NetSol Technologies Inc (NTWK) 2008 Q3 法說會逐字稿

Greetings, ladies and gentlemen, and welcome to the NetSol Technologies third-quarter fiscal year 2008 financial results conference call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (OPERATOR INSTRUCTIONS). As a reminder, this conference is being recorded. It is now my pleasure to introduce Mr. Christopher Chu with Grayling Global, formerly Global Consulting Group. Thank you, Mr. Chu. You may begin.

Thank you, operator. Hello, everyone, and thank you for joining us on the NetSol Technologies Inc. third-quarter fiscal year 2008 financial results conference call for the period ending March 31, 2008. We have prepared a PowerPoint presentation to accompany this call. The document may be found on the main page of the Investor Relations section of the NetSol website, www.netsoltek.com/investors. In addition, I would like to remind you that we are webcasting today's call. The webcast archive of the call also will be available in the Investor Relations section of the NetSol website.

Before we begin, please move to slide number 2; I would like to read a brief Safe Harbor statement. This conference call may contain forward-looking statements. These statements reflect the current belief of NetSol Technologies management as well as assumptions made by and information available to NetSol. Forward-looking statements are not guarantees of future performance and involve risk and uncertainties. Actual future results and developments could differ materially from those set forth in these statements due to various factors. These factors include, amongst others, changes in the general economic and competitive situation, particularly in NetSol's business and markets, in addition to future results and developments could be affected by the performance of financial markets, fluctuations and exchange rates and changes in national and supernational law, particularly with regard to tax regulations.

The Company assumes no obligation to update forward-looking statements. During today's call Mr. Najeeb Ghauri, Chairman and Chief Executive Officer, will share an overview of the business and financial results for the third quarter and first nine months of fiscal year 2008. Najeeb will then hand the call over to Mrs. Tina Gilger, Chief Financial Officer, to review more specific details of the financial results.

Also joining us on the call today for a question-and-answer session are Mr. Naeem Ghauri, President Europe and global products and Mr. Mitch Van Wye, Chief Operating Officer, NetSol North America. I would now like to pass the call over to Mr. Najeeb Ghauri. Go ahead, Najeeb.

Thank you, Chris. Hello, everyone, and good morning, and thank you for joining us today to review our third quarter and first nine month's financial results of fiscal year 2008. I am pleased to have my team, Tina, Mitch and Naeem with me on the call today. I hope you found the PowerPoint presentation we prepared to supplement this call and will follow along with us. The slide numbers we refer to are found at the bottom of each slide. As the press release issued earlier today and slide number 4 demonstrate, NetSol reported another very solid quarter of topline growth, up 19% over year-over-year to a record $9.1 million driven by double-digit increases in all three revenue lines. That is services, license fees and maintenance fees. The record revenues combined with increased operating leverage across our global delivery platform allowed us to post even stronger gains in terms of operating income, GAAP net income and EBITDA.

This quarter marked our fourth consecutive quarter of GAAP profitability, overall our third-quarter results provide an excellent start to the second half of fiscal 2008, which is historically NetSol's stronger half-year period. I will let Tina speak more about our financials later on. However, I would first highlight that based on the strong third quarter and year-to-date performance, NetSol remains on track to achieve its fiscal 2008 top and bottom line financial forecasts.

Now let's review some of the operational highlights for the quarter. Please turn to slide number 5. Complementing our strong financial progress, we have recently launched our new BestShoring strategic initiative that represents our best practices approach to delivering our customers the best solutions available. BestShoring is the evolution of our global solutions, global solutions business which we are building out in all the regions in which we operate as a methodology to servicing all of our customers. NetSol's BestShoring solution strategy yields an improved ROI or return on investment, while delivering an in-depth, globally sourced domain experience as well as localized support to customers.

We have developed the strategy as a method of expanding our offerings to leading IT decision-makers in today's competitive marketplace, with labor or service centric budgetary responsibilities, the decision-makers are not just inspired but are in fact obliged to engage in make or buy decision processes when contemplating how to support and staff new development testing, services, support and delivery activities. Unlike traditional outsourcing offshore vendors which may be concentrated and operating from a single geographic region, NetSol Technologies draws upon an international workforce and delivery capability to ensure that our BestShoring model delivers the BestSolution to customers.

