Shares of NetSol Technologies, Inc. NTWK have declined 6.3% since the company reported its earnings for the first quarter of fiscal 2025. This compares to the S&P 500 index’s 2% decline over the same time frame. Over the past month, the stock has lost 13.5% versus the S&P 500’s 0.5% decline.
Q1 Revenue & Earnings Performance
NetSol reported a 3% increase in total net revenues for the first quarter of fiscal 2025 to $14.6 million from $14.2 million in the prior-year period. This was primarily driven by a 26% increase in subscription and support revenues to $8.2 million from $6.5 million in the prior-year quarter. Services revenues were stable at $6.4 million, while license fees saw a sharp decline to $1,229 in the reported quarter from $1.3 million in the prior-year quarter.
The company posted diluted earnings per share of 0.6 cents for the first quarter of fiscal 2025, up from 0.3 cents in the prior-year quarter.
NetSol Technologies Inc. Price, Consensus and EPS Surprise
NetSol Technologies Inc. price-consensus-eps-surprise-chart | NetSol Technologies Inc. Quote
Segmental Performance
NetSol operates through three geographic segments — North America, Europe and Asia-Pacific.
For the quarter ended Sept. 30, 2024, the North America segment showed robust growth, with revenues of $2.87 million, rising significantly from $1.41 million in the prior year. This segment accounted for 19.7% of the company’s total revenues.
For the Europe segment, revenues declined to $2.50 million from $2.56 million in the prior-year quarter. This segment represented 17.1% of total revenues.
The Asia-Pacific segment was the largest contributor, generating $9.23 million in revenues. However, this declined from $10.27 million in the prior year, reflecting some challenges in this region. The Asia-Pacific segment accounted for 63.3% of the company’s total revenues.
While the North America segment displayed strong performance, Europe and Asia-Pacific faced moderate revenue declines. Asia-Pacific continues to be the dominant driver of NetSol's overall revenue mix.
Other Key Business Metrics
Gross profit increased to $6.6 million in the first quarter of fiscal 2025 from $6.2 million in the year-ago quarter, with margins improving to 45% from 43% a year ago. Operating expenses rose to $7.3 million from $5.8 million, attributed to higher selling, general and administrative expenses. As a result, NetSol reported a loss from operations of $760,000 against the income from operations of $350,000 in the prior year.
Cash & Debt
Cash and cash equivalents grew to $24.5 million as of Sept. 30, 2024, from $19.1 million at the end of the previous quarter.
Total current liabilities decreased to $22.4 million from $23.9 million in the prior quarter, reflecting improved financial management.
Management Commentary & Factors Influencing Performance
Management emphasized transitioning from the reliance on one-time license fees to predictable, recurring revenue streams through subscription and support services. CEO Najeeb Ghauri highlighted the expansion of the company’s AI-driven product offerings and geographical reach, alongside key contract wins, such as a $30-million agreement with a major automaker in China and a $16-million deal with a U.S. automaker.
Guidance
NetSol reiterated its goal of achieving double-digit revenue growth for fiscal 2025. This optimism is supported by the robust increase in subscription revenues, and investments in AI and cloud-based services. The company also underscored a strengthened cash position of $24.5 million as of Sept. 30, 2024, compared with $19.1 million at the end of the prior fiscal year.
Other Developments
The company reached a few business milestones in the quarter under review, including rebranding its product platform under the Transcend umbrella, and incorporating advanced AI and machine learning capabilities. Additionally, the company renewed a five-year support contract in China, projected to generate $30 million in revenues. A new agreement with a U.K.-based finance company and professional services contracts in China collectively contribute to NetSol’s ongoing diversification of its revenue base.
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NetSol Technologies Inc. (NTWK) : Free Stock Analysis Report
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