Patti McGlasson - Senior Vice President, Legal and Corporate Affairs, Compliance Officer, Corporate Secretary and General Counsel Najeeb Ullah Ghauri - Chairman and Chief Executive Officer Roger Almond - Chief Financial Officer Naeem Ullah Ghauri - Director and President, Global Sales

Howard Halpern - Taglich Brothers Jon Evans - JWest Mike Hughes - SGF Capital.

Please stand by, we’re about to go begin. Good day and welcome to the NetSol Earnings Call and Webcast for the Third Quarter 2015. Today’s conference is being recorded. At this time, I would like to turn the call first over to Patti McGlasson, Senior Vice President, Legal and Corporate Affairs, General Counsel and Corporate Secretary. Please go ahead.

Good morning, everyone and thank you for joining us today to discuss NetSol Technologies’ fiscal 2015 third quarter results. On the call today are Najeeb Ghauri, Chairman and Chief Executive Officer; Roger Almond, Chief Financial Officer; and Naeem Ghauri, President, Global Sales who will on for the Q&A session. Following a review of the Company’s business highlights and financial results, we will open up the call for questions. The call is scheduled for one hour. First, some housekeeping before we start, please note that all of the information discussed on today’s call is covered under the Safe Harbor provisions of the Private Securities Litigation Reform Act. The company’s discussion may include forward-looking information reflecting management’s current forecast of certain aspects of the company’s future, and our actual results could differ materially from those stated or implied. These forward-looking statements are qualified by the cautionary statements contained in NetSol’s press releases and SEC filings, including its annual report on Form 10-K and quarterly reports on Form 10-Q. I would also like to point out that NetSol will be discussing certain non-GAAP measures. The release issued earlier today contains a reconciliation of these non-GAAP financial results to their most comparable GAAP measures. In addition, I’d like to remind everyone that today’s call is being webcast at www.netsoltech.com. Following the conclusion of the call, the webcast may be accessed on the NetSol website, where it will be archived for 90 days. With that, I will now turn the call over to Najeeb. Najeeb?

Thank you, Patti, and thank you everyone for joining us today. I am most delighted to be conducting the call from our Netsol’s programming center of excellence campus in Lahore, Pakistan. Here we have most dedicated energetic and highly talented programmers and engineers that support our global clients in over 20 countries. It is due to their hard work that we are now seeing improved results for the third quarter. With service revenue more than doubling over the prior year period advancing to almost $9 million, as we recognize revenue from our large NFS Ascent contract announced in August 2014. This is truly impressive considering the way we began the year but not unexpected as we have consistently stated that we are just at the beginning of our turnaround. With a number of new deals that have yet to contribute to the results as well a strong and healthy new business funnel we have many reasons to be confident. Now let’s begin with North America where we recently held a Users Conference in San Francisco. Attended by more than 50% of the U.S. customers, the conference constituted of auto captives and banks as well as companies that conduct finance and leasing for windmills, earth movers, automobiles and everything in between. Discussion center and upgrades to LeasePak as well as our mobility solutions and NFS Ascent. It was also an opportunity for us to learn of their evolving needs. As an example of addressing evolving needs, we most recently initiated an upgrade project valued at about $2.5 million with our long standing U.S. clients. Their upgrading to an enhanced version of LeasePak which includes elements of Dot Net, the coding language NFS Accent is built on. This helps delivering a pathway to NFS Accent while protecting the client’s investment into LeasePak. Moving onto Europe, as we discussed last quarter we are focussed on capturing market share in the European Union by making important hires and of opening a new office in Germany. The U.K. and Germany the two largest finance and leasing markets in the European Union are growing and we want to participate in that growth. With the talent we hired in both countries our aim is to capitalize on a technology of fresh cycle offering a highly competitive solution in NFS Accent with a dedicated on the ground support and we are already starting to see progress. As we described in the last quarter, we began a program to upgrade a U.K. based client replacing our LeaseSoft solution with our next generation NetSol Accent platform. The importance of this implementation which we anticipate to begin in the first quarter of fiscal 2016 is that it serves as a reference point for our marketing efforts through the European Union. In Germany, we are also making progress with the VPO [ph] program we announced last quarter and continue to expect to add another European market in early fiscal 2016 in addition to the VPO agreement will also be implementing a legacy LeaseSoft solution with them. Now concluding the regional and the discussion with Asia Pacific region focussing on China, with China expected to lift restrictions on foreign invested financial leasing companies and in fact we’ll be granting licenses to these companies to conduct business, our addressable market ware, our first generation NFS Solution if preferred and that has the potential to expand rapidly. We are marketing NFS Accent in China, we continue to see demand for our Legacy NFS Applications, we believe this is a result of our leadership position in the country with a strong track record with many successful implementations and pent up demand for an end-to-end NFS solution. We are excited about our profits in the market and are in a strong position to capitalize on the opportunity. This means that we could see a pick-up in licensed revenue for our first generation solution which can be deployed relatively, rapidly and therefore recognize more quickly. Meanwhile in Thailand and Indonesia, our teams are progressing with Accent implementations and continuing to actively market our solutions. We are busy in each of these countries as well as others throughout the world. We continue see demand for our first generation and next generation solution and some benefit relative to improving market trends that favour greater utilization and adoption while try to be conservative. But before I turn the call over to Roger Almond our CFO to review our financial performance I will briefly discuss the recent development with China investing into Pakistan. As you might recall from a recent press release reflecting a major breakthrough development between China and Pakistan, this unprecedented agreements and confidence by second largest economic power they invest nearly $50 billion in key sectors such as power and energy infrastructure, rail roads and highways designed to create a powerful economic corridor with two countries. This not only reflects improving business in investment, environment, but also security conditions further it will create host of new opportunity for a growing IT industry in Pakistan. As we believe this major development would benefit our client with improved image and perception. Now Roger, please.

