Najeeb Ghauri - Chairman, Chief Executive Officer Roger Almond - Chief Financial Officer Patti McGlasson - General Counsel Murad Baig - CIO, OTOZ

Good afternoon. Welcome to the NETSOL Technologies, Fiscal Fourth Quarter and Full Year 2021 Earnings Conference Call. On the call today are Najeeb Ghauri, Chairman and Chief Executive Officer; Roger Almond, Chief Financial Officer; Patti McGlasson, General Counsel, and Murad Baig, CIO of OTOZ. I would now like to turn the call over to Patti McGlasson who will provide the necessary cautions regarding the forward-looking statements made by management during this call. Please proceed.

Good afternoon, everyone, and thank you for joining us. Following a review of the company's business highlights and financial results, we will open the call for questions. I'll now provide the necessary cautions regarding the forward-looking statements made by management during this call. Please note that all 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 statements reflecting management's current forecast of certain aspects of the company's future and of our actual results, and our actually 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 our annual report on Form 10-K and quarterly reports on Form 10-Q. I would also like to point out that we will be discussing certain non-GAAP measures. The press release issued earlier today contains a reconciliation of these non-GAAP financial results to their most comparable GAAP measures. Additionally the company had posted a presentation to accompany the remarks we plan to make on today’s call in the Investor Section of our corporate website. Finally, I would like to remind everyone that this call will be recorded and made available for replay at www.NETSOLtech.com and via link available in today's press release. Now, I would like to turn the call over to Najeeb. Najeeb.

Thank you, Patty, and good afternoon. As I speak to you today, we find ourselves close to being on the other side of what has been an eventful 18 months for everyone. Of course, we are continuing to monitor the latest developments and the potential impact from the COVID-19 Delta-variant, but I do think we are close to seeing light at the end of the tunnel. I'm calling in today from our Calabasas headquarters where we are still working at reduced capacity. Over the past few months we have implemented a stager alternate day in office plan that has allowed us to keep moving along without missing a beat. Our offices around the globe are continuing to operate partly remotely in accordance with regional mandates. But I know I speak to our entire organization when I say, I’m looking forward to a time soon when we can all be back together. Looking at our operations, while we are still facing a number of industry and macroeconomic headwinds, we continue to make incremental progress across our business regions as a global economy and broader leasing and financing industry slowly, but surely begins to reopen. Looking at the headline numbers, we improved our top-line performance in each quarter of the year, all while making significant adjustments to our spending in the face of a travel restricted sales environment. Our owner centric emphasis on managing the business has yielded positive results in several key areas, highlighted by a 154% increase in operating income for the year and a record cash position of nearly $34 million. Additionally, subscription and support revenues have now eclipsed a $20 million annual run rate, further, validating our investment in a recurring revenue model and providing us stronger visibility into future performance as well. And while we are continuing to pursue high value, larger deals with incumbent OEMs, our ability to grow a healthy recurring revenue base will allow us to grow our business more predictably over time, while still maintaining the opportunity for upside. We also generated over $2.5 million during the period and more than $7.7 million throughout fiscal 2021 by successfully implementing change requests from various customers across multiple regions. These kinds of data points support our belief that the long term industry trends remain in our favor and we have a diversified approach to growth that is now starting to materialize as the world begins to reopen. Looking ahead, with a leaner cost structure to support increased sales and marketing activities, we are making investments to build for long term success in our key growth markets. We are also entering fiscal 2022 with a record cash position of nearly $34 million and will be looking to deploy our significant resources towards a number of high value projects in the coming months. As one example, thanks to the effort of several key new hires made earlier in the year, we've been able to improve our lead generation processes. Our North American and European pipelines have shown continued outsized promise and we are now starting to see some of these pending deals come to fruition, most notably shown by our first NFS Ascent contract in the U.S., which we announced back in August. The pandemic has made it clear that all businesses need to have sound digital strategy and we are confident that we will benefit from this transition as customers continue to transform processes and future proof their businesses. I'll now hand the call over to our CFO, Roger Almond, who will walk us through the financial results for the quarter and year. After that, I'll provide an operational update and outlook before turning the call over to questions. Roger?