We feel that NetSol is combining domain expertise, not only with the lowest cost blended rates from our development programming centers and campuses located around the world, but also the guarantee of localized program and project management, all the while minimizing any implementation risk associated with a single service center. Our locations in Bangkok, Beijing, San Francisco, Lahore, London and Sidney assure that our clients are properly being served worldwide. Our BestShoring approach is leading the way into the 21st century, providing value added solutions for global business services.

This approach will provide NetSol customers with the optimal balance of subject matter expertise, indepth domain experience and cost-effective labor all merged into a scalable solution. The advantages that distinguish NetSol from the competition are many, including BestShoring based blended labor rates, proven domain and subject matter expertise, world-class customers, ISO 27001 and CMMI Level 5 certification and dedication to delivering global business service and product based solutions.

Moving on to slide number 6 please, another key development during the quarter has been our renewed focus on investing in our North American operations. As part of our aforementioned efforts, with regards to our BestShoring strategy, let me detail some of the key initiatives in our North American operations aimed at strengthening and expanding our presence in the region, a critical market for NetSol's future growth. Most notable, during the third quarter we made several key North American management appointments, including Greg Brinton as head of sales and Morgan Rees to the role of senior VP of marketing, working under the leadership of Mitch Van Wye, our Chief Operating Officer for the North American region.

We see the additions to the NetSol's core management as well as our investments in infrastructure as critical to supporting our long-term growth throughout the Americas as well as supporting our new globally focused BestShoring customer solutions. Additionally, we are further growing the US sales force to tap into the biggest IT and services market of North America and expanding our reach into various sectors and new verticals. Operationally, our North American division is focused on expanding its go-to-market strategy to encompass the rest of the Americas. As such way are developing our strategy to penetrate Central and South America with our products and services, opening up new areas for future growth.

Moving now to slide number 7, we look to recent customer wins and deployment as well as other key operational highlights. Regarding business wins, NetSol's security contract valued at approximately $2 million with one of the largest leasing companies in the Middle East, highlighting our penetration into one of the faster growth geographic markets as petroleum or oil revenues fuel expansion in a variety of other local economic sectors.

In the Chinese market we continue to expand our recent momentum with the sale of a new LeaseSoft license in China to a major European auto manufacturer. In Pakistan NetSol was awarded a pilot contract for the implementation of a Land Record Management Information System for the Islamabad Capital Territory. This is the second land project management project NetSol has been awarded. In securing a second consecutive region LRMIS project, we believe that we are improving our position for major projects the government is examining.

During the quarter we had a number of blue-chip clients who went live with LeaseSoft solutions. To name a few here, Dongfeng-Nissan Automotive Finance of China who went live with our LeaseSoft product suite, and Venture Finance, a subsidiary of ABN Amro in Europe who went live with LeaseSoft for its broad discounting portfolio. From a product standpoint during the quarter we launched a new LeasePak asset focused module, giving vehicle and commercial equipment finance product managers a robust means for tracking the revenue performance of finance assets.

We also renewed in the US our annual maintenance contract with a major US customer, Volkswagen Credit for year 2008 for LeasePak solutions. And finally, NetSol's Lahore based IT development campus, NetSol Village, achieved ISO 27001 certification from International Organization of Standardization or ISO for short, the world's largest developer and publisher of international standards. This reflects our dedication to aligning our IT services delivery platform with the highest standards for performance.

This new relationship has also put NetSol in a unique position to nurture the development of the IT industry in Pakistan and was a primary driver in our founding of the NetSol Corporate University. As a leading corporate citizen and promoter of the IT industry, we have launched Pakistan's first Corporate University. The University will primarily focus on the development of human capital at NetSol and aims to discover, develop, deploy and retain the talent of NetSol.

I would now like to turn the call over to Tina for a detailed review of our financials for this quarter. Tina, please go ahead.

Thank you, Najeeb. Good morning ladies and gentlemen. Thank you for joining us today on the conference call. As you look at slide number 9, you will note that NetSol topline revenue over the last year (technical difficulty) growth rate of 68% for our portfolio of products and services (technical difficulty) to date revenues of $26.1 million, up 26% over the prior year period. We are currently on track to achieve our forecasted top and bottom line guidance for the full 2008 fiscal year. (technical difficulty) remains 25 (technical difficulty) the stronger half of our fiscal year.

