We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
NetSol Incurs Loss in Q2 Despite Reporting Y/Y Revenue Growth
Read MoreHide Full Article
Shares of NetSol Technologies, Inc. (NTWK - Free Report) have declined 9.3% since the company reported earnings for the second quarter of fiscal 2025. This compares against the S&P 500 index’s 1.1% rise over the same time frame. Over the past month, the stock has lost 7.2% compared with the S&P 500’s 1.9% growth.
Revenue & Earnings Performance
For the second quarter of fiscal 2025, NetSol reported total net revenues of $15.5 million, a 2% year-over-year increase from $15.2 million. Growth was primarily driven by a 27% increase in subscription and support revenues, which reached $8.6 million. However, license fees dropped sharply to $73,000 from $3 million in the prior-year quarter. Service revenues saw a robust 26% increase to $6.8 million from $5.4 million in the same period last year.
Despite revenue growth, profitability metrics declined. The company reported a GAAP net loss of $1.1 million, or 10 cents per diluted share, against a net income of $408,000, or 4 cents per diluted share, in the prior-year period. This decline was partially influenced by a $698,000 loss on foreign currency exchange transactions. The gross margin declined slightly to 45% from 47% a year ago, while operating expenses rose to 48% of sales from 40%, reflecting increased investment in sales, marketing and AI initiatives.
NetSol Technologies Inc. Price, Consensus and EPS Surprise
A key highlight of the quarter was the continued expansion of NetSol’s recurring revenue base. Subscription and support revenues accounted for 56% of total sales compared with 45% in the previous year. Notably, the quarter included a one-time revenue catch-up of $1 million; excluding this, subscription and support revenue growth would have been 12%.
NetSol is also ramping up investments in AI-driven solutions. The company launched "Transcend AI Labs" to integrate artificial intelligence across its products and services. AI-powered enhancements, such as Intelligent Document Processing and an interactive AI assistant, aim to improve efficiency, automate compliance and enhance customer interactions.
Market Expansion & Key Customer Agreements
NetSol is seeing increased traction with its Transcend Retail platform. The platform, already in use by MINI Anywhere USA, is now being integrated with BMW USA, expanding its reach beyond the MINI dealership network.
Internationally, NetSol secured a multi-million-dollar expansion agreement with a long-standing customer in China and expanded an existing deal with a leading Japanese equipment finance company. The company also highlighted the growing demand for its products in the United States, Europe and the Asia-Pacific.
Balance Sheet & Cash Position
The company ended the quarter with $21.3 million in cash and cash equivalents, up from $19.1 million as of June 30, 2024. Working capital stood at $23 million, slightly lower than $23.6 million six months earlier. Shareholders’ equity totaled $33.9 million, or $2.91 per share.
Other Developments
NetSol’s subsidiary, NetSol Pakistan, approved a buyback of 10 million shares, aiming to increase the parent company’s ownership in the subsidiary by approximately 10%. As of the earnings call, 2.4 million shares had already been repurchased for $1.3 million.
Outlook
Management remains optimistic about long-term growth, emphasizing its focus on recurring revenue expansion and AI-driven product enhancements. However, near-term profitability remains under pressure due to increased investments and fluctuations in license revenues. The company believes these strategic initiatives will lead to greater revenue predictability and sustainable profitability in the future.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
NetSol Incurs Loss in Q2 Despite Reporting Y/Y Revenue Growth
Shares of NetSol Technologies, Inc. (NTWK - Free Report) have declined 9.3% since the company reported earnings for the second quarter of fiscal 2025. This compares against the S&P 500 index’s 1.1% rise over the same time frame. Over the past month, the stock has lost 7.2% compared with the S&P 500’s 1.9% growth.
Revenue & Earnings Performance
For the second quarter of fiscal 2025, NetSol reported total net revenues of $15.5 million, a 2% year-over-year increase from $15.2 million. Growth was primarily driven by a 27% increase in subscription and support revenues, which reached $8.6 million. However, license fees dropped sharply to $73,000 from $3 million in the prior-year quarter. Service revenues saw a robust 26% increase to $6.8 million from $5.4 million in the same period last year.
Despite revenue growth, profitability metrics declined. The company reported a GAAP net loss of $1.1 million, or 10 cents per diluted share, against a net income of $408,000, or 4 cents per diluted share, in the prior-year period. This decline was partially influenced by a $698,000 loss on foreign currency exchange transactions. The gross margin declined slightly to 45% from 47% a year ago, while operating expenses rose to 48% of sales from 40%, reflecting increased investment in sales, marketing and AI initiatives.
NetSol Technologies Inc. Price, Consensus and EPS Surprise
NetSol Technologies Inc. price-consensus-eps-surprise-chart | NetSol Technologies Inc. Quote
Recurring Revenue Growth & Strategic Investments
A key highlight of the quarter was the continued expansion of NetSol’s recurring revenue base. Subscription and support revenues accounted for 56% of total sales compared with 45% in the previous year. Notably, the quarter included a one-time revenue catch-up of $1 million; excluding this, subscription and support revenue growth would have been 12%.
NetSol is also ramping up investments in AI-driven solutions. The company launched "Transcend AI Labs" to integrate artificial intelligence across its products and services. AI-powered enhancements, such as Intelligent Document Processing and an interactive AI assistant, aim to improve efficiency, automate compliance and enhance customer interactions.
Market Expansion & Key Customer Agreements
NetSol is seeing increased traction with its Transcend Retail platform. The platform, already in use by MINI Anywhere USA, is now being integrated with BMW USA, expanding its reach beyond the MINI dealership network.
Internationally, NetSol secured a multi-million-dollar expansion agreement with a long-standing customer in China and expanded an existing deal with a leading Japanese equipment finance company. The company also highlighted the growing demand for its products in the United States, Europe and the Asia-Pacific.
Balance Sheet & Cash Position
The company ended the quarter with $21.3 million in cash and cash equivalents, up from $19.1 million as of June 30, 2024. Working capital stood at $23 million, slightly lower than $23.6 million six months earlier. Shareholders’ equity totaled $33.9 million, or $2.91 per share.
Other Developments
NetSol’s subsidiary, NetSol Pakistan, approved a buyback of 10 million shares, aiming to increase the parent company’s ownership in the subsidiary by approximately 10%. As of the earnings call, 2.4 million shares had already been repurchased for $1.3 million.
Outlook
Management remains optimistic about long-term growth, emphasizing its focus on recurring revenue expansion and AI-driven product enhancements. However, near-term profitability remains under pressure due to increased investments and fluctuations in license revenues. The company believes these strategic initiatives will lead to greater revenue predictability and sustainable profitability in the future.