Thanks, Najeeb. Turning to our fiscal fourth quarter and full year 2021 financial results for the period ended June 30, our total net revenues for the fourth quarter of fiscal 2021 were $15.4 million compared with $13.6 million in the prior year period. The increase in total net revenues was primarily driven by an increase in total license fees of $1 million, an increase in subscription and support revenues of $212,000, and an increase in total services revenues of $564,000. For all of fiscal 2021, total net revenues were $54.9 million compared to $56.4 million in fiscal 2020. The decrease in total net revenues was primarily due to a decrease in services revenues of $6.4 million, which was offset by increases in subscription and support revenues of $1.9 million and license fees of $3 million. Total license fees in Q4 were $1.5 million, compared with $530,000 in the prior year period. For the full year total license fees were $6.2 million compared to $3.3 million in fiscal 2020. The increase in license fees for both the quarter and the year was primarily due to revenue being recognized from contracts to implement our NFS Ascent retail platform. Total subscription and support revenues in Q4 were $5.6 million compared to $5.4 million in the prior year period. For the year total subscription and support revenues were $22.2 million, compared with $20.3 million in the prior fiscal year. The increase in total subscription and support revenues for the year was a result of several customers who went live with our product in fiscal 2021. We anticipate subscription and support revenue to gradually increase as we implement both our NFS legacy product and NFS Ascent. Total services revenues for the quarter were $8.2 million compared to $7.7 million in the prior year period. For the full year total services revenues were $26.5 million, compared with $32.9 million in the prior fiscal year. The increase in services revenues for the quarter was a result of services provided for a major contract that was entered into during fiscal Q2, as well as additional services revenue recognized for our ongoing 12-country contract with a German auto manufacturer. The decrease in services revenue for the year is due to the decrease in implementation revenue associated with customers who have gone live with our products. Services revenue is derived from services provided to both current customers, as well as services provided to new customers as part of the implementation process. Total cost of revenues was $7.9 million for the fourth quarter, an increase of $1.3 million from $6.6 million in the fourth quarter 2020. For fiscal year 2021, cost of revenues was $28.6 million, a decrease from $29.4 million in fiscal 2020. The increase in cost of sales for the quarter were primarily due to increases in salaries and consultant fees of [$185,000] (ph), depreciation of $104,000 and other costs of $289,000. The decreases in cost of sales for the year were primarily due to decrease in travel expenses of $2.5 million, offset by increases in salaries and consultant fees of $2.1 million. Gross profit for the fourth quarter of fiscal 2021 was $7.5 million or 48.8% of net revenues, compared to $7 million or 51.8% in net revenues in the fourth quarter of fiscal 2020. Gross profit for fiscal 2021 decreased to $26.4 million or 48% of net revenues, compared with $27 million or 47.8% of net revenues in fiscal 2020. The increase in gross profit for the quarter was primarily due to increases in revenue, offset by increases in cost of sales of $1.3 million. The decrease in gross profit for the year was primarily due to a decrease in revenue offset by decrease in cost of sales of $141,000. Operating expenses for the fourth quarter increased 8.7% to $6.4 million or 41.4% of sales from $5.9 million or 43.2% of sales in the same period last year. Operating expenses for fiscal 2021 decreased 8.7% to $23.6 million or 43% of net revenues and $25.9 million or 45.9% of net revenue in fiscal 2020. The increase in operating expenses for the quarter was primarily due to increases in selling and marketing, and research and development, slightly offset by decrease in general administrative expenses. The decrease in operating expenses for the year was primarily due to decreases in general and administrative expenses and research and development costs and then offset by a slight increase in selling and marketing expenses. Turning to our profitability metrics, our net income from operations was $1.1 million for the