Release Date: February 13, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• NETSOL Technologies Inc (NASDAQ:NTWK) reported a significant increase in recurring revenues, with a 27% rise compared to the previous year.
• The company has made strategic investments in AI, positioning itself as an AI-first organization, which is expected to drive future growth.
• NETSOL Technologies Inc (NASDAQ:NTWK) secured a multi-million dollar agreement with BMW Group in the US, expanding its presence in the automotive finance sector.
• The company is experiencing strong demand for its Transcend platform, particularly in the US market, with plans to integrate it with new customers like BMW USA.
• NETSOL Technologies Inc (NASDAQ:NTWK) has a strong balance sheet with increased cash and cash equivalents, providing a solid foundation for future growth initiatives.

Negative Points

• The company reported a GAAP net loss of $1.1 million for the second quarter of fiscal 2025, compared to a net income in the previous year.
• Operating expenses increased significantly, reaching 48% of sales, up from 40% in the same period last year.
• There was a notable loss on foreign currency exchange transactions, which impacted the company's financial results.
• License fees saw a dramatic decrease, dropping from $3 million in the prior year period to $73,000 in the second quarter of fiscal 2025.
• The company's gross profit margin decreased to 45% of net revenues, down from 47% in the prior year period.

Q & A Highlights

• Warning! GuruFocus has detected 4 Warning Signs with NTWK.

Q: Can you provide a breakdown of your revenue geography, specifically for North America, Europe, and Asia? A: Roger Almond, CFO: This quarter, approximately 70-75% of our revenue came from the AIPAC region, about 12.5% from Europe, and a higher percentage from the US due to our BMW contract, which slightly reduced the AIPAC percentage.

Q: Where do you expect your future growth to come from? A: Najib Khoury, CEO: We are focusing heavily on North America, especially with new hires in our Austin office. While other markets like China and Europe remain steady, we anticipate significant growth in North America.

Q: Can you provide details about your contract with AutoNation? Is it a flat subscription fee, or does it scale with their revenue growth? A: Najib Khoury, CEO: We've generated significant income since signing the contract about 9-10 months ago. The BMW deal has increased interest in our digital retail market in the US, opening more opportunities. Eric Wagner, CMO, added that the pipeline is strong, with increased RFP activity.

Q: With your investments in AI, do you have the pricing power to raise prices for your customers? A: Najib Khoury, CEO: While price adjustments are sensitive, we are exploring opportunities to increase revenue within existing customer relationships, particularly with premium clients in China.

Q: Is there a long-term goal to acquire all of NetSol Pakistan, or will it remain a separate entity? A: Najib Khoury, CEO: We initiated a buyback in Pakistan to increase our ownership. The goal is to strengthen the parent company's financials, and we aim to maximize ownership through buybacks, potentially increasing our stake to around 77%.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.