Q2 2026 NetSol Technologies Inc Earnings Call

February 12, 2026

Operator 3: Good morning, and welcome to the NETSOL Technologies Q2 and six-month ended December 31, 2025, earnings conference call. On the call today are Founder and Chief Executive Officer of NETSOL Technologies, Inc., Najeeb Ghauri, Co-founder and President, Naeem Ghauri, Chief Financial Officer, Sardar Abubakr, and Senior Vice President, Legal and Corporate Affairs, General Counsel, and Corporate Secretary, Patti McGlasson. I will now hand the call over to Patti, who will provide the necessary disclaimers regarding forward-looking statements made during today's call. Patti, please go ahead.

Operator: Good morning, and welcome to the NETSOL Technologies Q2 and six months ended 31 December 31, 2025, earnings conference call. On the call today are Founder and Chief Executive Officer of NETSOL Technologies, Inc., Najeeb Ghauri, Co-founder and President, Naeem Ghauri, Chief Financial Officer, Sardar Abubakr, and Senior Vice President, Legal and Corporate Affairs, General Counsel, and Corporate Secretary, Patti McGlasson. I will now hand the call over to Patti, who will provide the necessary disclaimers regarding forward-looking statements made during today's call. Patti, please go ahead.

Speaker #1: I will now hand the call over to Patti who will provide the necessary disclaimers regarding forward-looking statements made during today's call. Patti, please go ahead.

Speaker #2: Good morning, everyone. And thank you for joining us today. After we review the company's business highlights and financial results for the second quarter and six months ending December 31, 2025, we will open the call for questions.

Patti McGlasson: Good morning, everyone, and thank you for joining us today. After we review the company's business highlights and financial results for the Q2 and six months ending 31 December 2025, we will open the call for questions. Before we begin, I'd like to remind you that our remarks today may include forward-looking statements within the meaning of the federal securities laws, including the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. These statements reflect management's current expectations and are subject to risks and uncertainties, and actual results may differ very materially from those expressed or implied. We encourage you to review the cautionary statements and risk factors contained in NETSOL's press release issued earlier today, as well as in our filings with the Securities and Exchange Commission, including our most recent Form 10-K and quarterly reports on Form 10-Q.

Patti McGlasson (NETSOL Technol: Good morning, everyone, and thank you for joining us today. After we review the company's business highlights and financial results for the Q2 and six months ending 31 December 2025, we will open the call for questions. Before we begin, I'd like to remind you that our remarks today may include forward-looking statements within the meaning of the federal securities laws, including the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. These statements reflect management's current expectations and are subject to risks and uncertainties, and actual results may differ very materially from those expressed or implied. We encourage you to review the cautionary statements and risk factors contained in NETSOL's press release issued earlier today, as well as in our filings with the Securities and Exchange Commission, including our most recent Form 10-K and quarterly reports on Form 10-Q.

Speaker #2: Before we begin, I'd like to remind you that our remarks today may include forward-looking statements within the meaning of the Federal Securities Laws. Including the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Speaker #2: These statements reflect management's current expectations and are subject to risks and then uncertainties. And actual results may differ materially from those expressed or implied.

Speaker #2: We encourage you to review the cautionary statements and risk factors contained in NETSOL's press release issued earlier today. As well as in our filings with the Securities and Exchange Commission, including our most recent Form 10-K and quarterly reports on Form 10-Q.

Speaker #2: I'd also like to note that today's discussion will include certain non-GAAP financial measures. A reconciliation of these measures to their most direct comparable GAAP figures can be found in the press release issued earlier today.

Patti McGlasson: I'd also like to note that today's discussion will include certain non-GAAP financial measures. A reconciliation of these measures to their most direct comparable GAAP figures can be found in the press release issued earlier today. Lastly, please remember that this call is being recorded and will be available for replay on our website at netsoltech.com, and through a link included in today's press release. At this time, all participants are in listen-only mode. Following their prepared remarks, we will open the call for Q&A session. I will now hand the call over to our founder and CEO, Najeeb Ghauri. Najeeb?

Patti McGlasson (NETSOL Technol: I'd also like to note that today's discussion will include certain non-GAAP financial measures. A reconciliation of these measures to their most direct comparable GAAP figures can be found in the press release issued earlier today. Lastly, please remember that this call is being recorded and will be available for replay on our website at netsoltech.com, and through a link included in today's press release. At this time, all participants are in listen-only mode. Following their prepared remarks, we will open the call for Q&A session. I will now hand the call over to our founder and CEO, Najeeb Ghauri. Najeeb?

Speaker #2: Lastly, please remember that this call is being recorded and will be available for replay on our website at netsoltech.com. And through a link included in today's press release.