fourth quarter, a decrease from a net income from operations of $1.2 million in Q4 last year. Net income from operations for the full year was $2.7 million, an increase of net income from operations of $1.1 million in fiscal year 2020. Out GAAP net income attributable to NETSOL for the fourth quarter of fiscal 2021 totaled $1.9 million or $0.17 per diluted share. This compares with GAAP net income of $1.2 million or $0.10 per diluted share in the fourth quarter of last year. GAAP net income attributable to NETSOL for fiscal 2021 totaled $1.8 million or $0.15 per diluted share, and this is compared to net income of $937,000 or $0.08 per diluted share for fiscal 2020. The increase in GAAP net income attributable to NETSOL for both the quarter and the year was primarily due to the increases in revenues previously mentioned at a greater rate than our related costs to support those revenues. As mentioned on previous calls, it's important to point out that included in our income this quarter was a gain of $917,000 on foreign currency exchange transactions, compared to a gain of $327,000 in Q4 of last year. For the full year we experienced a loss of $597,000 compared to a gain of $399,000 for all of 2020. Because we operate in several geographical regions, a significant portion of our business is conducted in currencies other than the U.S. dollar. The decrease in the value of the U.S. dollar compared to foreign currency exchange rates generally has an effect of increasing our revenues, but it also increases our expenses denominated in currencies other than the U.S. dollar. Similarly, as the U.S. dollar gains strength relative to foreign currency exchange rates, it tends to reduce our revenues, but it also reduces our expenses denominated in currencies other than the U.S. dollar. We plan our business accordingly by deploying additional resources to areas of expansion, while continuing to monitor our overall expenditures given the economic uncertainties of our target markets. Moving to our non-GAAP metrics, our Non-GAAP adjusted EBITDA for the fourth quarter of fiscal 2021 totaled $2.9 million or $0.26 per diluted share, compared with non-GAAP adjusted EBITDA of $2 million or $0.17 per diluted share in the fourth quarter of last year. For the full fiscal year 2021 non-GAAP adjusted EBITDA totaled $5.4 million or $0.47 per diluted share, compared with $4.3 million or $0.37 per diluted share in fiscal 2020. Please see the reconciliations schedules contained in our earnings release for our revised calculations of adjusted EBITDA for the fiscal year ended June 30, 2021. Turning to our balance sheet, at quarter end we had cash and cash equivalents of approximately $33.7 million or approximately $2.93 per diluted common share, which was up from $20.2 million or approximately $1.71 for our diluted common share at June 30, 2020. On July 30, 2020 NETSOL'S Board of Directors approved a stock repurchase program that authorized potential repurchases of up to $2 million of its common stock over a 6-month period. All shares permitted to be purchased under this July 2020 plan were purchased during the plans original date and prior to the conclusion of extension of the plan. On May 21, 2021 the Board of Directors authorized an additional repurchase plan of up to $2 million worth of shares of common stock through November 20, 2021. Under the program, the company may repurchase its common stock in the open markets from time-to-time, in amounts, at prices, and at such times as the company deems appropriate, subject to market conditions and federal and the state laws governing such transactions. NETSOL expects to fund the repurchase with its existing cash balance and cash generated from operations. As of June 30, 2021, we had purchased 669,018 shares of our common stock at an aggregate value of $2,364,781. One final note before I hand the call back over to Najeeb, on a go-forward basis, the company will now be providing annual financial guidance for select key performance metrics. For the fiscal year ending June 30 2021, the company expects total revenues to increase by at least 10% and subscription and support for recurring revenues to increase by at least 20%. The company's guidance is based on existing contracts and recurring revenue from its current customer base, performance results tracked through August of this calendar year and other information available as of the date of this call. That concludes my prepared remarks. I'll now turn the call back over to Najeeb. Najeeb?