Thank you, Najeeb. During the quarter I visited what the board of directors and other members of the management team at our Bangkok office to review our strategy and be with our local team on the ground. Everyone is excited and optimistic about the opportunities before us. As management, we are focused on growth but also understand that we have to effectively manage our growth. This means having a talented pool of employees who are properly trained and who we can readily deploy with increased utilization. We also have to have the proper infrastructure in place to be able to provide a quality service that our customers demand. Since 2012 we have nearly doubled our workforce, adding employees across all disciplines and regions serving NFS, NFS Accent and NetSol Innovation along with a few other areas. This hiring was done in anticipation of the next stage of our growth and development. We also invested in improving the work environment. We constructed a new building and enacted a program to decrease turnover especially as we invest in the training of our employees in order to provide customers with quality service. We also increased salaries to maintain some of our key talent. While we currently have hire ongoing expenses, the value and complexity of our deals are growing and our new business pipeline is very promising with many in the latter stages of negotiations. With that as a backdrop let me look at the results of our third fiscal quarter ended March 31, 2015. Total net revenues increased at $13.1 million led by a more than doubling of services revenue which grew to a total of $8.8 million as we recognize work from our large NFS Accent contract and revenue from our joint venture partner NetSol Innovation, which we classify as services revenue related party. To date we have recognized approximately $3.2 million from the NFS Accent contract with approximately $2.2 million being recognized in this quarter. Licensed fees were $1.2 million down from $2.2 million which is related to the mix of sales between NFS and NFS Accent. Maintenance fees were $3.0 million compared to $2.4 million last year. As I stated last quarter, on an annual basis maintenance revenue is trending at about $12 million. Cost of sales for the current quarter were $8.4 million up from $6.9 million for the same period last year. The increase was related to higher depreciation and amortization expense of nearly $440,000 as we have begun amortizing NFS Accent development cost. Remaining increase relates to the hiring of new employees to achieve our growth objectives and the timing of salary increases as part of the initiative I described earlier. Expenses are expected to remain at the current level as new hiring has slowed with the addition of only seven people in the quarter. However, we do maintain some flexibility depending on our need in Europe as our efforts have progressed. Gross profit for the quarter rose to $4.7 million from $2.4 million last year. Operating expenses were $6.3 million for the fiscal 2015 third quarter up from $4.1 million a year ago. Sequentially from the second quarter of 2015 operating expenses increased about $300,000 related in sales and marketing efforts to achieve our growth objectives. Removing depreciation and amortization of $2.4 million as well as other items described in our press release issued today, EBITDA and non-GAAP measure was $883,000 for the third quarter of 2015 or $0.09 per adjusted diluted share. This compares to EBITDA of approximately $658,000 or $0.07 per adjusted diluted share. Cash and cash equivalents at quarter end were $10.9 million of which approximately $7.3 million were held by the company sponsored city areas. Accounts receivables were $7.6 million compared to $5.4 million last year. The quality of our receivables continues to remain strong. We also purchased 1.58 million shares of NetSol PK of common stock in the open market for $577,000, resulting in an overall decrease in non-controlling interest from 36.6% to 34.9%. With that, I would like to now turn the call back over to Najeeb. Najeeb?

