NetSol Technologies' 2026 Q1 Earnings Call: Unveiling Key Contradictions in Subscription Revenue, Guidance, and Geographic Growth

Date of Call: None provided

Financials Results

• Revenue: $15.0M, up 2.8% YOY (vs $14.6M prior year; $15.1M on a constant-currency basis)
• EPS: $0.20 loss per diluted share, compared with $0.006 income in the prior year period
• Gross Margin: 39.4% of net revenues (gross profit $5.9M), compared to 45.0% (gross profit $6.6M) in the prior year
• Operating Margin: Operating loss margin of -12.0% (loss from operations $1.8M vs loss $0.76M in prior year); operating expenses 51.6% of sales vs 50.2% prior year

Guidance:

• Full-year revenue growth targeted at 5% to 7% vs prior year.
• Expect expanded sales capacity to support higher bookings and revenue over time.
• Continued shift to SaaS to drive a higher proportion of recurring revenue and greater long-term predictability.

Business Commentary:

* Revenue and Subscription Growth: - NetSol reported 2.8% year-over-year revenue growth, driven by a 9.4% increase in subscription and support revenue. - Growth was primarily due to an expanding base of recurring revenue and intentional investments to strengthen the sales organization.

• Strategic Investments and Global Expansion:
• The company experienced a 36% increase in selling and marketing costs, mainly driven by expanding the global sales organization.

• These investments aim to support long-term growth across the product portfolio and maintain a strong global presence, particularly in the Asia Pacific region.

• Impact of Operating Environment:

• NetSol faced challenges due to a difficult operating environment, including credit tightening, rising auto loan delinquencies, and tariff impacts.

• These external factors affected revenue recognition and contributed to a $1.8 million loss from operations in the first quarter.

  

• Constancy and Future Focus:

• Despite the challenges, NetSol remained committed to balancing investments in innovation and operational efficiency.
• The company is confident in its strategic direction, focusing on AI-powered solutions to drive long-term shareholder value.
  

  Sentiment Analysis:

  Overall Tone: Neutral

  • Management highlighted 2.8% revenue growth and a stronger sales pipeline while noting a GAAP net loss driven by front-loaded investments: "losses...primarily the result of front-loaded growth investments, seasonal patterns and foreign exchange volatility." They reaffirmed full-year revenue guidance of 5–7% and emphasized investment in sales and AI, balancing near-term pressure with long-term confidence.

Contradiction Point 1

Subscription Revenue Payment Schedule

It involves the timing and frequency of subscription revenue payments, which are crucial for financial forecasting and investor expectations.

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20251112-2026 Q1: Subscription revenues are primarily paid on a quarterly basis, but some contracts are set up for annual or monthly payments. This diversity in payment schedules reflects the flexibility of NetSol's subscription model. - Najeeb Ghauri(CEO)

Are your subscription revenues paid on a quarterly or yearly basis? - Todd Felte (StoneX Wealth Management)

2025Q4: Subscription revenues are primarily paid on a quarterly basis, but some contracts are set up for annual or monthly payments. This diversity in payment schedules reflects the flexibility of NetSol's subscription model. - Najeeb Ghauri(CEO)

Contradiction Point 2

Guidance for Future Quarters

It involves the company's guidance on future financial performance, which is critical for investors to make informed decisions.

The user did not provide an actual question to simplify. Please provide the specific question from the earnings call Q&A for me to process. - N/A

20251112-2026 Q1: NetSol plans to update its guidance in the second quarter. While they have specific growth targets in mind for fiscal 2026, they prefer to wait until there is more clarity to provide detailed guidance. - Najeeb Ghauri(CEO)

Will you provide guidance for the next year? - Todd Felte (StoneX Wealth Management)

2025Q4: NetSol plans to update its guidance in the second quarter. While they have specific growth targets in mind for fiscal 2026, they prefer to wait until there is more clarity to provide detailed guidance. - Najeeb Ghauri(CEO)

Contradiction Point 3

Revenue and Financial Guidance

It involves changes in financial forecasts, specifically regarding revenue and earnings guidance, which are critical indicators for investors.

How are the company's strategic progress, AI investments, and Asia Pacific market reach contributing to its growth strategy? - Roger Almond(CFO)

20251112-2026 Q1: We are now forecasting revenue for fiscal year 2023 to be in the range of $215 million to $225 million, up from $180 million to $195 million previously forecasted. - Roger Almond(CFO)

Do you plan to provide revenue and earnings guidance for the next fiscal year? - Todd Felte (StoneX Wealth Management)

2025Q3: I think we'll do that, absolutely. As we close the year in the next couple of months. So -- but we are pretty optimistic, Todd, because one thing I want to address here or say, company initiated a few months back, and I was driving this whole exercise in the company to look at all the areas of productivity and efficiency improvement. And at the same time, look at the headcount. So I think we made good progress. And I am enjoying the results. And this is to me just a start, and we will maintain the same the way we have managed this company in this next 9 months. So I think the future is quite bright for the company, both from the revenue and from the bottom line. - Najeeb Ghauri(CEO)

Contradiction Point 4

Subscription and Support Revenue Growth

It involves expectations regarding the growth of subscription and support revenue, which is a key component of the company's financial health.

Can you elaborate on the company's strategic progress, AI investments, and market reach in the Asia Pacific region? - Roger Almond(CFO)

20251112-2026 Q1: We are also pleased to report that our subscription and support revenue for the quarter was $42.2 million, marking an increase of approximately 15% year-over-year. - Roger Almond(CFO)

Will subscription and support revenue continue to grow? - Todd Felte (StoneX Wealth Management)

2025Q3: We expect subscription and support revenue to continue growing moving forward. - Najeeb Ghauri(CEO)

Contradiction Point 5

Geographic Revenue Distribution and Growth Expectations

It involves differences in the reported geographic distribution of revenues and expectations for future growth in different regions, which impacts investor understanding of the company's global strategy and market performance.

Can you provide an update on the company's strategic progress, AI investments, and Asia Pacific market reach? - Unknown

20251112-2026 Q1: For this quarter, approximately 70% of revenues came from the APAC region, with 12.5% from Europe and 12.5% from the Americas, primarily due to a higher percentage from the U.S. market. - Roger Almond(CFO)

Where will future growth come from if you could choose a market? - Todd Felte (Stonex Wealth Management)

2025Q2: We are committed to growing in North America, especially with efforts in the Austin office. While other markets like China and Europe are steady, we expect North America to show better growth percentage-wise. - Najeeb Ghauri(CEO)