Thank you, Roger. From a high level, I'd like to outline the fundamental components of our growth strategy. Firstly, we have a continued focus and organic growth within the core business. Subscription and support revenue reached $22.2 million for fiscal 2021, a nearly 10% increase over the prior year and at $23 million-plus run rate projected over the coming 12 months. With each new customer we sign, we add to our recurring revenue, which drives both the top and the bottom line. As you layer on post contract support through larger traditional enterprise contracts and increase our SaaS based footprint, we expect to build this base over time, which provides more predictable revenues with a more attractive margin profile. Our initial 2022 guidance for 10% top line growth and 20% ARR growth underscores our belief in this approach. Moving on to the second component of our strategy, we are innovating in new areas and looking to create partnerships with technology and personnel, which can be a major benefit to other organization, as well as our own. To this end, I’d like to take some time to provide a brief update on our progress within the Otoz Innovation Lab. Perhaps, the most exciting development has been the launch of the Otoz Digital Automotive Retail platform which we announced in a few months ago. Otoz has been working with BMW Group Financial Services through its key brand, MINI Anywhere to provide many USA customers with a fully digital shopping experience and powering their marketing strategy and creating a new automated sales channel with dealerships and lenders. The development of MINI Anywhere started when both, MINI USA and MINI Financial Services came together during the pandemic, looking for an end-to-end digital contracting solution for MINI’s 100-plus dealers in the U.S. After a search for an off the shelf solutions came up empty, the two entities decided a custom platform was needed to bridge several complicated gaps in the automotive retail process. MINI USA and MINI Financial Services teamed up with Otoz, which has developed the platform at a true end-to-end and e-commerce experience. For MINI dealers, the tool can be set up in as little as 60 minutes and is supported by Otoz dedicated success team that provides online and on-site, on-boarding and training services. Now since its launch in late May of this year, the new platform has quickly gained traction. MINI Anywhere is now live with five MINI dealerships in California. Otoz is also scheduled to onboard additional California based dealers before an expansion into Florida next. Long term, the solution has the potential to be rolled out to all MINI dealerships in the United States. We appreciate MINI’s belief in our product and team and are looking forward to the expansion of our regional partnerships. We believe the potential for this MINI Anywhere deal platform is limitless. Our mission is no less than to be an early leader in this fast evolving space. Digital will be the go-to channel for auto sales and we are setting the benchmark for its adoption through cutting edge technology and by building compelling customer journeys. The final component of our strategy is exploring in organic growth, opportunities where it makes sense. On this note, I can share that we are continuing to evaluate opportunities in the marketplace that are highly accretive and complementary to our business. With this overview completed, I will now get into our operational updates from this quarter. Starting in the Asia Pacific or APAC Region, the previously announced 12-country, $110 million contract with Daimler Financial Services, we are continuing to make considerable progress along our multi-year, multi-country implementation roadmap. In August we officially went live with the CMS module in New Zealand. To-date we are live in 10 of the 12 markets and are making progress on the remaining deliverables in accordance with our customer timelines. During the last quarter we also recognized almost $1.04 million associated with service provided under a restructured contract as a result of organizational changes. In fiscal Q4, we also officially went live with one of the subsidiaries of a Japanese equipment finance company of Kubota Tractors in New Zealand. This multi-million dollar contract with the implementation of our flagship and some retail solution had been signed pre-COVID and was a major effort across our global organization to support. Finally, I recently announced multi-year, multi-million dollar upgrade with GSE [inaudible], a global automotive financial service company in China continues to move forward. Based on additional implementation considerations, we are currently anticipating a fall 2023 go-live. Moving next to our European Countries or NTE. Europe and North America remain exciting new growth areas for NETSOL. We are strategically marketing our cloud and SaaS based offering. Specifically in these regions, we are contributing to the growing subscription and support revenues noted earlier. From a total contract size perspective, some of the highest value opportunities are currently coming out of our NTE region. Furthermore, NTA and NTE combined now represent a larger pipeline of contract opportunities compared to APAC, and that gap has widened over the last quarter. Many potential opportunities are progressing through the deal stage and we are looking forward to providing more material updates here in the coming months. Finishing with our north American operations or NTA, in fiscal 2021 we made several key strategic hires with the goal of investing more meaningfully in this growth market with the appointment of James Freto, as NTA’s new Vice President of Sales, and Peter Minshall as Executive Vice President. We have a solid team with strong industry relationships forged over many years to support these efforts. We recently announced the first official sale for NFS Ascent in the U.S. market, an agreement with Motorcycle Group to deploy the cloud based version of our flagship platform across their entire operations, including our omni point of sale and contract management system to support retail lending and leasing. Motorcycle Group consisting of MotoLease and MotoLoan presents lease and loan offers simultaneously to qualified applicants, so that motorcycle and power sports dealers can maximize their sales and enable consumers to pre-qualify and select their vehicle through Motorcycle Group's advisers. This agreement validates a sense of capability across the entire leasing and loan contract lifecycle. At the same time by leveraging the deployment of Ascent on the cloud Motorcycle Group will be enabled to run their retail operations seamlessly and with the pricing flexibility to scale on demand. MotoLease has been a NETSOL client since 2013 in California, and has been a leader in this field when it comes to modern technology adoption. Their selection of Ascent is further recognition of this commitment and we are proud to support the strategic business development with our fleet of modern solutions. Our core business and underlying technology assets that drive it have not changed. What has changed though are the underlying industry dynamics. We are finding new ways to future proof our business and adopt to a next generation digital strategy and one of these is by accelerating our transition to the cloud. In recent months the automotive industry has witnessed a significant push towards digital transformation in the retail space, marked by various announcements of newly formed partnership, major acquisitions in e-commerce, pilots. Stakeholders are racing to meet the consumers evolving expectation for online shopping option, including for traditionally in-person, big-ticket items. In summary, we are welcoming the return to normalcy that we are starting to see around the globe and developing comprehensive strategies to target high value customers in key geographies and in new formats. After a challenging year, we have emerged stronger than before, and we are entering fiscal 2022 focused on a return to growth with the plan to get there. And with that, we can open the call for questions. Operator?