Turning to slide number 10, we take a look at the major components of revenue for the third quarter 2008 as compared to (technical difficulty) NetSol's top line for the quarter (technical difficulty) driven by solid growth in license and service fees, with the services segment posting an exceptionally strong 23% year-over-year growth in services. Please note the balance of growth with all three revenue lines posted double-digit gains year-over-year.

Slide number 11 shows the breakdown of revenue by business. For the fiscal third quarter period as a percentage of total revenue IT consulting and services represented 51%. License fees represented 33%, and maintenance fees represented 16%. On a geographic basis for the [fiscal] third quarter as a percentage of total revenue Asia-Pacific represented 69%, Europe represented 21% and North America represented 10%.

On slide number 12 we see NetSol's historical quarterly acceleration in topline revenues culminate with the record $9.1 million generated in the most recent quarter.

Moving on to slide number 13, we look at NetSol's gross margin performance over time. NetSol achieved gross margins of 56% in the fiscal third quarter, up from 48% in the same period a year ago. We have been able to maintain our gross margins while continuing to improve NetSol's global operations. Our goal is to maintain on a quarterly basis gross margin within the high 50% to 60% range, and we believe that we may ultimately over the long-term be able to reach gross margins of 65% as we grow the businesses and begin to operate at or near full capacity.

Gross margins for this nine months also improved hitting 58% in the period as compared to 50% for the nine months of fiscal 2007.

Slide number 14 shows the breakdown of the operating expenses for the fiscal third quarter as compared to the year ago period. Total operating expense increased a relatively modest 5% year-over-year. As a percentage of total revenues, operating expenses were reduced to 37%, down from 42% in the same period a year ago. A key component of this has been our ability to successfully leverage the cost advantages of our lower cost global delivery centers and development background based in Lahore, Pakistan to the direct benefit of our global organization.

Expenses related to sales and marketing increased 9% year-over-year. In the period we have continued to invest in our sales and marketing teams, especially in the US. This investment is a critical part of NetSol's evolution as a provider of global BestShoring practices, and we believe these investments will support the continued organic expansion of our services revenue stream. Going forward, our goal is to continue to use the operating leverage inherent in our organization to drive increased levels of GAAP profitability.

Moving on to slide 15, and a look at GAAP EPS; our fiscal third quarter marks NetSol's fourth consecutive quarter of GAAP profitability. NetSol's GAAP net income increased to $2.3 million or $0.09 per basic and diluted share versus a GAAP net loss of $229,000 or loss of $0.02 and $0.01 per basic and diluted share, respectively, in the year ago period. For the nine months of fiscal 2008 NetSol's GAAP net income was $5.1 million or $0.21 per basic and diluted share, respectively. This compares to NetSol recording a GAAP net loss of $6.2 million or loss of $0.36 and $0.35 per basic and diluted share, respectively. For the nine months of fiscal year 2007 minority interest income deducted was $1.1 million and $1.8 million respectively, for the third quarter and nine months of fiscal 2008.

Slide number 16 illustrates NetSol's EBITDA performance on a quarterly basis over time. And as you can see, NetSol posted record quarterly EBITDA results. EBITDA is defined as earnings before interest, taxes, depreciation and amortization. The Company uses EBITDA as a measure of the Company's operating trends. Investors are cautioned that EBITDA is not a measure of liquidity or of financial performance under generally accepted accounting principles. The EBITDA numbers presented may not be comparable to similarly titled measures reported by other companies. EBITDA, while providing useful information, should not be considered in isolation or as an alternative to net income or cash flows as determined under GAAP. We believe EBITDA is one of the best metrics to measure the underlying profitability of our business.

