Fiscal First Quarter 2021 and Recent Operational Highlights
NETSOL Implemented the NFS Ascent Retail Platform, including the company’s proprietary loan origination system (LOS) and contract management system (CMS) for a tier-one German auto captive finance company in China in the second phase of a previously announced $30 million contract.
Regarding the previously announced 12-country, $110 million contract with a German auto manufacturing giant, NETSOL made continued progress with respect to additional NFS Ascent implementations. The company had “go live” events in Singapore and Thailand in September and October, respectively. The implementation process has also now begun in New Zealand and Australia.
NETSOL implemented its first North American cloud-based NFS Ascent CMS for SCI Lease Corp, a Canadian-based national automotive leasing company.
NETSOL appointed Peter Minshall executive vice president (EVP) of NTA. The EVP role will report directly to the company CEO and is responsible for the entire NTA portion of NETSOL’s business operations.
NETSOL generated $315,000 in additional SaaS subscription and support revenues, which are recurring in nature and anticipated to gradually increase as the company implements NFS legacy products and NFS Ascent.
NETSOL generated approximately $1.3 million by implementing change requests from various customers across multiple regions.
NETSOL’s new mobility startup subsidiary, Otoz, is partnering to launch its digital automotive retail platform for a U.S.-based subsidiary of a German auto manufacturer for one of its key brands.
“We recently began a partnership to launch a fully-digital mobile app for a major German auto captive in the U.S. that will enable a touchless customer journey, all built on the Otoz platform,” Naeem Ghauri, CEO of Otoz, said. “The end product will be rolled out to hundreds of auto dealers across the U.S. and is expected to generate significant SaaS revenues for our business. Separately, we are in the final contract negotiation stages with a number of other major players in the automotive space and look forward to announcing those agreements in the near future.”
Fiscal First Quarter 2021 Financial Results
Total net revenues for the first quarter of fiscal 2021 were $12.6 million compared with $13.6 million in the prior year period. The decrease in total net revenues was primarily due to a decrease in total license fees of $2.5 million, which was offset by an increase in subscription and support revenues of $565,000 and an increase in total service revenues of $970,000.
Total license fees were $3,500 compared with $2.5 million in the prior year period. Total subscription (SaaS and cloud) and support revenues were $5.2 million compared with $4.6 million in the prior year period. Total services revenues were $7.5 million compared with $6.5 million in the prior year period.
Gross profit for the first quarter of fiscal 2021 was $6.4 million (or 50.5% of net revenues) compared with $6.1 million (or 45% of net revenues) in the first quarter of fiscal 2020. The increases in gross profit and gross profit as a percentage of revenue were primarily due to decreases in cost of revenues, which were predominantly driven by a decrease in travel expenses resulting from the COVID-19 pandemic.
Operating expenses for the first quarter of fiscal 2021 decreased 18.2% to $5.3 million (or 42.3% of net revenues) from $6.5 million (or 48.2% of net revenues) for the first quarter of fiscal 2020. The decrease in operating expenses was primarily due to decreases in selling and marketing, professional services, research and development, and general and administrative expenses, which were offset by a minor increase in depreciation and amortization.
“The beginning of the fiscal year was an extension of the same business conditions we’ve witnessed since the pandemic took hold, but we are continuing to operate efficiently, control costs and execute on our long-term strategic growth plan,” Najeeb Ghauri, co-founder, chairman and CEO of NETSOL, said. “Financially, we generated roughly $1.3 million from change requests and reduced expenses by nearly 20% leading to sustained profitability on a trailing 12-month basis. We also grew our recurring revenue base by double digits to $5.2 million. As we layer on maintenance fees through larger, traditional, enterprise contracts and increase our SaaS-based footprint, we expect to build this base over time, which provides for more predictable revenues with a more attractive margin profile.
“During fiscal Q1, we were very active on the implementation front and had multiple successful ‘go live’ events within our APAC region for a pair of major international auto manufacturers. We are also gaining traction with mid-size auto captives in our North American and European markets, with the latter comprising a greater portion of overall revenues compared to last year. Our Otoz Innovation Lab remains a bright spot, making great progress on current partnerships, including work with a renowned German OEM on a digital automotive retail platform for one of its key brands. With several catalysts on the horizon, we are optimistic about our prospects for the new fiscal year.”
“Sales discussions with a number of potential customers remain active, and we are confident that the market is beginning to pick up in all global regions. We have a number of high-value, near-term opportunities in our pipeline and are cautiously optimistic about our growth outlook.”
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