Thank you. [Operator Instructions] Our first question is from Todd Felte with Advisory Group Equity Service. Please go ahead.

Congratulations Najeeb to you and your team on a great quarter. It looks like NETSOL’s emerged nicely out of COVID and this was the strongest quarter for the company I've seen in the last couple of years. I was really happy to see the guidance going forward and it looks like you're going to have an increasing revenues, margins and profitability. But what I wanted to ask you about was a little bit of your Investor Relations going forward. I see a company that has over a $5.50 per share book value, $33 million in cash and $3.50 in assets for every dollar and liabilities and I just can't figure out why your stock price is trading at such a discount. So I was hoping that you could discuss some upcoming investor relation activities and some ways that we can get more investors informed of your company.

Well, thank you Todd for your comments, I appreciate it. I think the combination of reasons as I spelled out and Roger did about the numbers, obviously the last 18 months have been challenging to do any kind of aggressive Investor activities, doing roadshows shows and different conferences. But I think the company has been focused on the fundamentals as we have demonstrated in the last – this quarter. I think once the fundamentals continue to improve, which I have every confidence that this would continue and the guidance we've given, I believe we will try [Indiscernible] and we'll do some more activities in the coming two years or so to see if we can really broaden our investor base and invite some people to look at the company and we will do many other things. But right now Todd, we are so focused on new strategies, looking at the new innovation we are doing, whether its autos or our current business and the new innovation happening in the company. I think in the market we’re seeing that with our buyback strategy, which we have done quite successfully in the last few months and improvement of fundamental, I think the market will appreciates that this company is really exceptionally doing well in the fundamental and we will work very hard to unlock the potential, the real potential.

Thank you, I appreciate that. And I know that you're continuing to do the stock buyback. Have you and your Board considered a dividend for shareholders with some of that cash?

You know, this thought has come to our mind many times quite frankly. Buyback was really designed to really – to make sure that we do understand the price was undervalued and that we had the ability. Now we have the cash and we have many investment opportunities and whether its innovation or hiring more people or driving some maybe M&A at some point. So I think we will weigh in very carefully what is the best way to invest and give it back to the shareholder, and that option has never been ruled out, but I think we have to be very careful how we deploy cash. If we can invest to create twice more opportunities in the accretive revenue or maybe invest in the innovation that is moving so fast, I think we'll do quite well and then eventually the investor will see the value in the price by performance, by fundamental improvement.

Again, I appreciate you taking my question, and congrats to you and your team on a great quarter again, and I look forward to witnessing the success in the future. Thank you.

Thank you again, Todd.

[Operator Instructions] At this time, this concludes our question-and-answer session. If your question was not addressed during the Q&A session, please contact NETSOL’s Investor Relations team by emailing them at investors@NETSOLtech.com or by calling them at 949-574-3860. I would now like to turn the conference back over to Mr. Ghauri for his closing remarks.

Thank you for joining us today, but I do want to make a correction. The dealers we signed in California is about seven, not five. I think I misread the numbers, so it is seven dealerships gone live in California for the MINI solution. I especially want to thank all of you investors for their continued support, our loyal customers and our most dedicated employees worldwide for their ongoing contribution. We look forward to updating you on our next call in the Q1. Thank you.

Thank you for joining us today for NETSOL’s fiscal fourth quarter and full year 2021 earnings call. You may now disconnect. Thank you.