EBITDA for the third quarter was $3.2 million or $0.13 per basic and diluted share compared to a negative EBITDA of -$676,000 or $0.04 per basic and diluted share in the third quarter of fiscal year 2007. EBITDA for the nine months of fiscal year 2008 was approximately $8 million or $0.34 per basic and $0.33 per diluted share. Year-to-date our EBITDA margin as a percentage of total revenue increased to 32%. With regards to cash, NetSol ended the quarter with approximately $4.8 million in cash and cash equivalents, reflecting [strong] collection in Q3. However, we have nothing to report of any bad debts and have full comfort with our customers worldwide. For more details you can also refer to our consolidated cash flow table in the earnings press release and in form 10-QSB we will file with the SEC.

Moving to slide number 17, based on the strength of NetSol's nine-month results including 19% topline growth, 56% gross margins and the fourth consecutive quarter of GAAP profitability, we are reiterating our fiscal year 2008 financial guidance for the period into Junes 30, 2008. We continue to forecast organic annual growth rate of 25% to 30%, our quarterly gross margin target remains between the high 50% to 60% range. Our forecast for fiscal year 2008 diluted earnings per share is $0.28 to $0.32. We are also targeting EBITDA of between 27% and 30% of revenues. Based on a historical stronger second half, we are optimistic in our outlook for the remainder of the fiscal year.

Turning to slide number 18, I would now like to turn the call back to Najeeb for some closing remarks.

Thank you, Tina. We are extremely pleased with the progress we continue to make against our financial and operational objectives despite the slowing economy in the US. We do recognize the weakness in the financial sectors, particularly in the US, but we also see an opportunity as these forces can also prove to be a catalyst for our more efficient price driven BestShoring model. Strategically if the launch of our new BestShoring approach enhances the competitiveness of our global IT services offering and initial feedback from our current and prospective customers has been very, very positive. We believe we are well positioned with a much healthier and a robust pipeline for a strong finish to our fiscal year 2008.

With this, I will now like to facilitate any question and answer for the session. Operator, please take our first question.

(OPERATOR INSTRUCTIONS) Matthew Weiss, Maxim Group.

Congratulations on the quarter. Just can you give us an overview of what is going on in Pakistan from a political standpoint? You had in the past talked about some -- no specific deals being launched, but elongated sales cycles there. If you could just give us an idea of the environment.

It will be two full answer one, I will give some overview, and Naeem will come in with a fresh look on the business side. All I think politically things are much more stable today as when we were in the last quarter earnings call, fall of elections and the formation of government has gone through some challenges, but it now it seems to us that things are stabilizing and the new government is really ready to move on with all the challenges and opportunities they have. So we are quite comfortable, as you can see; if you have not the stock market in Karachi was rallying today a recently positive development. Basically I am still quite confident, but Naeem, you want to give a fresh look what you think is going on?

Sure, Matthew. I'm not sure if you saw the news, Pakistan was re-allowed in the commonwealth today, and that is very helpful in terms of aid coming into Pakistan, and some of this aid is directed towards infrastructure projects and so on. And as you familiar, that is one of the projects we've been working on is a land contract is a World Bank finance contract. We have been winning pilots and smaller pieces of this very large program. And really it is a question of when and not if they will award this project. Obviously we cannot say that we will win the project, but all indications are that we are on the shortlist of companies. And the fact that we won the pilots is also obviously very, a positive sign. The pilots -- the idea behind the pilots is that you need to prove the concept and your capabilities that you can actually do this. Because it is such a huge program they want to make sure that the Company has the scale and ability and the skill set to be able to deliver such a large program. So really we are all keen and anticipating something positive happening over the next quarter or so.

Okay, can you give us an idea what the growth rates were in the different geographies? North America versus EMEA versus APAC? And then -- yes, that's fine.

I will let Tina answer that. Tina, you have those numbers in front of you, I'm sure.

I have the overall growth rate, but I would have to get back to you on the growth rate by each geographical region.

Okay.

How do you want it, Matthew?

What's that?

How do you want it?

Give the revenue mix of what the divvied up between the three regions.

Yes, we have the revenue mix by each geographic region. Asia-Pacific was 69%. Europe was 21% and North America was 10% of revenues.

Okay, and then maybe on North America, can you give us a little idea of where you think that can go given some of the changes you made there in the sales organization? And then maybe some detail around some of your plans that you talked about moving down into Central and South America.