Speaker #2: At this time, all participants are in listen-only mode. Following their prepared remarks, we will open the call for Q&A session. I will now hand the call over to our founder and CEO, Najeeb Ghauri.

Speaker #2: Najeeb?

Speaker #3: Thank you, Patti. Good morning, everyone. And thank you for joining NETSOL TECHNOLOGIES' call to review our results for the second quarter and six months ended December 31, 2025.

Najeeb Ghauri: Thank you, Patti, and good morning, everyone, and thank you for joining NetSol Technologies' call to review our results for the second quarter and six months ended December 31, 2025. We delivered a strong second quarter of fiscal 2026. Total net revenues increased 21% year-over-year to $18.5 million, driven by higher services revenues and growth in our recurring subscription and support revenues. Services revenue grew 41%, primarily from new implementations from major customers. As these implementations move through go-live and expansion phases, we believe they can support recurring subscription and support revenues over time. I'm pleased with strong balance sheet. Our current ratio of 2.3 reflects strong liquidity, giving us substantial flexibility for growth initiatives. I'd like to highlight the strategic progress we made during the quarter across product innovation, customer momentum, and leadership.

Speaker #3: We delivered a strong second quarter of fiscal 2026. Total net revenues increased 21% year over year to $18.5 million, driven by higher services revenues and growth in our recurring subscription and support revenues.

Speaker #3: Services revenue grew 41%, primarily from new implementations from major customers. As these implementations move through go-live, an expansion phases we believe they can support recurring subscription and support revenues over time.

Speaker #3: I'm pleased with strong balance sheet, our current ratio of 2.3 reflects strong liquidity, giving us substantial flexibility for growth initiatives. I'd like to highlight the strategic progress we made during the quarter across product innovation, customer momentum, and leadership.

Speaker #3: Firstly, on product and innovation, we launched our loan origination platform or CHECK, our AI-enabled credit decisioning engine CHECK is designed to modernize credit underwriting by combining deep reasoning intelligent automation and agentic workflows to support faster smarter and more consistent credit decisions.

Najeeb Ghauri: Firstly, on product and innovation, we launched our loan origination platform or Check. Our AI-enabled credit decisioning engine, Check, is designed to modernize credit underwriting by combining deep reasoning, intelligent automation, and agentic workflows to support faster, smarter, and more consistent credit decisions. It is an important extension of our Transcend platform and reflects our focus on building high-margin products that expand long-term revenue opportunities. Second, on customer momentum, we strengthened a key relationship with a $50 million four-year contract extension with a tier one global auto captive and long-standing partner. This extension reinforces customer trust, provides meaningful revenue visibility, and validates the scalability of our platform. In addition, Transcend Retail continued to gain traction in the US, in the US market, with new dealer groups and franchised dealerships signing on during the quarter.

Speaker #3: It is an important extension of our Transcend platform and reflects our focus on building high-margin products that expand long-term revenue opportunities. Second, on customer momentum, we strengthened a key relationship with a $50 million, four-year contract extension with a Tier 1 global auto captive and long-standing partner.

Speaker #3: This extension reinforces customer trust, provides meaningful revenue visibility, and validates the scalability of our platform. In addition, transcend retail continued to gain traction in the US and the US market with new dealer groups and franchised dealerships signing on during the quarter.

Speaker #3: Demand for digital automotive retail solutions remains strong. And these wins support our strategy to expand recurring revenue while increasing our footprint in a high-potential growth market.

Najeeb Ghauri: Demand for digital automotive retail solutions remains strong, and these wins support our strategy to expand recurring revenue while increasing our footprint in a high-potential growth market. Finally, we continue to strengthen our leadership team to support our next phase of growth. During the quarter, we appointed Sardar Abubakr as officer, with Roger Almond transitioning to serve as a Chief Accounting Officer. Together, they bring deep financial expertise and will help maintain strong governance, discipline, and transparency as we continue to scale globally. Overall, these milestones reflect solid execution across innovation, customer expansion, and leadership. We remain focused on sustainable growth, deepening customer partnerships, and advancing our position as a trusted technology partner, helping OEMs, dealerships, and financial institutions sell, finance, lease, and manage assets end-to-end. Looking ahead, our pipeline, multi-year contract, and recurring revenue base provide visibility into near and long-term performance.

Speaker #3: Finally, we continue to strengthen our leadership team to support our next phase of growth. During the quarter, we appointed Siddhar Abu Babkar as officer with Roger Almond, transitioning to serve as a chief accounting officer together there bring deep financial expertise and will help maintain strong governance, discipline, and transparency as we continue to scale globally.

Speaker #3: Overall, these milestones reflect solid execution across innovation, customer expansion, and leadership. We remain focused on sustainable growth, deepening customer partnerships, and advancing our position as a trusted technology partner helping OEMs dealerships and financial institutions sell finance lease and manage assets end to end.