Thank you, Roger. As you can hear we are making strong progress throughout the world and those efforts are now showing up in our results. From Asia Pacific to Europe and North America, our new business pipeline is solid and growing with customers upgrading solutions as well as new customers for both our first generation and the next generation NFS Accent solutions, and that is evident from the contract we already announced as well as what we believe we can achieve in this coming months and years. I must state here that the founding management and every NetSol in is excited and determined to unlock the true potential of our company. We are embarking on an exciting new chapter in the history of NetSol and look forward to updating you as we progress and work to close the fourth quarter and set up a strong fiscal 2016. With that we would like to open the call up for question and answers. Operator, please.

Thank you. [Operator Instructions] And we’ll take our first question from Howard Halpern from Taglich Brothers.

Congratulations guys, great quarter.

Thank you, Howard.

The first thing I see there with the revenue that you generated in this quarter if we were to annualize it, it would be a new record revenue for any 12 month period, am I correct in that?

It looks like.

And do you believe this run rate is sustainable based on I guess your qualified pipeline and if you could talk about the qualified pipeline or albeit how many customers potentially the value of that pipeline?

I think Naeem, you want to jump in?

Yes, so Howard naturally the revenues largely made up of recurring revenue, a lot of the revenue seem from services which has a lot more predictability and they are of recurring nature. For example, the maintenance and professional services revenue has jumped nicely. And we see that continuing in this quarter through the end of the fiscal year, due mainly to the large number of commitments we order yet have at hand and a lot of the services revenue that is coming through is from existing projects which are part of our sales backlog, which probably continues for another two or three quarters in terms of commitment work. So I think in terms of services revenue and maintenance our visibility is very strong, and sort of underpins the next two or three quarters in a very solid way. The other part is license and new business in the pipeline of which there is one particular program that we are in kind of advanced discussions with our client who is an existing client who is looking to upgrade to Ascent and this is a multiple country program which runs into more than 10 countries and that is a significant piece that we expect to have completed and closed by the end of probably July for the first month of the fiscal 2016 we expect to have closed that deal and that is a significant material number which then actually factors into fiscal 2016 and go on for probably about four to five years that the program scale is that – but naturally we need to [Indiscernible] eyes before that’s done, but that’s a very very strong prospect. In addition we are negotiating with several other clients both on Ascent as well as our existing products in the U.S. Europe and not forgetting NFS are all key products continue to show a lot of resilience in each of the markets they are operating in. So the example what Najeeb shared with you, the success of LeasePak and to get new upgrades and more licenses is very very heartening and then in addition to the U.K. where we are about to sign two deals the LeaseSoft which is our current generation in addition to the new clients who is upgrading to Ascent. So I feel all-in-all 2016 is starting with a very strong footing with both committed work as well as new work that will come on stream and that is exactly the reason why we have ramped up our engineers to appoint now – our additional incremental hiring would be not at this scale that we’ve have done in the last two years. We’ve got capacity now to deliver a much larger revenue base from the capacity we have. So that I think incremental cost would be nominal compared what we’ve been into the hiring last two years and training people, so they are ready to take on the new work. I think that’s kind of gives you a complete picture.