Quickly I will bring in Mitch, but you know what? I feel the management and my board, we are strongly committed to investing in the growth of North America and overall Americas, because we really see amazing opportunity that are coming our way. But I will let Mitch stop in and he can really give you a brief overview.

Good morning. Over the last several quarters we have been involved with extensively retooling our North American operation with an eye towards improving our scalability, as well as market expansion. And thus the revenue contribution within the framework of improved margins. In positioning NetSol Technologies North America to take a more leadership role within the Company we've considered North, Central and South America as important elements of our regional and global solutions strategy. Not only do these additional regions represent new business opportunities for us, a large number of existing client -- of our existing client base already have operations in Central and South America.

In addition as part of our business planning process for the Americas we've recognized and are moving quickly to expand our traditional focus beyond the financial market vertical and structure our domain and subject matter expertise and product offerings into a formalized business solution practices set. These areas would include, for example, healthcare, real estate, technology as well as penetrating public sector opportunities. So in summary, it is our objective in the North American region to encapsulate all of the Americas into a BestShoring solution strategy across key solution practices within both the public and private sector.

Thank you, Mitch.

Okay, thank you. And then one quick other one, and then I'll get back in the queue. More on the financial side. Obviously we are rounding out fiscal '08 here, and you guys look to be on track to meet your stated objectives. I am probably assuming you are waiting until next quarter's call to talk about fiscal '09; but can you give us an idea of from a topline perspective if we can think about growth, perhaps accelerating into the next fiscal year? And then from an EPS standpoint you are putting up -- you put up two 30% plus EBITDA margin quarters this year, and you are targeting 27% to 30%. Is it realistic to think that next year could get up towards 35% as we see more leverage in the model come through?

Yes, Matthew. We are absolutely very bullish and optimistic of '09 already, because of the way the business is growing in solution and the new verticals developing in North America and other parts of our business. And we also believe that this projection for year '08 is quite realistically achievable as you've seen the Q3 numbers; Q4 is basically ending about six weeks. But of course this is an audit period. I will report -- I will meet our guidance, and I like to beat your guidance, of course, we will do our best, Matthew. But Naeem, do you want to give any further on this on '09?

Matthew, the most exciting part of the business, at least one I am really focused on is the LeaseSoft business. And there is three ways we can tell where the growth is; one is obviously the backlog of business we already signed. And then the work that we already are doing, is a work in progress, and what is in the pipeline in new prospects. So I think in those three areas really, really busy and the backlog suggests that the next year will be an equally exciting year for us in growth terms. So really we want to achieve these levels of growth and better. The rest of this year or the quarter as Najeeb said, six weeks down the quarter literally a month and a half to go, there is obviously very strong visibility. That is why we are so confident that we can meet or beat the estimates.

Okay, thank you. I will get back in queue.

Mike Vermut, Newland Capital Management.

Nice quarter here. Quick question. The expansion plans in the US and Europe, when you look a year, two years down the road, what should the split of the company look like? What is the goal? Is it going to be a US-centric firm? Because I think the valuation obviously isn't getting a huge discount for the Pakistan piece. But I'm trying to figure out what are you going to look like two, three years from now?

Well, my CEO wants to monopolize and have the biggest contribution in two, three years from the whole company, and obviously we are positioning the global strategy in a way that most of the business is coming from US which is the biggest market and American, of course Europe. And use our BestShoring model to provide the best margins, cost benefit and supporting mechanism to our new customer and growing customer base. So I really believe North America will play a key role in light of the opportunity we have in the US. I am sure Naeem jump in with your thoughts.

Just as quickly on Europe, it really the company already the way we have positioned the Company is no longer a Pakistani company anyway. Today, you have Pakistan produces less than 10% of our revenue. Most of the revenue is coming from Asia-Pacific, and some of the developed economies like Australia, New Zealand, Japan and some of the emerging markets like Thailand, and then China you can see what a big growth engine that is. So really we are very, depending very little on our growth opportunities from Pakistan. So we are quite immune to any political sort of volatility in Pakistan. And as Najeeb said, the focus into the US and Europe is going to make us truly a global BestShoring company where we are selling services from everywhere and also delivering from wherever we think is the best blend of cost and margin. Mitch, do you want to add anymore on the US side?

