Transcript: NETSOL Technologies Q4 2026 Earnings Conference Call

NETSOL Technologies (NASDAQ: NTWK ) held its fourth-quarter earnings conference call on Monday. Below is the complete transcript from the call. This content is powered APIs. 5% increase year-over-year, surpassing their $73 million guidance.

The company is transitioning from a services and license business to a platform business, with recurring subscription and support revenue now accounting for about half of total revenue. , and integrating AI to enhance operations. Recent notable contracts include a major upgrade deal with BMO and a large contract extension with a Tier 1 global auto captive customer. For fiscal 2027, NETSOL expects net revenue growth of 13% to 16%, gross margins of approximately 50% or better, and consolidated Adjusted EBITDA growth of 15% to 25%.

Full Transcript Perry, Investor Relations Good morning and welcome to NETSOL Technologies fourth quarter and full fiscal year ended June 30, 2026 earnings conference call. On the call today are our Founder and Chief Executive Officer of NETSOL Technologies, Incorporated, Najeeb Ghauri; Global Head of Sales and Group Managing Director of Europe, Asad Ghauri; Chief Financial Officer, Sardar Abubakar; and Senior Vice President of Legal Affairs, General Counsel and Corporate Secretary, Patti McLassen. Also available for the Q&A portion are Chief Accounting Officer, Roger Ahmed, and Chief Marketing Officer, Eric Wagner.

I will now turn the call over to Patti, who will provide the necessary disclaimer regarding the forward-looking statements made during today's call. Patti, please go ahead. Patti McLassen, General Counsel and Corporate Secretary Thank you. Good morning everyone and thank you for joining us today.

After we review the Company's business highlights and financial results for the fourth quarter and full fiscal year ended June 30, 2026, we will open the call for questions. Before we begin, I'd like to remind you that our remarks today will 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 include our fiscal 2027 guidance, reflect management's current expectations, and are subject to risks and uncertainties, and actual results may differ 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 our filings with the Securities and Exchange Commission, including our most recent Form 10-K and quarterly reports on Form 10-Q. 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 figure can be found in the press release issued earlier today. com and has been furnished as an exhibit to the Form 8-K we will file with our press release issued this morning.

com and through a link included in today's press release. At this time, all participants are in listen-only mode. I will now hand the call over to our Founder and CEO, Najeeb. Go ahead, Najeeb.

Najeeb Ghauri, Chairman & CEO Thank you, Perry. Good morning everyone and thank you for joining our call today to review our results for the fourth quarter and full fiscal year ended June 30, 2026. Fiscal ’26 was the strongest financial year in NETSOL history. 5% year-over-year and over our $73 million guidance.

Non-GAAP EBITDA grew almost 23% and income from operations nearly doubled. The growth reached the bottom line this year. These results reflect a company in the middle of a deliberate transformation from a services and license business to a platform business. Recurring subscription and support revenue now represents approximately half of our total revenue.

Later in the call, Sardar Abu, our CFO, will walk you through remaining performance obligations and the measures we will report each quarter so you can track the durability of this base. In June, NETSOL returned to the Russell indexes, added to six benchmarks including the Russell 3000 and the Russell Microcap Index. Membership matters for a company our size. It makes NETSOL eligible for the many institutional mandates that are limited to index constituents, and it puts us back in the universes where institutional investors screen.

Let me talk about the business behind these numbers. Fiscal 2026 gave us the proof points across every part of our strategy. Earlier this month we announced that BMO has signed a contract to upgrade from our legacy platform to Transcend Finance. BMO is one of the largest banks in North America and this agreement is the clearest validation yet of our upgrade strategy.

We have customers across North America who have run our acquired legacy software for decades. Each of them now has a modern path forward, and BMO shows what that path looks like: a long-tenured customer choosing to deepen the relationship with NETSOL on our newest technology. Across the rest of the business, the platform continued to deliver. In December we signed one of the largest Transcend Finance contract extensions in our history with a Tier 1 global auto captive customer.

