NetSol Technologies, Inc. (NTWK) on Q2 2021 Results - Earnings Call Transcript
Operator: Good morning, and welcome to NETSOL Technologies' Fiscal Second Quarter 2021 Earnings Conference Call. On the call today are Najeeb Ghauri, Chairman and Chief Executive Officer, Naeem Ghauri, President of NetSol Technologies Inc. and Otoz's Chief Executive Officer, Roger Almond, Chief Financial Officer and Patti McGlasson, General Counsel. I would now like to turn this call over to Patti McGlasson, who will provide the necessary cautions regarding the forward-looking statements made by management during this call. Thank you, Ms. McGlasson. Please go ahead.
Patti McGlasson: Good morning, everyone and thank you, for joining us. Following the review of the company's business highlights and financial results, we will open the call for questions. I'll now provide the necessary cautions regarding the forward-looking statements made by management during this call.
Najeeb Ghauri: Thank you, Patti. Good morning, everyone. Today I'm calling from my Lahore office, NETSOL office, in Lahore Pakistan. I hope you are listening or staying safe and in good health, as we continue to this ongoing global health crisis. Our team and NETSOL has been closely watching, the latest developments with COVID-19 vaccine rollouts, as well as adhering to the updated best practices from our legislators and healthcare regulatory bodies. We are optimistic, that things are slowly but surely, returning to normal. Similarly, the fiscal second quarter of 2021, yielded, incrementally, improved results for our global business. We witnessed the early stages of return to work from many businesses and even at some of our international campuses, as infection rates and hospitalizations stabilized and vaccine access continues to expand. On the whole, we have continued to lean into our technology strengths and are still operating remotely, for the most part without missing a step. During the period, we expanded our subscription-based footprint through a multimillion-dollar upgrade, as well as several large-scale implementations, driving our recurring revenue, base close to $6 million for the quarter and close to $11 million year-to-date. We are continuing to focus on growing these recurring revenues, as the leading indicator of the health and driver of long-term stability for NETSOL. At the same time, we also recorded, nearly $1.5 million in change requests from current customers in fiscal Q2. And while these revenue streams are less predictable, in our subscription business we view this performance as another encouraging data point, for the improving health of the industries we serve and economy as a whole.
Roger Almond: Thank you, Najeeb. Turning to our fiscal second quarter 2021 financial results for the period ended December 31, our total net revenues for the second quarter were $13.1 million, compared to $15.7 million in the prior year period. The decrease in total net revenues was primarily due to a decrease in total services revenue of $5.6 million, which was offset by an increase in total license fees of $2.4 million and an increase in total subscription and support revenues of $620,000. Total license fees in Q2 were $2.6 million, compared to $177,000 in the prior year period. The increase in license fees was primarily related to a new agreement with an existing Tier 1 finance company in China to upgrade to our NFS Ascent retail and wholesale platforms. As a reminder, subscription and support revenues are now included as a separate revenue line item in place of what was formerly referred to as maintenance revenues. In addition to traditional maintenance revenues from post-contract customer support, this metric also includes subscription revenues from our software-as-a-service or SaaS offerings including the cloud-based version of our flagship NFS Ascent platform.
Naeem Ghauri: Thank you, Roger. I'm really excited to be joining you all today for my first call as President. As Najeeb highlighted a few minutes ago, my new responsibility will be to oversee company operations, both domestically and internationally, including P&L for our subsidiaries as well as developing cohesive strategy to market our 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. In the same way, we saw an opportunity over 20 years ago to provide a leading technology solution for the nascent online auto finance market, I believe we now have a great opportunity to do the same for the new mobility economy. 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. 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. SaaS revenues, together with innovation initiatives, would be our most exciting story in the coming quarters. To be clear, the goal is to drive consistent top line growth, which should lead to increased profitability. As we look to expand our footholds in key regions outside of APAC, namely Europe, and North America, and also increasing the focus on cloud and subscription offerings in all our markets, we expect to accelerate the initial progress we've already seen. Early success in penetrating these geographies bodes well for our future growth initiatives. As we noted in our last call, we have begun reporting subscription and support or cloud revenues in lieu of the previously reported maintenance revenues. We made that change to represent the recurring nature of these revenues more accurately to outline the potential for our business to maintain a stable, growing stream of predictable revenues year-over-year, and because that's where we are focusing our efforts going forward. In fiscal Q2 as well as year-to-date, we have grown this segment at a double-digit rate. On an annualized basis, this equates to well over $22 million in annual recurring revenue for the fiscal year exclusive of the remaining ARR to be added following the completion of Go Live events and our other pending agreements.
Operator: I will now turn the call over to Najeeb Ghauri for his closing remarks.
Najeeb Ghauri: Thank you for joining us today. I especially want to thank our investors for their continued support, our loyal customers, and our very dedicated employees worldwide for their ongoing contributions. We look forward to updating you in our next call. Thank you and goodbye. Operator?
Operator: Thank you for joining us on NETSOL's fiscal second quarter 2021 earnings conference. You may now disconnect your lines, and have a wonderful day.