Just to say that again, we are really -- with our retooling process of the North American operations and we are taking a very bullish position within the company to help drive NetSol's profitability and revenue to the next level. Primarily due to our increased focus in all of the Americas and also in introducing BestShoring practices across many verticals.

I think you also asked the question about the revenue splits. I see within three years you will find the US and the European markets will speak for maybe almost half to two-thirds of the revenues in this kind of growth we are seeing. So that is where the bigger growth opportunities are for us, and so in three years time maybe Pakistan and Asia is doing only one-third and the two-thirds are coming from Europe and the US.

Excellent. Okay. Appreciate it. I will get back in the queue. Thanks.

[Paul Cooney], Maxim Group.

Najeeb, I ask this question just about on every conference call, but just to go through some of the parts valuation here, what is the market cap now of NetSol Pakistan?

Today it stands over $110 million, I believe.

$110 million and the percentage of ownership there is what?

About 61% here.

61% --

No, 61%.

61%, okay.

Yes, that's about right.

Okay, and it accounts for what percentage of your revenue?

If you look at the nine-month basis, it is just about I would say 60%.

About 60% of your revenue?

Yes.

Okay. So right there that is about the US market cap that you have for 60% of your company.

Yes, Paul, that's right.

Okay, and then secondly, you had mentioned earlier the land contract had gotten some pilots on so far. Did I hear correctly that you expect to hear more about that on some of the bigger parts in the next quarter or so?

You know, Paul, this is an excellent question, and I am sure a lot of people like to hear that. One thing on this fiscal '08 revenue projection we have not factored in anything of that nature in terms of big projects. Of course the pilots are (technical difficulty) brings us one step closer to winning the big one because we are the leading contender. So one we have not factored into the projection, secondly the new government is now pretty much on track. It is a broad (inaudible) dealing with and now that you have new cabinets, new ministers who are controlling these exercises. So we are cautiously optimistic. We are still working on these development in two markets, in Islamabad and Punjab and Lahore. And we still, I would say without being biased we are the best company to fulfill this major development.

You know also one thing, Najeeb, also worth mentioning is the Land Record contract is something that obviously is going to bring us a higher profile, but obviously some things we have not shared and is difficult to share are some of the other very large public projects we are working on. Some of them are defense-related. So there are also things we haven't discussed in the past but some of them can be equally big or similar size or maybe slightly smaller as Land Record. So at any given time we are working on four or five very large opportunities in the public sector in Pakistan. So it may be the surprise is that (inaudible) something else, which is equally strong and revenue and profits for the company we may come up with. But at the moment the center of the attention is LRMIS because of its high profile, I guess.

[Ben Kettum, Kettum Capital]

You are discussing the land project in Pakistan, and you use adjectives like huge or very big. Could you give us a quantitative number or range? What kind of numbers are we talking about?

Najeeb, do you want me to?

Yes, go ahead.

Okay. So Land Record is a very, very large program basically to computerize all the land titles into a database. So the exercise is not only involving IT, but also deploying hundreds and thousands of people to actually capture information and enter the data. So this program is worth over $350 million in total. And there is an IT component offered with this technology component which is going to be worth maybe $150 million to $200 million. Now the point is that we are actually trying to win the entire program, of which we will then outsource some of the data entry components to other companies. So as a lead contractor we are trying to win the whole thing. But now it is up to the government how they will allocate maybe pieces of it to different companies depending on what the strengths are. So basically our strength is in the technology part, and the solution part. Whereas we are also going for the entire program into capturing data and some official like mobilizing people, as well, as offering a turnkey solution as opposed to just a technology solution. So basically we are in for the entire thing or the technology part of it.

What kind of time period is something like that allocated? Are we talking about many years, a couple of years, just to get a feel for it.

It would not be less than three years I can tell you. And it can go five years as well. It is a very complex program to capture this kind of data on all title records. So I would say if it is worth $300 million project it would be at least a three-year or it can go up to five years or more. So it gives you an idea of the scale.

Okay, thank you.

Matthew Weiss, Maxim Group.

Just another quick one. On the financials. It might be more for Tina. The translation adjustment there, is that ForEx related? And if so, what have you built into your outlook with regard to ForEx moves? Do you guys hedge? Can you talk a little bit about that?

