NetSol(NTWK) - 2026 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total net revenues increased by 21% year over year to $18.8 million, driven by higher services revenues and growth in recurring subscription and support revenues [4][10] - Subscription and support revenues rose approximately 5.1% to $9.1 million, while service revenues increased by 40.9% to $9.6 million [10][11] - Gross profit was $9 million, representing 48% of net revenues, with cost of sales at $9.8 million or 52% of net revenues, reflecting improved margins [11][12] Business Line Data and Key Metrics Changes - Services revenues grew significantly, primarily from new implementations, indicating strong demand for the company's offerings [4][10] - Recurring subscription and support revenues increased by 7.2% to $18 million for the six months ended December 31, 2025, compared to the prior year [14][16] Market Data and Key Metrics Changes - Demand for digital automotive retail solutions remains strong, with new dealer groups and franchised dealerships signing on during the quarter [6][7] - The company secured a $50 million four-year contract extension with a tier one global auto captive, reinforcing customer trust and revenue visibility [6] Company Strategy and Development Direction - The company is focused on product innovation, including the launch of an AI-enabled credit decisioning engine, Check, aimed at modernizing credit underwriting [5][9] - There is a commitment to expanding the global footprint and enhancing solutions to meet evolving client needs, with an increased revenue growth guidance for fiscal 2026 to nearly $73 million [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in capitalizing on market opportunities and emphasized the importance of long-term customer relationships supported by a strong pipeline [18] - The company acknowledged macroeconomic and currency dynamics as considerations but highlighted a diversified business model and resilient customer base as a solid foundation for future growth [18] Other Important Information - The company appointed Sardar Abubakr as Chief Financial Officer, enhancing the leadership team to support growth initiatives [7] - Cash and cash equivalents were reported at $18.1 million, indicating a solid liquidity position [16] Q&A Session Summary Question: About margin improvement expectations - Management anticipates improving margins in the coming quarters, driven by investments in growth strategies and new hires [22][24] Question: Inquiry about non-controlling interest computation - The company follows standard GAAP definitions for non-controlling interest, with profits from the Pakistani subsidiary allocated accordingly [35][38] Question: Consideration of stock buyback or dividend - Management is open to the idea of allocating cash for stock buybacks or dividends but will decide based on board discussions [39][41]