Okay. And as the license revenue begins the increase, again then we should start to see gross margins approach and get back into the 40% area?

I want to add. You’re right. That is our – I think our goal to see the gross margins improve from last two-year level. And it’s exactly how we look at it. As we can start to recognize quarterly like license revenues based on completion, I think we can see that improvement there. And do you want to add more, Roger.

Yes, I agree. As we start to the see the license revenue pick up then you’ll definitely see the increase in margin. And as we’re able to hold our cost kind of stable with the current personnel that we have and then increase of revenue on top of that those gross margins will continue to increase.

One last one, do you have an employee counts for the end of the quarter?

Yes. We have…

Go ahead.

Yes. We’re about at 1,530 is where we’re sitting here at the end of March.

Okay. Well guys, keep up the great work and look forward to upcoming quarters.

Thank you, Robert.

And we’ll go next to Jon Evans from JWest

Yes. Can you just give us any insight, so in the backlog you obviously have this one big software deal that you’ve been working on et cetera? You haven’t really recognized much in the license revenue for that yet. Can you give us some kind of feel of how you think that’s going to happen over the next couple of quarters and maybe that gross margin in license relative to the existing license of the older products?

Yes. I think it’s a – where you added technical question. I think I like Roger to add any comment here.

Yes. I think you’re referring to our NFS deal that we talked about in August that we’re currently working on. So if you look at deal, we’ve recognize a revenue of the services and the license over implementation period. And currently, we’ve recognized about $507,000 in license revenue of about $1.8 million. And today we’ve recognized about $3.2 million of that about $10 million, about $10 million of worth licenses and services revenue worth anticipated to be to get the company going live with the product. So, over the remaining period, a year, and maybe Naeem can fill in the time frame of how that project is progressing. But then we – so we have about $1.3 million of license that will recognize with that project and then we – remaining license – I’m sorry the services revenue that will continue to recognize over the period. So, if we anticipated $10 million being the original amount we recognize that $3.2 million than we have the $6.8 million that will continue to come in over the next year or so which were going to be implementing the project.

Yes. I want to add Roger, we have seen the projects that is, I mean, actually in Lahore, and the project look pretty promising and on-track, and so we’re encourage with the time frame. So you’ll see I think strong recognition in the coming quarters from that big project?

Got it. And then, just can you give us a sense of your expectation for the gross margin and the new license product compared to the old license product? Do you think that the gross margin will be much different or it would be roughly the same? How do you think that will play out?

Well, the way I look at Evan historically we’ve been – we have pretty strong I know it was 50% to 60% range and then it drop as you notice largely because of the shift of the product from our to the next generation. There was a huge gap in between. So now we’re coming back. The sales are improving as you have noticed. Of course, we have yet to recognize bigger chunk of license revenue and that they’ll have their proportional to each quarter based on what the completion is. And I believe – I’m hesitant in giving any specific number, but I believe that it will improve quite impressively in fiscal 2016, if you look at the whole year. And I think as also Naeem mentioned, we have very pretty much scaled up the capacity. We’re now really not really hiring program too many programs with developers anymore, because we think enough still here. But we are looking at some good role, management role in the U.K. and Europe and some of course in Asia Pacific market overall, but but that helps our long-term vision. But that’s mean, it may not affect our margin that much, the license recognition you will see improvement in the margin. I’m pretty confident.

And then, last quarter you alluded to that demand was so strong that you didn’t want to disappoint customers or clients, so you were being very prudent with trying to take on new business or looking at new business et cetera, do you feel comfortable now that you’ve been able to satisfy the existing clients and now you’re starting to get more aggressive in new business or can you just give us an update on kind of how you think that is?

Again that’s a good question, I’ll have Naeem. He obviously has direct interface with customers all the time and his team. So he can shed some light. Naeem, go ahead please.