Speaker #3: Looking ahead, our pipeline multi-year contract and recurring revenue base provide visibility into near and long-term performance. We remain focused on discipline execution and continued progress on growth and profitability.

Najeeb Ghauri: We remain focused on disciplined execution and continued progress on growth and profitability. Now I'd like to turn the call over to our president, Naeem Ghauri, who will share an update on NETSOL's journey and latest development with AI, and how we are leveraging this transformative technology, both through our products and across our operations. Naeem?

Speaker #3: And now I'd like to turn the call over to our president, Najeeb Ghauri, who will share an update on NETSOL's journey and latest development with AI and how we are leveraging this transformative technology both for our products and across our operations.

Speaker #3: Najeeb?

Speaker #4: Thank you, Najeeb. And good morning, everyone. I'd like to share a brief update on our AI strategy and progress. Over the past year, our focus has been to embed AI across the transcend platform and our internal operations horizontally.

Naeem Ghauri: Thank you, Najeeb, and good morning, everyone. I'd like to share a brief update on our AI strategy and progress. Over the past year, our focus has been to embed AI across the Transcend platform and our internal operations horizontally, not as a standalone feature, but as workflow capabilities that drive measurable outcomes for our customers. We have built a shared AI layer with reusable components and governance built in, so we can deploy AI consistently across products while maintaining reliability, auditability, and human oversight. Our teams work closely with customers to integrate AI into real-world workflows, so we can adapt general models into domain-specific capabilities tied to ROI and operational impact.

Speaker #4: Not as a standalone feature, but as workflow capabilities that drive measurable outcomes for our customers. We have built a shared AI layer with reusable components and governance built in, so we can deploy AI consistently across products while maintaining reliability, auditability, and human oversight.

Speaker #4: Our teams work closely with customers to integrate AI into real-world workflows, so we can adapt general models into domain-specific capabilities tied to ROI and operational impact.

Speaker #4: AI at NETSOL is now integrated into our product development lifecycle supported by dedicated teams shared tooling and an integrated roadmap that helps us scale AI in a repeatable way.

Naeem Ghauri: AI at NETSOL is now integrated into our product development life cycle, supported by dedicated teams, shared tooling, and an integrated roadmap that helps us scale AI in a repeatable way, with evaluation and monitoring designed in from the start. A good example, as Najeeb mentioned, is Check, our AI-enabled credit decisioning capability within our loan origination product. It combines reasoning, automation, and agentic workflows to help underwriting teams move faster with greater precision while keeping humans in the loop. In parallel, we are applying AI internally, horizontally, to streamline delivery and improve productivity, and we are also exploring value-based pricing approaches for select AI-enabled capabilities. Overall, we believe this strengthens differentiation, supports operating leverage, and positions us to scale AI value responsibility across our business. With that, I'll turn the call over to our CFO, Sardar Abubakr, to review the financial results. Abu?

Speaker #4: With evaluation and monitoring designed in from the start. A good example as Najeeb mentioned, is CHECK, our AI-enabled credit decisioning capability within our loan origination product.

Speaker #4: It combines reasoning, automation, and agentic workflows to help underwriting teams move faster with greater precision while keeping humans in the loop. In parallel, we are applying AI internally horizontally to streamline delivery and improve productivity and we are also exploring value-based pricing approaches for select AI-enabled capabilities.

Speaker #4: Overall, we believe this strengthens differentiation, supports operating leverage, and positions us to scale AI value responsibility across our business. With that, I'll turn the call over to our CFO, Siddhar Abu Babkar, to review the financial results.

Speaker #4: Abu?

Speaker #5: Thanks. Thank you, Najeeb. And good morning, everyone. I will begin with our financial results for the second quarter of fiscal year 2026, followed by results for the six months ended December 31, 2025.

Sardar Abubakr: Thank you, Naeem, and good morning, everyone. I will begin with our financial results for the second quarter of fiscal year 2026, followed by results for the six months ended 31 December 2025. For the second quarter of fiscal 2026, total net revenues increased 21.1% to $18.8 million, compared with $15.5 million in the prior year period, driven primarily by higher services revenues and higher subscription and support revenues. On a constant currency basis, total net revenues were also $18.8 million. Subscription and support revenues increased approximately 5.1% to $9.1 million, compared with $8.6 million in the prior year period. On a constant currency basis, subscription and support revenues were $9.2 million.

Speaker #5: For the second quarter of fiscal 2026, total net revenues increased 21.1% to 18.8 million dollars, compared with 15.5 million in the prior year period, driven primarily by higher services revenues and higher subscription and support revenues.

Speaker #5: On a constant currency basis, total net revenues were also 18.8 million. Subscription and support revenues increased approximately 5.1% to 9.1 million, compared with 8.6 million in the prior year period.