Transcend Retail became a growth engine in the US, and Asad Ghauri will take you through the momentum in detail. Our Asia Pacific business continued to perform, anchored by market leadership in China and expanding alongside our customers across the region. Fiscal 2026 was also the year we built the team for the next phase. Sardar Abubakar joined us as Chief Financial Officer in January.

At our annual meeting in June, shareholders elected a strengthened board, re-electing Ian Smith, the former CEO of BMW Group Financial Services for the USA and the Americas, and adding Richard Howard, the former President and CEO of Daimler Truck Financial Services for North America, and Ahmed Ibrahim, the CEO of Jazz World, one of the world's biggest digital operators who earlier in his career held senior leadership roles at the Ford Motor Company and Jaguar Land Rover. The people who ran our customers’ businesses now help govern ours. I can think of no stronger endorsement of where the company is headed. We are also transforming how we operate across Transcend Finance.

We are reducing the resource intensity of our development and delivery model through AI-enabled development, automation, and structural efficiencies. I want to be clear about how we think about this. It is not about reducing headcount for its own sake. It is about building a more scalable organization, one that is more nimble and faster to respond to changing market requirements, where our engineering and delivery capacity can grow client impact without growing costs at the same time.

As part of that, we are focusing our investment on the core Transcend platform and the adjacencies where NETSOL has a defensible customer and domain advantage. Looking to fiscal 2027 our priorities are very clear. First, scale Transcend Retail across the US dealer market. Second, embed AI across our products and our operations.

Third, upgrade our legacy install base to Transcend, with BMO as a template. And fourth, grow with our customers as they expand into new markets. You saw that model this year when a leading Chinese leasing company went live on Transcend Finance in Indonesia. When our customers enter a new country, they take NETSOL with them.

We are also introducing full-year guidance with our fourth quarter results. Sardar Abu will take you through the numbers. I will close with this. We believe the value of what we have built—the customer base, the recurring revenue, the platform—is not yet reflected in our market valuation, and we see that as an opportunity.

Last December we rang the bell in Times Square, New York to mark our 26th year on NASDAQ. There's no better way to honor that milestone than the strongest year in our history, and we intend to build on it. With that, I'll hand the call over to Asad Ghauri, our Global Head of Sales and Group Managing Director of Europe, to walk through the commercial and sales updates. Asad Ghauri, Global Head of Sales and Group Managing Director, Europe Thank you, Najeeb, and good morning everyone.

My focus today is on what's converting into revenue for us and the pipeline behind it. But before I start, one point of context for everyone on this call is our key messaging. Our core growth engine today and going forward is Transcend Finance worldwide, and Transcend Retail is our big bet in our home market in the US, and total focus is on the execution of that. I'll start with the go-lives.

This year we've had multiple. A leading Chinese leasing company launched its Indonesian operations on Transcend Finance. Northridge Finance, a division of the Bank of Ireland, went live on Transcend to support its growth strategy in the UK. A Tier 1 US-based auto captive went live on Transcend Finance in China, a deal valued at multiple millions.

Tiora Leasing Thailand upgraded to the latest wholesale finance system on our Transcend platform, expanding its use of our technology. These go-lives convert into recurring subscription and support revenues going forward. Sardar will be quantifying that later in the call. We also renewed a multi-million-dollar contract with a Tier 1 multinational bank in the United Kingdom, extending that relationship for more than a decade by another 10 years and deepening our presence in the UK asset finance market.

Let me turn to Transcend Retail, our digital retail platform for OEMs and dealer groups. The commercial progress this year was real. It's accelerating. Sonic Automotive, the Fortune 500 dealership group, is building its branded digital retail experience on our platform.