The translation is the conversion from rupees and British pounds and included in the rupees there is also translation adjustment for some of the contracts in Pakistan are in euros.

Australian dollars.

Yes, Australian dollars. So there is various currencies involved. So it is just that function of translating all those currencies into US dollars. We have not done any hedging for that at the current time.

Do you plan to?

I don't believe we do at the current time because it is just a function of how the dollar changes. But that could change in the future as we grow.

Hedging, Matthew, comes with a cost of its own. And I think in the terms of numbers we are talking of the hedging cost can sometimes also be pretty prohibitive. So I think our view is the rupee has been a bit volatile lately. But it seems to be stabilizing now. And as you know, dollar is on recovery as well. So really it is a very difficult thing to be trying to play the market and hedge -- you don't even know when to hedge, as well. But I think if the numbers are bigger, then we think Tina maybe you need to consider it for future.

Okay, and then on the buyback, is that completed, the repurchase announced back in March, could you update us on that?

Yes, quickly, first of all this was announced about last week I believe of March. This was just about the ending of the Q3 quarter financially. So we did some buying, as we had promised about 14,000 shares, I believe. And then we entered into a quiet period, which we have our board, our company has a quiet period within 45 days of the fourth earnings and no one can (inaudible) sell which is exact we follow very strictly in the Company. So now we are pretty much over the quiet period after today's call and release. The Company will have six months according to SEC program to buy back. So we will see when we need to step in and when it is prudent.

Is it fair to assume that you guys will be aggressive with that given.

We like to balance about our liquidity position and be more smart how and when to step in. But we have given this assurance that we will follow the requirements as given to us by the SEC. We will announce accordingly in the respective quarters or case the results if there are any further developments on that.

Okay. Thanks for the color.

Mike Vermut, Newland Capital Management.

Two quick questions. Who are you competing against on the land management contract? I think obviously you look at it if you win this contract it is obviously a game changer for the Company.

Our competition is local, because only local companies are allowed to compete in this program. This is a world bank condition so we are not competing against IBM, for example, or Cap Gemini, these big companies. NetSol, as you will be aware is the largest IT Company in Pakistan with all of the (inaudible). So our competition are good companies, smaller companies. But we feel that we are stronger. So basically it is not really international competition. It is our local competition.

Excellent. Thank you, guys.

Paul Cooney, Maxim Group.

The previous caller asked my question about who the competition is, so there is no international competition; it is all local?

That's right, it is. It is all local.

And the other question, just to reiterate, and you think you'll know about this contract in the next quarter or so?

We sure like to, because this question is asked every quarter, and it is so difficult to give a timeline. Because you can imagine this kind of opportunity how hard we work at it to make it happen, so really you can rest assured that we want to obviously close it sooner than later. But I would say give us the first quarter of next year to give you more updates.

The one thing I want to make comment here, gentlemen, that if this contract is awarded to us, the big one, then it will be, we will be required to update or upgrade our guidance according. Because we have not again factored this project in this year's financial projections.

And as you stated earlier, it is all local competition, you guys are the biggest in the space. Just give me an example; how big is the next biggest guy?

We have to be careful, but just the other company is basically a company that is very focused in a certain space. They probably have $2 million, $3 million a year revenue. The other thing, the government is very aware of the fact to give it to a company that can handle the size of it, the scale of it is so huge. They want to make sure the company size can manage it. So that is also going in our favor. However, I don't want to rule them out, the competition, because it could even turn out that the government awards some pieces to one company and other pieces to another company. So there is all kinds of possibilities that they give it to two companies for different regions, as well. So we need to be sure, be careful of what we say.

What is in our favor in our experience, Paul, that we are the only CMMI Level 5 company. We just got 27001 certification by ISO. And of course we are the biggest and most experienced infrastructure in Lahore. So these are all very positive I think strengths for our company to be in the leading.

Like Naeem said, it can be split with other vendors; the time will tell. The scope is quite large, and they (inaudible) they can give us all to us or spread it out between two, three other. We don't know that yet.

Terrific. Thank you.

[Pizod Zandi], private investor.