Speaker #5: On a constant currency basis, subscription and support revenues were 9.2 million. Service revenues increased 40.9% to 9.6 million, compared with 6.8 million in the prior year period.

Sardar Abubakr: Service revenues increased 40.9% to $9.6 million, compared with $6.8 million in the prior year period. Total service revenues on a constant currency basis were $9.6 million.... Gross profit was $9 million or 48% of net revenues. On a constant currency basis, gross profit was $9 million or 47.8% of net revenues. Cost of sales was $9.8 million, or 52% of net revenues, compared with $8.6 million, or 55.5% of net revenues in the second quarter of fiscal 2025. On a constant currency basis, cost of sales was $9.8 million, or 52.2% of net revenues. The increase primarily reflected increased salaries and travel costs, even though the margin has improved.

Speaker #5: Total service revenues on a constant currency basis were 9.6 million dollars. Gross profit was 9 million or 48% of net revenues. On a constant currency basis, gross profit was 9 million or 47.8% of net revenues.

Speaker #5: Cost of sales was 9.8 million or 52% of net revenues, compared with 8.6 million or 55.5% of net revenues in the second quarter of fiscal 2025.

Speaker #5: On a constant currency basis, cost of sales was 9.8 million or 52.2% of net revenues. The increase primarily reflected increased salaries and travel costs, even though the margin has improved.

Speaker #5: Income from operations was 1.3 million dollars, compared with a loss from operations of 0.5 million dollars in the second quarter of fiscal 2025. On a constant currency basis, income from operations was 1.3 million.

Sardar Abubakr: Income from operations was $1.3 million, compared with a loss from operations of $0.5 million in Q2 of fiscal 2025. On a constant currency basis, income from operations was $1.3 million. Foreign currency movements contributed again $0.05 million in the quarter, compared with $0.7 million loss for the prior year period. Moving to non-GAAP, EBITDA for the quarter was $1.7 million, compared with a loss of $0.8 million in Q2 of fiscal 2025. Overall, the quarter reflected strong top line growth, driven by implementation activity along with continued subscription and support performance. We also delivered meaningful profitability improvement versus the prior year, supported by gross margin expansion, and improved operating leverage.

Speaker #5: Foreign currency movements contributed again of 0.05 million dollars in the quarter, compared with 0.7 million loss for the prior year period. Moving to non-GAAP, EBITDA for the quarter was 1.7 million dollars.

Speaker #5: Compared with a loss of 0.8 million, in the second quarter of fiscal 2025. Overall, the quarter reflected strong top-line growth driven by implementation activity, along with continued subscription and support performance.

Speaker #5: We also delivered meaningful profitability improvement versus the prior year, supported by gross margin expansion and improved operating leverage. Turning now to the six months ended December 31st, 2025, total net revenues were 33.8 million compared with 30.1 million in the prior year period.

Sardar Abubakr: Turning now to the six months ended 31 December 2025, total net revenues were $33.8 million, compared with $30.1 million in the prior year period. On a constant currency basis, total net revenues were $33.5 million. Recurring subscription and support revenues increased 7.2% to $18 million, compared with $16.8 million in the prior year period. On a constant currency basis, recurring subscription and support revenues were $17.9 million. Service revenues increased 17.9% to $15.6 million, compared with $13.2 million in the prior year period. On a constant currency basis, services revenues were $15.5 million.

Speaker #5: On a constant currency basis, total net revenues were 33.5 million. Recurring subscription and support revenues increased 7.2% to 18 million, compared with 16.8 million in the prior year period.

Speaker #5: On a constant currency basis, recurring subscription and support revenues were 17.9 million. Service revenues increased 17.9% to 15.6 million, compared with 13.2 million in the prior year period.

Speaker #5: On a constant currency basis, services revenues were 15.5 million. Gross profit was 14.9 million or 44.2% of net revenues, compared with 13.5 million or 44.8% of net revenues in the prior year period.

Sardar Abubakr: Gross profit was $14.9 million, or 44.2% of net revenues, compared with $13.5 million or 44.8% of net revenues in the prior year period. On a constant currency basis, gross profit was $14.6 million or 43.5% of net revenues. Cost of sales was $18.9 million or 55.8% of net revenues, compared with $16.7 million or 55.3% of net revenues in the prior year period. On a constant currency basis, cost of sales was $18.9 million or 56.5% of net revenues.

Speaker #5: On a constant currency basis, gross profit was 14.6 million or 43.5% of net revenues. Cost of sales was 18.9 million or 55.8% of net revenues, compared with 16.7 million or 55.3% of net revenues in the prior year period.