Yes, sure. So what, I think the strategy has been that ensuring that we are gear up for the larger programs. Our plan actually has always been that some of the strategic clients that we have which spend multiple millions and their programs are run over many years in many countries. I believe that type of programs, projects we have been targeting. And the capacity built that are you seeing actually we’ve been building for those type of clients. So this one particular project which I mentioned earlier which is just ready to grow in the six weeks or so in terms of closure that is the project for which we are gear up for in capacity. There are number of other opportunities where there are smaller opportunities but still run in a few million dollars. But the larger programs can be anything over $20 million, $25 million, $30 million over time in many market give us a better productivity and usability of our resources with more predictability in revenue over longer term. So we try and position ourselves in such a way that we keep capacity for those types of programs and then the smaller projects that come in we see the more opportunistically that if they fit in, that we’ll take them on. But it’s a good problem to have that we’ve got the larger programs which are the one which is kind of imminent. We have capacity for this rather than engaging ourselves in too many of those smaller projects which take capacity out and also doesn’t work with the timing of the bigger clients if they want to start immediately. So it’s a fine balance. But in sales we have so much visibility of how each dealers tracking so we can adjust accordingly. If we see the larger deals that are going to take too long, we bring the smaller projects earlier so that we continue remain busy and use our capacity and not sitting on the bench basically.

Got it. And then just a last question, can you just help me understand what you guys are trying to achieve by buying back the stock in Pakistan. I mean, are you trying eventually by all that stock back or maybe help us understand that?

Yes. I think I’ll answer that. So, Evans you might be our new investor I believe or analyst. We as you own about 55% roughly, the parent owned 45% [ph] of the net sold Pakistan stock, and of course we have to report minority interest which means that takes our bottom line from the EPS and the net income. So the goal is on not the whole company but at least come to a point where we have at least 35% ownership and that will absolutely improve our earnings per shares and on a consolidated basis. So that’s where we see opportunity plus target undervalued that the market has been kind of over boiled and oversold in the KEC [ph]. It’s a good opportunity for us to whenever we can free up some cash we acquire the margin than we reported, but I think goal is to really improve our earning per shares by earning of the subsidiary stock.

Got it. And the just the last question. Do you ever think about buying your stock back here, I mean if you look at the market cap, if you take out – if you put the cash and the receivables together that’s roughly with the market cap is and its sounds like your business is acceleration, so are you just want to keep the cash on the balance sheet?

Well, I think you know this company is obviously is a global footprint, very dynamic, lot of thing happening in this company, there’s a developer and lot of new hires, so we want to use our cash quite carefully and there has been opportunity in the past, we did some buyback, but at this stage we don’t any plan, but things do change that allow us some cash that we can free up and invest in our own stock, though I can’t really focus on business and its activities.

Got it. Thank you for your time.

[Operator Instructions] We’ll take our next question from Mike Hughes from SGF Capital.

Good morning. Najeeb, I think on the last call you’ve indicated that revenue for the current fiscal year and in the current quarter that approach the fiscal 2013 results, which were roughly $50 million. Is that still the case? Do you still feel comfortable where you could end up roughly around that level?

Yes. I think, I remember the call. Of course, we’ve done three quarters now and you know the nine-month numbers as it stands. It’s a pretty good run rate. I’m not giving any guidance at this stage as you know, but it looks like it is like -- this is where its trending. We did make the statement that we -- our goal to be it or achieve at least hit that number of 2013. So it looks like we are approaching there.

Okay. So that would imply that. I know you’re providing guidance, but that would imply a revenue number for the current quarter of roughly $14 million. And if you can hold your costs of good sold roughly flat with the March quarter we should see pretty good gross margins expansion in the June quarters, is that correct?

Well, let’s hope for the best. We are actually – we do this every day to make sure that we do better results every quarter. And as I said in the whole prepared remarks, a bit worried [ph] about the way things are looking across the Board especially in Asia Pacific and now in Europe. And the team is very pumped up and excited about the opportunity ahead of us, but I think yes, your assessment is quite fair.

Okay. And then turning to operating expenses which were roughly $6 million of the December quarter and then $6.3 million roughly in the just reported quarter, can you hold that number flat in the June quarter or would it be up a few hundred thousand dollars?

