NetSol Technologies Inc (NTWK) 2011 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the NetSol Technologies report 2011 fourth-quarter and fiscal-year financial conference call.

During today's presentation all participants will be in a listen only mode. Following the presentation the conference will be open for questions. (Operator Instructions). Today's conference is being recorded, September 16, 2011.

I would now like to turn the conference over to Patti McGlasson. Please go ahead.

Good morning. This is Patti McGlasson. I am General Counsel and Chief Compliance Officer for NetSol Technologies. Thank you for joining us today to discuss NetSol Technologies' fiscal 2011 fourth-quarter and year-end results.

On the call today are Najeeb Ghauri, Chairman and Chief Executive Officer; Boo-Ali Siddiqui, Chief Financial Officer; Naeem Ghauri, President of the Americas and Europe; and Shaz Khan, Senior Vice President. Following a review of the Company's business highlights and financial results we will open the call to questions.

I would like to remind you that today's call is being webcast at www.netsoltech.com. A playback will be available for one week and may be accessed on the Internet at NetSol's website.

I would like to make the cautionary statement and remind everyone that all of the information discussed on the call today is covered under the Safe Harbor provisions of the Litigation Reform Act.

The Company's discussion today may include forward-looking information reflecting management's current forecast of certain aspects of the Company's future, and their actual results could differ materially from those stated or implied.

With that said, let me now turn the call over to Najeeb Ghauri.

Thank you. Thank you, Betty, and thank you everyone for joining us today. Our fiscal 2011 year certainly posed its share of challenges, particularly in the fourth quarter. But when I look at the year as a whole there are several accomplishments that continue to make NetSol even stronger moving forward.

Among those accomplishments, our sales gained new momentum as customers signed agreements for new features in our core LeasePak product. We also had NetSol Europe sign a LeaseSoft license upgrade with one of the UK's leading providers of leasing solutions to the health care industry.

We were awarded a software and IT service contract with a major US automotive manufacturer's captive finance arm in China. And we announced the North American launch of LeasePak-SaaS, a subscription-based lease and loan accounting and portfolio management system using the Software-as-a-Service deployment model.

We had several other accomplishments in fiscal 2011 and a few that have already come to fruition in fiscal 2012, which we will discuss later on the call. But end of the day it comes down to our performance. And while we were profitable for the year, we experienced an unexpected revenue shortfall in the fourth quarter.

As we previously announced, the single main reason for the revenue shortfall was an unprecedented response by a few of our major global clients and partners to the May 2 event in Pakistani. Last month we announced that we signed a contract that had been deferred. In similar fashion I am pleased to report that customers are regaining confidence in our ability to continue to provide superior service despite geopolitical pressures in the region.

With that I would now like to turn the call over to NetSol's CFO Boo-Ali, to review the Company's financial highlights for the fiscal year and fourth quarter. Boo-Ali, please.

Thank you, Najeeb. Revenues of fiscal 2011 totaled $36.5 million, compared with $36.8 million for the fiscal year 2010. Net revenues from license fee for our core NetSol Financial Suite product totaled $11.3 million compared with $14.2 million.

Our net income attributable to common shareholders totaled $5.7 million or $0.12 per diluted share, up from net income of $1.4 million or $0.04 per diluted share for the fiscal 2010.

Net income improved mainly due to reduction in (inaudible) expense from $1.8 million to $450,000; reversal of a lease abandonment charge of $860,000; and a gain of $1.1 million on foreign currency exchange transactions.

Operating income increased to $10.2 million from $9.7 million in the previous fiscal year. Earnings before interest, income tax, depreciation and amortization totaled $10.8 million or $0.22 per diluted share versus EBITDA of $6.6 million or $0.17 per diluted share in fiscal 2010.

Now I would like to focus on our fourth-quarter results. For the three-month period ended June 30, 2011, total revenues decreased to $6.9 million from $10.7 million for the same period in 2010. Net revenues from license fee totaled $1.03 million, down from $4.6 million for the same period a year ago.

This decrease in license revenue is merely due to delay in signing of new deals with some prospective customers. The good thing is that none of the deals have been lost by us, rather the customers took more time to make decisions due to some geopolitical issues.

We had a net loss of $1.1 million or $0.02 per share compared with a net income of $1.5 million or $0.04 per diluted share in the fourth quarter of fiscal 2010.

[We had] a quarter net operating loss of $564,000 compared with an operating income of $4.4 million in the fourth quarter of fiscal 2010. EBITDA for three months' period totaled approximately $400,000 or $0.01 per diluted share compared with an EBITDA of $2.8 million or $0.07 per share in the same period a year ago.

Looking ahead at fiscal year 2012, we are poised to see more growth in our NetSol Financial Suite and smartOCI businesses. We are also focusing on improving both our gross and net margins through a reduction in operating costs.

I would now like to turn the call back over to Najeeb to provide more detail on regional business highlights as well as discuss new area of growth for the Company. Najeeb, please.

Thank you, Boo-Ali. We are embarking upon an exciting time in NetSol as we further establish our presence as a global IT company. We continue to experience growth in Europe, the Asia-Pacific region, including India and China. NetSol Technologies has earned a reputation among our worldwide customers as a company that provides high-quality products at a cost effective price.

We are able to leverage a highly skilled workforce that is committed to going head-to-head with the competition and delivering superior results. This has helped us distinguish ourself in regions where we believe there is a lot of low hanging fruit.

I would like to also add that NetSol has a distinguished track record having maintained a 100% delivery record and never losing a single NFS customer in our history as a company. We believe this reflects our cutting-edge technology, best IT talent in our industry, our global outreach, and a growing base of blue-chip client partners' references worldwide.