Speaker #5: On a constant currency basis, cost of sales was $18.9 million, or 56.5% of net revenues. GAAP net loss attributable to NETSOL for the six months totaled $2.1 million, or $0.18 per diluted share, compared with a GAAP net loss of $1.1 million, or $0.09 per diluted share, in the prior year period.

Sardar Abubakr: GAAP net loss attributable to NETSOL for the six months totaled $2.1 million or $0.18 per diluted share, compared with a GAAP net loss of $1.1 million or $0.09 per diluted share in the prior year period. On a constant currency basis, GAAP net loss attributable to NETSOL was $2.5 million or $0.21 per diluted share. Non-GAAP EBITDA for the six months ended 31 December 2025 was a loss of $0.1 million, compared with a non-GAAP EBITDA loss of $0.5 million for the prior year period. Turning to the balance sheet, cash and cash equivalents were $18.1 million at 31 December 2025, compared with $17.4 million at 30 June 2025.

Speaker #5: On a constant currency basis, GAAP net loss attributable to NETSOL was 2.5 million or 21 cents per diluted share. Non-GAAP EBITDA for the six months ended December 31st, 2025, was a loss of 0.1 million compared with a non-GAAP EBITDA loss of 0.5 million for the prior year period.

Speaker #5: Turning to the balance sheet, cash and cash equivalents were 18.1 million at December 31st, 2025, compared with 17.4 million at June 30th, 2025. Working capital was 26.4 million compared with 26.6 million, and NETSOL stockholders' equity was 35.9 million, or $3.04 per share.

Sardar Abubakr: Working capital was $26.4 million, compared with $26.6 million, and NETSOL's stockholders' equity was $35.9 million or $3.04 per share. For the first half of fiscal 2026, we delivered continued revenue growth across both recurring and services businesses, while maintaining a solid balance sheet and liquidity position. I'll now hand over the call back to Najeeb.

Speaker #5: For the first half of fiscal 2026, we delivered continued revenue growth across both recurring and services businesses, while maintaining a solid balance sheet and liquidity position.

Speaker #5: I'll now hand over the call back to Najeeb.

Speaker #4: Thank you, Abu Bakar. Looking ahead, we remain confident in our ability to capitalize on opportunities across our markets. We will continue investing in our product portfolio including AI-enabled capabilities across the transcend platform, while expanding our global footprint and enhancing our solutions to meet evolving client needs.

Najeeb Ghauri: Thank you, Abubakr. Looking ahead, we remain confident in our ability to capitalize on opportunities across our markets. We will continue investing in our product portfolio, including AI-enabled capabilities across the Transcend platform, while expanding our global footprint, and enhancing our solutions to meet evolving client needs. Our focus on long-term customer relationships, supported by a strong pipeline of recurring and services engagements, positions us well for continued progress. With that context, we have increased our full-year fiscal 2026 revenue growth guidance to nearly $73 million or better, supported by our current pipeline and continued investment in go-to-market initiatives, and our unified AI-enabled Transcend platform. While macroeconomic and currency dynamics remain a consideration, our diversified business model, execution discipline, and resilient customer base provide a solid foundation for the remainder of the fiscal year.

Speaker #4: Our focus long-term: customer relationships, supported by a strong pipeline of recurring and services engagements positioned us well for continued progress. With that context, we have increased our full-year fiscal 2026 revenue growth guidance to nearly $73 million or better.

Speaker #4: Supported by our current pipeline and continued investment in go-to-market initiatives and our unified AI-enabled transcend platform. While macroeconomic and currency dynamics remain a consideration, our diversified business model execution discipline and resilient customer base provide a solid foundation for the remainder of the fiscal year.

Speaker #4: Overall, our first half performance reinforces our view that NETSOL is well positioned to achieve our full-year objectives and continue creating value for our customers and shareholders.

Najeeb Ghauri: Overall, our first half performance reinforces our view that NETSOL is well positioned to achieve our full-year objectives and continue creating value for our customers and shareholders. With that, operator, please open the line for question and answer.

Speaker #4: With that, operator, please open the line for questions and answers.

Speaker #5: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad.

Operator 3: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue.... For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question comes from the line of Todd Felty with StoneX Group. Please proceed with your question.

Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue.... For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question comes from the line of Todd Felty with StoneX Group. Please proceed with your question.

Speaker #5: A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue.

Speaker #5: For participants using speaker equipment, it may be necessary to pick up your hands up before pressing the star keys. One moment, please, while we pull for questions.

Speaker #5: Thank you. Our first question comes from line of Todd Felty with Stonex Group. Please proceed with your question.

Speaker #6: Hey, congratulations on a great quarter. I think the 18.8 million may be an all-time record for a quarterly revenue. So that's great to see.

Todd Felty: Hey, congratulations on a great quarter. I think the $18.8 million may be an all-time record for quarterly revenue, so that's great to see. Wanted to ask about your margins. I know you had some recent hires and some travel expenses, but as those new hires get up to speed, do you expect continued margin improvement? And where do you think your margins will kind of stabilize out at?