You know, I believe – I don’t see any major incremental activity in this quarter. Nevertheless we’re half way through in the fourth quarter anyway. I’d say, I don’t know what you think Roger, but I think it’s pretty much on the same track of Q3.

I would agree that assessment.

Yes. You saw a little run up because we had an annual increment salary especially in our key development location which is right here in Lahore. And we’ve done with the salary increases as of last quarter, so that may help us a little bit on the cost line and in the Q4.

Okay. And then last question, on this large deal that may close in six weeks, did you buy that that deal could be larger than the larger sand field that you’ve talked about over the last few quarters. Is that correct?

I don’t want to speculate anything right now. As Naeem said, it’s obviously we have focus on some major project there and it will be great to cover the press release and also when its done, sign. So, I mean, yes, it could be, potentially yes, to be most specific.

Okay. Good luck at the conference tomorrow. Thank you.

Thank you so much.

Thank you.

And we’ll go next to Jon Evans from JWest

Can you just talk a little bit about two other issues, kind of as you go into 2016, is there any tax implications or can you talk about the tax rate that you think. And the other question I have for you is how about the auditor, do you think guys will changer auditors et cetera mean, your international company, I think, you’ll start go into more recognized auditor or your thoughts there?

Well, let me take up both points and then of course Roger can add. The first point on the tax, are you talking tax rate from the Pakistan or you talking about general U.S. taxes?

The taxes that will flow through in the U.S. subsidiaries, so the ones that we see that you report here?

Yes. I think you’re right. We have export tax rate for many years -- another two more years to go. What happened in 2017 is that we don’t know that yet. But we believe this may not any major impact because we have what Roger, pretty good losses up there. If you want to jump in, Roger

Yes. So basically to the question on taxes, because most of the revenue generated out of our Pakistan office they are currently in a tax holiday. So any of the export business is not tax, any business at in-houses or basically that is in Pakistan that will be tax. But that’s the majority of the revenue is coming from services that’s on outside. So you continue to see the tax has been very minimal. When you get up to the parent level of course we have the losses for U.S. taxes at both the parent and then for NTA, therefore we have the tax losses to offset any further income there. So I think you’re going to see the tax would be very minimal as they have been over the past.

So Roger will the license revenue for the big deal as you come through will that come through on the Pakistan side? Will that come through in the U.S. subsidiary. That’s what I’m – go ahead.

That will come through the Pakistan side. That’s could be Pakistan subsidiary.

Okay. Got it. Okay. And then, relative to the auditor?

Yes. We’ve got – answers, we have dual strategy, but I think I’ll let CFO, who will give some run down.

This is an area that we see as we continue to grow. We’ve had a great relationship with our current auditor, but as we continue to grow and increase we believe that its important that we probably move to a – it will probably be big five type of a tax or an auditor and so I think we’re probably starting to do the process, the due-diligence to see who would be the best fit who would have ability to work internationally with this in Pakistan, Bangkok, China and kind of have that international fields. So we started that process and we feel that it is necessary as we continue to grow to probably move from Kabani Company up to a big type of a firm.

And is that this fiscal end then?

No. The problem its very difficult to move that quickly with a -- to the next to have a step in and take over the whole every quarter they have to basically come in and review everything that’s already been done. I think we’re looking at using Kabani for the end of this fiscal quarter and then moving to a different auditor we will move in the new 2016 year. Usually the best time to move within audit firm is the second quarter of the year, so that we’ll probably expect to see.

Okay. Thanks, Roger.

Yes.

It appears there are no further questions at this time. I’d like to turn the conference back to Mr. Najeeb Ghauri for any additional or closing remarks.

Yes. Thank you again for joining us today. If you have not done so, yet I would encourage you to visit our updated website and to sign up for news, alerts to keep up to-date on our progress. In closing, I’d like to express a deep gratitude to our shareholders for their continued support and we’ll see you next time. Have a good day.

This does conclude today’s conference. We thank you for your participation. You may now disconnect.