase of 1,022% versus the same period a year ago.

•100% sequential growth in the core NetSol Financial Suite(TM) license sales.

•Gross margin increased to 61.3% compared to 10.7% in the same period a year ago.

•Operating income increased to $2.58 million as compared to an operating loss of $4.26 million in the same period a year ago.

•EBITDA totaled $1.9 million or $0.05 per diluted share, versus an EBITDA loss of $3.5 million, or a loss of ($0.13) per diluted share, in the year-ago period.

In the press release announcing the positive results, the company also reiterated its previous guidance for fiscal year 2010 projecting revenues in the range of $33.0 million and $35.0 million, representing full-year revenue growth of between 25% and 32% over fiscal year 2009. The Company projects a return to GAAP net income for fiscal year 2010, versus a GAAP net loss of $0.30 per diluted share for fiscal year 2009. License revenues for fiscal year 2010 are projected to increase more than 100% over fiscal year 2009.

In addition to the results for the three month period, the company also reported financial results for the nine-months ended March 31, 2010:

•Revenues for the nine months ended March 31, 2010 totaled $26.1 million up from $19.6 million for the same period year-over-year representing an increase of $6.5 million or 33%.

•Net revenues from license fees totaled $9.52 million, up from $3.50 million for the same period year-over-year, representing an increase of $6.01 million, or 171.6%.

•Gross margin increased to 59.3% compared to 34.1% in the same period a year ago.

•Operating income increased to $5.42 million as compared to an operating loss of $5.95 million in the same period a year ago.

•EBITDA totaled $4.07 million, or $0.12 per diluted share, versus an EBITDA loss of $3.04 million, or a loss of ($0.11) per diluted share, in the same period a year-ago.

Najeeb Ghauri, NetSol Technologies chairman and chief executive officer, commented: “We are very pleased with our performance in the third fiscal quarter, highlighted by a 78% increase in our sales versus the same period a year ago and a return to quarterly profitability for the first time in six quarters. It is our aim to finish the year completely profitable on the fiscal year analysis. Our financial results continue to deliver material improvements in every major metric of financial health, and we are optimistic about future outlook.”

He continued, “Our efforts to invest in our core NetSol Financial Suite (NFS)(TM) throughout the global economic downturn has well positioned the company to leverage the upturn in customer activity that we continue to see, particularly in China and APAC region in general. We enter the end of our fiscal year 2010 with the most positive momentum in the company’s recent history and we see increased interest among our major customers as well as new potential partners in the sector. Additionally, we see excellent opportunities for collaboration and strategic initiatives as we head to the conclusion of the fiscal year 2010.”

Recent Business Highlights include:

•NetSol Technologies North America announced the formal launch of smartOCI(TM), a SAP-Compatible Multiple-Catalog Search Engine. The launch will be on May 17, 2010, at the SAP SAPPHIRE Conference in Orlando, Florida, targeting approximately 1,000 SAP SRM platform customers. smartOCI(TM) will be sold on subscription basis with the software delivered as a Software as a Service (SaaS) model.

•NetSol Technologies and Atheeb Group formally launched Atheeb NetSol Limited, a new entity joint venture in the Kingdom of Saudi Arabia. The Atheeb NetSol limited joint venture is focused on market development opportunities around penetrating the software engineering arena in key business sectors such as telecommunications, defense, public sectors and finance, among others.

•NetSol Technologies signed a new agreement with a Chinese finance company that has a major European bank and a multi-billion dollar Chinese financial services group as partners. The client selected NetSol’s NFS BI Module, a unique end-to-end Business Intelligence offering.

•A FORTUNE 50 client upgraded the NetSol Technologies LeasePak License. The highly scalable LeasePak solution offers North American clients the ability to scale from a core platform via modular components.

•NetSol Technologies Thailand won a major contract for the NetSol Financial Suite(TM).

•NetSol Technologies, Ltd. Pakistan has parlayed its reputation as a quality IT company into participation in three new pre-qualified bids in the public sector.

•NetSol Technologies North America downsized its office space from Emeryville to Alameda in California, saving an estimated $5.0 million over the next five years.

NetSol will host a conference call today at 11:00 a.m. ET (8:00 a.m. PT) to review the quarterly financial and operational performance. Najeeb Ghauri, NetSol Technologies chairman and chief executive officer, will host the call.

Investors and prospective investors are invited to participate in the call by dailing (877) 941-1429, or (480) 629-9666 for international calls, approximately 10 minutes prior to the scheduled start time. Interested parties can also listen via a live Internet webcast, which can be found at the Company’s website at http://www.netsoltech.com.

A replay of the call will be available for two weeks from 2:00 p.m. May 12, 2010, EDT until 11:59 p.m. EDT on May 26, 2010. The number for the replay is (800) 406-7325, or (303) 590-3030 for international calls; the pass code for the replay is 4294953. A recording of the call will also be available via the Company’s website at http://www.netsoltech.com for one year.

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