Todd Felte: Hey, congratulations on a great quarter. I think the $18.8 million may be an all-time record for quarterly revenue, so that's great to see. Wanted to ask about your margins. I know you had some recent hires and some travel expenses, but as those new hires get up to speed, do you expect continued margin improvement? And where do you think your margins will kind of stabilize out at?

Speaker #6: Wanted to ask about your margins. I know you had some recent hires, and some travel expenses. But as those new hirees get up to speed, do you expect continued margin improvement?

Speaker #6: And where do you think your margins will kind of stabilize out at?

Najeeb Ghauri: Thank you, Todd. Absolutely. We are anticipating improving margins in the coming quarters in the next fiscal year. As you said rightly, we are continuously investing in our growth strategy. It means travel, new employees, building, new platforms, so forth. So I think the growth margin will improve, absolutely, and I think I can have you on Naeem, and, Abu jump in to add further.

Speaker #4: Thank you, Todd. Absolutely. We are anticipating improving margins in the coming quarters and the next fiscal year. As you said rightly, we are continuously investing our growth strategy.

Speaker #4: It means travel, new employees, building new platforms, so forth. So I think the growth margin will improve. Absolutely. And I think I can have your name and Abu jump in to add further.

Speaker #4: Yeah, I'll just add a little bit more color. So essentially, the new hirings are primarily in the AI teams. Todd. And we see that continuing for a period.

Sardar Abubakr: Yeah, I'll just add a little bit more color. So essentially, the new hirings are primarily in the AI teams, Todd, and we see that continuing for a period. We're also incurring some expense on cross-training. So what we have, a very aggressive plan to cross-train our existing workforce across horizontally in every department, from HR to software engineering and testing, accounting, admin. So literally, we are touching every single business segment. So internally, we are very, very confident that within the next six months, we will have a major transformation, phase one completed. And we'll go on to more advanced training as we go forward in the rest of the calendar year. Does that help?

Speaker #4: We're also incurring some expense on cross-training. So what we have very aggressive plan to cross-train our existing workforce across horizontally in every department from HR to software engineering and testing accounting admin.

Speaker #4: So literally, we are touching every single business segment. So internally, we are very, very confident that within the next six months, we will have a major transformation phase one completed.

Speaker #4: We'll go on to more advanced training as we go forward in the rest of the calendar year. Does that help?

Speaker #6: Yeah. Yeah. I'd like to just add that. Yeah. While I got you, I was wanting also to ask about the non-controlling interest and how that is computed.

Todd Felty: Yeah, I appreciate that. And, yeah, while I got you, I was wanting also to ask about the non-controlling interest and how that is, computed. I know that took a big chunk out of our earnings per share this quarter.

Todd Felte: Yeah, I appreciate that. And, yeah, while I got you, I was wanting also to ask about the non-controlling interest and how that is, computed. I know that took a big chunk out of our earnings per share this quarter.

Speaker #6: I know that took a big chunk out of our earnings per share this quarter.

Speaker #4: Do you want to answer, Abu? Just talking about the Pakistan subsidiary, right?

Najeeb Ghauri: You want to answer, Abu? Just talking about the Pakistan subsidiary, right?

Speaker #6: Minority interest, yeah.

Sardar Abubakr: Minority interest, yeah.

Speaker #4: Yeah, yeah.

Najeeb Ghauri: Yeah, yeah.

Speaker #6: Sure. So if I could, Todd, just go back to your previous question first, and then we'll come back to this one just to add some color.

Sardar Abubakr: Sure. So if I could, Todd, just go back to your previous question first, and then we'll come back to this one just to add some color. So, to take on what Naj and Naeem said, we will continue to invest in the right areas that will propel our future growth. But margin improvement, both at a gross and at a net level, is going to be important for our profitability story and our journey going forward. You probably will see, just very quickly, that our GP percent percentage revenues this quarter versus the preceding quarter was up 48% as compared to 44.5%. Cost of sales was down. Similarly, this quarter is 55.5% compared to the equivalent quarter of 52%.

Speaker #6: So to take on what Naj and Naeem said, we will continue to invest in the right areas that will propel our future growth. But margin improvement, both at a gross and at a net level, is going to be important for our profitability story and our journey going forward.

Speaker #6: You probably will see, just very quickly, that our GP percentage of revenues this quarter versus the preceding quarter was up 48% as compared to 44.5%.

Speaker #6: Cost of sales was down. Similarly, this quarter is 55.5% compared to the equivalent quarter of 52%. And then EBITDA, which is an important metric, of course, clocked at about a 9% margin compared to a loss in the equivalent quarter last year.