Our platform is rolling out across approximately 350 franchise dealerships of a premium global OEM in North America, one of the largest digital retail deployments in the US automotive market. The US digital retail market remains large and underpenetrated, and our combination of finance and leasing depth, fast time to go live, and a modern customer experience is winning head-to-head evaluations against well-funded competitors. We're the only vendor at the table who also runs the lender side of the transaction, and that is why we will win. We expect Transcend Retail to be one of the most important growth stories in the company over the next several years.

Alongside retail there is a second US growth motion: upgrades. Our legacy installed base is a defined set of accounts where we are the incumbents with relationships that in some cases span decades. Template legacy-to-Transcend upgrades are now an active category in our pipeline, and each upgrade turns a maintenance relationship into a modern subscription relationship. A word on AI.

It's an area of focus for the company and it's increasingly central to how customers engage with us commercially. During the year we introduced various product functionalities in the AI-enabled credit decisioning areas, automating manual tasks, accelerating decision time, and improving underwriting accuracy, and we deployed intelligent document processing systems with AI capability within the platform. All of these have amplified the efficiencies for our clients and we expect to push forward with that. Another key aspect of our AI focus is our platform has become AI-native.

So while we focus on presenting products within our platforms, the enablement of our customers to be able to deploy their own AI functional pieces is as important, and the architecture currently of Transcend Finance and Retail supports that, and that has been real traction for us. Finally, the pipeline remains strong, supported both by expansion within our existing customer base and by new business development. The pipeline, together with the upgrades and rollouts already signed—BMO, the OEM retail deployment, the expansion customers are taking to new markets—is what underpins the guidance Sardar will walk you through.

With that, I'll hand over the call to our CFO, Sardar, to review the financial results. Roger Almond, CFO Thank you, Asad, and good morning, everyone. Fiscal 2026 was an important year for the company. We delivered double-digit revenue growth, expanded gross and operating margins, nearly doubled operating income and generated strong cash flow.

Just as importantly, we are putting in place the financial discipline, operating model and performance metrics required to make this progress durable. My comments will cover five areas: the rebound and fourth quarter exit rate; the quality of the full-year results; the strength and use of our balance sheet; the actions underway to improve earnings conversion and simplify the organization; and our guidance for fiscal 2027. Before turning to the full year, I want to provide a fourth-quarter perspective. 5% year over year.

7 million. 2%. 4% last year. 22.

The exit rate is particularly important in the context of our start to the new year. 4 million. 6% and operating income was $3 million. 5 million.

3 million. This demonstrates a meaningful rebound in execution while recognizing that timing of agreements, implementation milestones and development capitalization can create quarter-to-quarter variability. 4 million, above our $73 million guidance. 8 million, demonstrating continued growth in the recurring foundations of the business.

6 million as we progressed. 7 million associated with the renewal and amendment of an existing Transcend customer agreement. We want investors to distinguish absolute recurring revenue growth from revenue mix. 8% last year.

Because license revenue increased this year, we will increasingly supplement this disclosure with consistent measures of recurring revenue, remaining performance obligations, and implementation activity. We are also introducing a metric we call contracted revenue. As of June 30, 2026, contracted revenue was approximately $60 million. We define this as revenue expected under existing signed agreements plus our best estimate of change requests from those same customers and same agreements.

It is not annual recurring revenue, not backlog, and of course not a guaranteed revenue floor. We will report this each quarter on a consistent basis and our objective is to grow well above it through Transcend deployments, expansion within existing customers, selected new customers and partnerships. 6%. 3%.

These are the clearest indicators of improved execution. The results benefited from revenue mix, delivery leverage and the capitalization of qualifying software development costs. We will provide investors with clearer visibility into total product development investment so that the underlying trend remains transparent. 8% to $8 million.

42 million. 73 million the prior year. Comparison has been recast to exclude foreign exchange gains and losses on a consistent basis. Reconciliations of all non-GAAP measures are included in today's earnings release.

25 per diluted share, consistent with the prior year. 87 million. 07 million. 27 million lower year over year.

65 million.