As part of our vision to market NFS and IT services in growing and emerging regions, we recently have focused in Brazil. We announced the establishment of a NetSol office in Sao Paulo. Now that we have formalized our partnership with Brasilinvest Group, a preeminent business development company in Brazil, we are aggressively targeting new business opportunities throughout the region.

As one of the fastest-growing economies in the world, Brazil represents an important market of NetSol's NFS solution for asset and auto finance and leasing businesses.

China and India also represent lucrative marketplaces, and we continue to sign agreements and mine for new business in these regions. In fact, we have been able to win contracts, particularly in India, with a major European captive auto finance company as a result of recently expanding our Bangkok office into a complete service development center with a full range of project management, business analysis, software development and technical support capabilities. Our key clients have been visiting our facility in Bangkok in recent weeks.

Unlocking the potential of these regions is not something that will happen overnight, but now that we have ramped up our presence we are well-positioned to seize opportunities. Which brings me to our next topic of discussion, namely what are we doing in North America.

In recent months we have signed several agreements for our smartOCI product with Fortune 500 companies and that also are leaders in their respective sectors. These agreements are a testament to the strength and sales potential of smartOCI, which is designed to facilitate the B2B procurement process by providing companies with a powerful e-commerce search engine that improves purchasing efficiencies.

As a result of the strong reception we have formed an e-commerce division called Vroozi, Vroozi, Inc., to provide a dedicated sales and delivery channel for smartOCI. Naeem Ghauri, NetSol's President of the Americas and Europe region now will serve as CEO of Vroozi, and Mr. Shaz Khan, Senior Vice President, and also will serve as Chief Operating Officer.

With that I would now like to turn the call over to Shaz Khan to provide some more detail about Vroozi and our target audience. Shaz, please.

Thank you, Najeeb. This is a very exciting development for all of us, and I feel extremely fortunate to have the support and strength of NetSol's management team behind this new division. For the last several months we have worked hard tirelessly to introduce smartOCI to several companies, and our hard work is beginning to pay off.

As a founder of technology startups, I understand what it takes to develop and deliver software products to the market. Now that we have seen some traction among Fortune 500 companies with our smartOCI marketplace solution, it is time to move full speed ahead to gain more visibility.

I would like to note a few details about Vroozi. Vroozi will provide more market visibility by helping NetSol become an industry leader in e-commerce technologies centered around searching and optimizing information and data flow between corporate buyers and suppliers.

Our target market includes companies large and small, cross industry, currently using Tier 1 ERP systems such as SAP, and looking to enhance and optimize their purchasing operations, supplier channel and relationships and value proposition to their employee base when ordering goods and services from their global suppliers.

Vroozi products will be deployed exclusively on demand in the cloud. Now our revenue streams will be derived from three primary sources. Number one, implementation fees, which will be based on time and material. Number two, monthly subscription fees to the marketplace, which will provide a recurring revenue stream, and lastly, professional services.

The division will be based in Los Angeles. And we plan to hire 8 to 10 additional employees in sales, marketing, project management and software development. If you would like more information about smartOCI, I encourage all participants to visit www.smartOCI.com.

I will now turn the call back over to Najeeb.

Thank you, Shaz. It is products like smartOCI that help us differentiate ourselves as an innovative and well-diversified global IT company. While our products are by no means immune to challenging economic conditions and certain issues we may encounter as a company with an international presence, we remain committed to providing our customers with the very best solutions in the world.

Before opening the call up to questions, I would like to further articulate why NetSol Technologies is well-positioned in the marketplace. Number one, we remain an industry leader in leasing and asset finance software with an international team that is more than 800 employees strong. We continue to introduce innovative and on-demand products, most recently with smartOCI and the signing of agreements with Fortune 500 companies.

Number two, we are gaining traction with our core products in burgeoning markets such as Brazil, China and India as we ramp up development centers and form strategic partnerships with key regional players.

Number three, in fiscal 2012 we intend to invest in Brazil, Thailand, China, Saudi Arabia, and beef up our US presence by hiring several new sales personnel. Additionally, we have a very impressive business plan to market and grow our Vroozi division by aggressively growing smartOCI.

Number four, to address the disclosure reported in August 2011, we are searching for a qualified CPA, CFO to be based at our company headquarters in California. We are on the lookout for talent that is willing to travel to our subsidiaries, particularly in Pakistan, as we own more than 50% of NetSol NetSol PK Limited, but have the majority of earnings, close to 52%, concentration from the APAC region. As we previously discussed, this material disclosure had no adverse effect to our reported financials.

Number five, members of our management team are significant shareholders in the Company and regularly purchase common stock at open market. And, finally, we are 100% committed to growing the Company and enhancing the valuation, and we expect to remain profitable in fiscal 2012.

As a founder of NetSol Technologies, I take great pride in the work we do. I would like to thank each and every NetSol employee for their dedication and hard work. We would not be in a leadership position without their commitment, so I thank them for their passion and drive.

I also want to thank NetSol's management team for its diligence and support. The team's determination and efforts are vital components to the Company as well as our partner's needs.

And finally, I would like to thank our customers and, you, our shareholders for your continued loyalty. We are in business because of your partnership, and we greatly appreciate your commitment to NetSol.

With that I would now like to open the call for questions. Your questions, the operator, please.

Ladies and gentlemen, we will now begin the question-and-answer session. (Operator Instructions). I show no questions at this time. I would like to turn the conference back to management for any closing remarks.

Thank you, operator, and thank you everyone for listening to our call. We will see you back in the quarter one 2012 earnings call. Thank you and have a good day.

Ladies and gentlemen, this concludes the NetSol Technologies report 2011 fourth-quarter and fiscal-year financial conference call. Thank you for your participation. You may now disconnect.