Sardar Abubakr: And then EBITDA, which is an important metric, of course, clocked at about a 9% margin compared to a loss in the equivalent quarter last period. I think what gives me confidence, Todd, in addition to that, is that our liquidity position is solid. We, the current ratio, but also our debt to equity, it gives us an opportunity to continue to invest in exciting growth markets. And I think we're at the intersection of both software, financial services, and mobility. Now, coming to your second question on non-controlling interest. If I understood that question, you were saying that, how is that computed?

Speaker #6: I think what gives me confidence, Todd, in addition to that is that our liquidity position is solid. The current ratio but also our debt-to-equity gives us an opportunity to continue to invest in exciting growth markets and I think we're at the intersection of both software financial services and mobility.

Speaker #6: Now, coming to your second question, on minority interest controlling, if I understood that question, you were saying that how is that computed? If you could just mention that again.

Todd Felty: That's correct.

Todd Felte: That's correct.

Sardar Abubakr: If you could just mention that again.

Speaker #4: Yeah, yeah.

Najeeb Ghauri: Yeah, yeah.

Speaker #6: Yeah. Just how is it computed? I know that there was a nice profit for the Pakistani subsidiary and I showed you took a $715,000 loss on that non-controlling interest.

Todd Felty: Yeah, just how is it computed? I know that there was a nice profit for the Pakistani subsidiary, and I showed you took a $715,000 loss on that non-controlling interest.

Todd Felte: Yeah, just how is it computed? I know that there was a nice profit for the Pakistani subsidiary, and I showed you took a $715,000 loss on that non-controlling interest.

Speaker #4: Yeah. We follow the standard definitions applied in GAAP for non-controlling interest. So, the Pakistani subsidiary is majority-owned, but there is a 30% minority interest.

Sardar Abubakr: Yeah, we, we follow the standard definitions applied in GAAP for non-controlling interest. So the Pakistani subsidiary is owned majority, but there is a 30%, minority interest, and we follow the standard definitions as per calculation for GAAP. Roger, if you want to add to that, you can feel free to add, if I missed anything.

Speaker #4: And we follow the standard definitions as per calculation for GAAP. Roger, if you want to add to that, you can feel free to add if I've missed anything.

Speaker #7: No, I think you have that correct. So Todd, if you look at our Pakistani entity, there we own almost 70%, 30% is held by a non-controlling interest.

Roger Almond: No, I think you have that correct. So Todd, if you look at our Pakistani entity, there we own almost 70%. 30% is held by non-controlling interests. So if they have, you know, recorded a very nice profit for the quarter or for the six months, then the 30% of their profit would then get allocated to the non-controlling interest piece. Based on the consolidation, all of their revenues would be included up in our revenues and costs into our costs, et cetera. And then, the non-controlling interest is then calculated down at one number in the bottom. So that's. And we follow the GAAP processes, Abu had mentioned.

Speaker #7: So as they have recorded a very nice profit for the quarter, or for the six months, then the 30% of their profit would then get allocated to the non-controlling interest piece.

Speaker #7: Based on the consolidation, all of their revenues would be included up in our revenues and costs into our costs, etc. And then the non-controlling interest is then calculated down at one number in the bottom.

Speaker #7: So that's we follow the GAAP process as Abu had mentioned.

Speaker #6: Okay. That's helpful. So basically, the better that the subsidiary does, it will add to your revenues. But if it's really profitable, a third of that will have to be written off in a non-controlling interest.

Todd Felty: Okay, that's helpful. So basically, the better that the subsidiary does, it will add to your revenues, but if it's really profitable, you know, 1/3 of that will have to be written off in a non-controlling interest?

Todd Felte: Okay, that's helpful. So basically, the better that the subsidiary does, it will add to your revenues, but if it's really profitable, you know, 1/3 of that will have to be written off in a non-controlling interest?

Speaker #7: Correct.

Roger Almond: Correct.

Speaker #6: So Todd, yes. So as a subsidiary and not an affiliate, we will consolidate all revenues and costs. But from the profit share, you're right.

Sardar Abubakr: So, Todd, yes. So as a subsidiary and not an affiliate, we will consolidate all revenues and costs. But from the profit share, you're right, any earnings are split on a 70/30 basis between the parent and minority interests.

Speaker #6: Any earnings are split on a 70/30 basis between the parent and minority interests. Okay. That's helpful. And then finally, to allude to your comments about the strong financial position the company's in, as a shareholder, we see the stock still trading just barely above book value.

Todd Felty: Okay, that's helpful. And then finally, to allude to your comments about the strong financial position the company's in. You know, as a shareholder, we see the stock still... you know, trading just barely above book value. Have you thought about allocating some of that $18 million in cash, you know, a small amount to either a stock buyback or maybe a small dividend?

