NETSOL Technologies — Fiscal First Quarter 2027 Earnings Summary

Financial Performance:

• Total net revenues increased 9.3% year-over-year to $16.4 million, compared to $15.0 million in the prior-year period; constant currency revenue was $16.5 million.
• Subscription and support revenue grew 6.1% to $9.5 million, while services revenue increased 6.3% to $6.4 million.
• Gross profit rose to $8.3 million, representing a gross margin of 50.5%, an expansion of more than 1,100 basis points from 39.4% in the prior-year period.
• Income from operations was $0.4 million, a significant improvement from an operating loss of $1.8 million in the prior-year period, resulting in an operating margin of 2.5% versus negative 12.2%.
• GAAP net income attributable to NETSOL was $0.16 million ($0.01 per diluted share), compared to a net loss of $2.36 million ($0.21 per diluted share) in the prior-year period.
• Adjusted EBITDA attributable to NETSOL was $0.48 million, compared to a negative $1.66 million in the prior-year period.
• Net cash used in operating activities was $5.6 million, primarily driven by working capital changes, compared to $5.3 million provided in the prior-year period.
• Cash and cash equivalents stood at $19.7 million at September 30, 2026, down from $27.1 million at June 30, 2026.
• Stockholders' equity was $42.0 million at September 30, 2026.

Guidance and Future Outlook:

• Management stated that revenue, gross margin, and profitability moved in the right direction compared to the prior year.
• Priorities for the remainder of the year include growing recurring revenue, building on year-over-year margin gains, and continuing to convert consolidated performance into shareholder value.
• The fiscal 2027 outlook assumes continued subscription growth, execution of contracted implementations, disciplined cost management, and no material acquisitions.

Business Segments and Product Lines:

• Headcount decreased to 1,272 at September 30, 2026, from 1,370 at June 30, 2026 and 1,442 at September 30, 2025.
• Gross margin benefited from revenue mix and the capitalization of approximately $1.0 million of software development costs, compared to none in the prior-year period.
• The company brought Transcend Retail live across two new U.S. dealerships: Atlanta Autos and Royal Coach RV.
• BMO Equipment Finance, a 30-year customer, migrated from the legacy LeasePak platform to Transcend Finance.

Market and Competitive Landscape:

• Revenue and gross margin for the first quarter were the highest for a first quarter in the past five fiscal years.
• The company serves automotive and equipment OEMs, dealerships, auto captives, and financial institutions across over 30 countries.
• Foreign currency exchange loss narrowed significantly to $7,000, compared to $287,000 in the prior-year period.

Risks and Challenges:

• Net cash used in operating activities was driven by decreases in contract liabilities ($3.4 million), increases in contract assets ($2.6 million), and decreases in accounts payable and accrued expenses ($1.5 million).
• The company is evaluating strategic alternatives for its subsidiary Virtual Lease Services Limited (VLS), including a potential sale or wind-down; VLS revenue represented approximately 1.7% of consolidated revenues.
• If a sale or wind-down of VLS is completed, the company may recognize a loss on disposal and incur exit-related costs, which cannot be estimated at this time.
• Forward-looking statements are subject to risks including timing of customer agreements, foreign currency volatility, customer concentration, and macroeconomic conditions.

Management Commentary and Tone:

• CEO Najeeb Ghauri described the quarter as showing progress toward making the company's performance more predictable through growth, margin improvement, and deepening customer relationships.
• CFO Sardar Abubakr noted that the first quarter marked a clear improvement from the prior year, with liquidity sufficient to fund the business through the year.
• CFO Abubakr explained that operating cash outflow was primarily due to delivering against billings collected in the fourth quarter, whereas the fourth quarter saw billing and collection ahead of delivery.
• Asad Ghauri, Global Head of Sales, highlighted strong commercial momentum and a broader pattern of customers migrating to Transcend Finance.

Other Key Points:

• On October 30, 2026, the board of NETSOL Technologies Limited (a majority-owned subsidiary listed on the Pakistan Stock Exchange) recommended a buy-back of up to 4,000,000 shares (approximately 4.45% of issued capital) to be held in treasury, subject to shareholder approval on December 3, 2026.
• The company invested approximately $2.0 million in property, equipment, and capitalized software development during the quarter, compared to approximately $0.5 million in the prior-year period.
• The board of NETSOL Technologies Europe Limited began evaluating strategic alternatives for VLS on October 1, 2026.