Congratulations, guys. I had a question, a two-part question. First of all, on BestShoring, what is the size of the market because there are some other companies in Pakistan who are doing the same thing and they are awfully big. And have you won any contracts in the BestShoring yet?

Also, you indicated that there are some other contracts as big as the land contract in the world. What timeframe are you looking at those?

Let me answer one piece and my friend Mitch can help me. BestShoring is a rather new strategy, just a few months old in the Company and I am sure Mitch and the team has a lot of research on how to better grow up the Company and get the results out of it. Mitch, do you have any comments on this?

Absolutely. NetSol Technologies BestShoring initiatives represents really one of the cornerstones in our positioning to provide cost-effective and value added solutions to our global clients. As a trademarked initiative, NetSol Technologies BestShoring is really comprised of two primary elements. The first as a global provider of requirement-oriented solutions, domain and subject matter expertise resource assignments are based upon relevant proficiency, not upon that resources global location.

Secondly, deployment of a dedicated project or program manager who is both local to and serves as a single point of contact for the client, thus eliminating the traditional outsourcing offshore challenges associated with things like time zone conflicts, language barriers and cultural differences. We believe that NetSol Technologies BestShoring delivers the BestSolution approach; really delivers solutions to our clients combining the best blend of technical expertise, cost-effective labor rates and reactive and responsive localized program management.

Thank you.

The second part of your question was basically are there bigger opportunities in Pakistan. We believe that we are focusing on two, three key new areas including of course land defense as Naeem said earlier. And while the growth coming from the global markets, which we utilize our global platform to develop these solutions is also growing. So we are really deploying our resources on key projects in Pakistan while not depending too much on the other, smaller areas so that we can use our resources more intelligently where we can generate more results in (inaudible)basis.

Thank you.

Mike Vermut, Newland Capital Management.

Two more question and I'll leave you alone. What does the pipeline look like in the US?

Mitch, do you want to jump in?

The pipeline is starting to look a lot more exciting than it frankly has over the past two quarters since I have been involved. Nothing that we can really talk about that I can really speak to specifically other than to say that we are -- we have both identified and have leveraged existing international clients who possess North American or America's operational positions here. And we are working very, very hard to leverage and extend our already successful track record with these clients around the world, and gain those similar kinds of successes in the North American region.

We are also with the appointment of our new sales marketing team we are very aggressively ramping up and expanding our sales force to really start to penetrate and promote practices that both support our traditional financial services focus, as well as the other practice areas that I mentioned earlier such as healthcare, real estate and other techno sectors.

Excellent. Okay, and then the last just so I can understand it, so your holding in the Pakistan subsidiary, in the Asian subsidiary is worth roughly $70 million?

That is about right.

Okay, so there is zero value being attributed to US and Europe?

Yes, that is about right.

Okay.

That is a good point.

Just trying to clarify that there.

All right. If there is no further questions -- any other questions, operator?

Matthew Weiss, Maxim Group.

I couldn't help myself. Sorry. Just a quick question on the share count. Obviously it depends on my question before related to the buyback, but you had originally said you were going to be exiting the year at about 28 million to 30 million of shares, based on where that level came down to in the third quarter. Do you care to revise that for computation purposes?

We have about 26 million shares outstanding, right Tina, as of Q3?

25.7 million.

25.7 million, yes.

And what do you think that goes --.

In the Q4?

Yes, and if you want to talk about next year.

I think Q4, unless there is new warrants exercised by the current investors, I don't expect to grow it within the next six weeks that much. It all depends on if there are warrants coming in. If there is (inaudible) in the money or the price today, but that may happen. Other than that, we have no immediate plan to issue more shares in this quarter or this fiscal year end.

Okay, thanks.

If there are no further questions at this time, I would like to turn the floor back over to management for closing comments.

Again, thank you all for joining us on the call today.

Again, thank you all for joining us on the call today. NetSol's core business continues to grow at a strong rate, and we have demonstrated our ability to expand our customer reach. I want to thank and appreciate my growing team further provide dedication and their continuous achievement. We look forward to reporting back to you in our fiscal year 2008; another solid year at a conference call sometime in September. Thank you all and have a good day.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time, and we thank you for your participation.