Todd Felte: Okay, that's helpful. And then finally, to allude to your comments about the strong financial position the company's in. You know, as a shareholder, we see the stock still... you know, trading just barely above book value. Have you thought about allocating some of that $18 million in cash, you know, a small amount to either a stock buyback or maybe a small dividend?

Speaker #6: Have you thought about allocating some of that $18 million in cash, a small amount to either a stock buyback or maybe a small dividend?

Speaker #4: I think, Todd, thank you.

Najeeb Ghauri: Todd, thank you for asking the question. We did that a couple of years ago, and we always open to same approach, but as soon as we can decide between, within the board, then we'll get back to you accordingly. Yeah, I mean, we'd definitely like to see-

Speaker #6: Go ahead. Go ahead. Go ahead.

Speaker #4: I'm sorry. Todd, thank you for asking the question. We did that a couple of years ago, and we always open to same approach. But as soon as we can decide between the boards, then we'll give back to you accordingly.

Speaker #4: I mean, we'll definitely like to see profits go up. Yeah. But Todd, I want to thank you especially for taking time to visit us a few months ago.

Todd Felty: Okay, that's all from me.

Todd Felte: Okay, that's all from me.

Najeeb Ghauri: Yeah. But Todd, I wanna thank you especially for taking the time to visit us a few months ago. It shows your commitment and belief in our company. So thank you so much for your long-term view.

Speaker #4: It shows your commitment and belief in our company. So thank you so much for your long-term view.

Speaker #6: Thank you. Yeah. It was great to visit you, and I'll jump back in the queue. Thank you so much.

Todd Felty: Yeah, it was great to visit you, and I'll jump back in the queue. Thank you so much.

Todd Felte: Yeah, it was great to visit you, and I'll jump back in the queue. Thank you so much.

Speaker #4: Sure. Thanks, Todd.

Najeeb Ghauri: Yep. Thanks, Todd.

Speaker #1: As a reminder, if you would like to ask a question, press star one on your telephone keypad. One moment, please. While we repoll for any additional questions.

Operator 3: As a reminder, if you would like to ask a question, press star one on your telephone keypad. One moment please, while we repoll for any additional questions. We have no further questions at this time. Mr. Ghauri, I'd like to turn the floor back over to you for closing comments.

Operator: As a reminder, if you would like to ask a question, press star one on your telephone keypad. One moment please, while we repoll for any additional questions. We have no further questions at this time. Mr. Ghauri, I'd like to turn the floor back over to you for closing comments.

Speaker #1: We have no further questions at this time. Mr. Guaria, I'd like to turn the floor back over to you for closing comments.

Speaker #4: Thank you for joining today's call. Todd, you want to come back?

Najeeb Ghauri: Thank you for joining today's call. Sorry, Todd, you want to come back? Yeah, I thought Todd wanted to come back. He's going back in the queue. Is he in the queue, operator?

Speaker #6: Yeah, I thought Todd wanted to come back. He's going back in the queue.

Speaker #4: Is he in the queue, operator?

Operator 3: Todd, if you want to hit star one again.

Speaker #1: Todd, if you want to hit star one again. Okay. Yep.

Operator: Todd, if you want to hit star one again.

Najeeb Ghauri: No, I think it's okay. It's fine.

Operator 3: Okay. Yep.

Operator: Okay. Yep.

Speaker #4: Well, thank you for joining us today.

Najeeb Ghauri: Well, thank you for joining the call today.

Operator 3: Oh, no, I'm sorry. He did jump back in. Let me get you.

Operator: Oh, no, I'm sorry. He did jump back in. Let me get you.

Speaker #1: No, I'm sorry. He did jump back in. Let me go check.

Speaker #4: Okay.

Najeeb Ghauri: Okay.

Speaker #1: Todd, your line is live.

Operator 3: Todd, your line is live.

Operator: Todd, your line is live.

Speaker #6: Okay. I'm good with that. Again, congratulations on a great quarter and I look forward to future success.

Todd Felty: Okay, I'm good with that. Again, congratulations on a great quarter, and I look forward to future success.

Todd Felte: Okay, I'm good with that. Again, congratulations on a great quarter, and I look forward to future success.

Speaker #4: And we'll come back again to Encino, California, Todd. Thank you for joining us today for your ongoing interest in NETSOL. We look forward to updating you on our continued progress in the coming quarters.

Najeeb Ghauri: Do come back again to Encino, California, Todd. Thank you for joining us today for your ongoing interest in NetSol. We look forward to updating you on our continued progress in the coming quarters. Have a nice day.

Speaker #4: Have a nice day.

Speaker #1: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.

Operator 3: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.

Operator: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.

Najeeb Ghauri: Thank you, operator.

Q2 2026 NetSol Technologies Inc Earnings Call

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