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Operator
$740,000 in Q1 last year. Our GAAP net loss attributable to net sold for the first quarter fiscal 2023 totaled $621,000, or $0.06 per diluted share. And on a constant currency basis, our net loss totaled $912,000, or $0.08 per diluted share. This compares with GAAP net income of $188,000, or $0.02 per diluted share in the first quarter of last year. The decrease in GAAP net income attributable to net sold for the quarter was primarily a result of cost to support revenues increasing at a greater rate than increases in revenues. As I mentioned on previous calls, it's important to point out that included in our net loss this quarter was a gain of 1.3 million on foreign currency exchange transactions, and on a constant currency basis, 1.8 million, compared to a gain of 1.3 million in Q1 of last year. Because we operate in several geographical regions, a significant portion of our business is conducted in currencies other than the US dollar. A decrease in the value of the US dollar compared to foreign currency exchange rates generally has the effect of increasing our revenues, but also increases our expenses denominated in currencies other than the US dollar. Similarly, as the US dollar gains strength relative to foreign currency exchange rates, It tends to reduce our revenues, but it also reduces our expenses denominated in currencies other than the U.S. dollar. We plan our business accordingly by deploying additional resources to areas of expansion while continuing to monitor our overall expenditures given the economic uncertainties of our target markets. Moving to our non-GAAP metrics, our non-GAAP adjusted EBITDA for the first quarter of fiscal 2023 totaled a negative $28,000. or zero cents per diluted share and on a constant currency basis at negative 136,000 or one cent per diluted share compared with non-GAAP adjusted EBITDA of 770,000 or seven cents per diluted share in the first quarter of last year. Please see the reconciliation schedules contained in our earnings release for revised calculations of adjusted EBITDA for the quarters ended September 30th, 2022 and 2021. Turning to our balance sheet, at quarter end, we had cash and cash equivalents of approximately $21 million or approximately $1.86 per diluted common share. Total net sole stockholders' equity at September 30, 2022 was $42.1 million or $3.73 per share. That concludes my prepared remarks. I'll now turn the call back over to Najeeb for an overview of our business updates. Najeeb?
Gowrie
Thank you, Roger. I'll now take a minute to provide updates within the major components of our growth strategy. We are seeing a return to sales growth with a related increase in expenses to support our increased business activity. Our cash position remains healthy, providing additional resources to support our core business, as well as strategic investment in high return long-term opportunities, including our work in the Autos Innovation Lab. We are cautiously optimistic for our growth overall on a constant currency basis, but are cognizant of the macro and microeconomic challenges facing the world. We hope to be in a better position to provide some financial guidance when we announce second quarter 2023. With that said, we anticipate continuous and double-digit revenue growth of annual recurring revenue in SaaS and support services. Moving on the second component of our strategy, we are innovating in new areas and looking to create partnerships with technology and personnel, which can be a major benefit to other organizations as well as our own. To this end, I'd like to take some time to provide a brief update on our progress within the Autos Innovation Lab. Recent traction in the U.S. through Otto's offering has provided excellent validation of Nexsol's commitment to innovation. The Mini Anywhere program, powered by Otto's digital retailing suite, has now been adopted by 38 mini-dealers across 15 states, which includes 10 additional enrollments post Q1. At the end of Q1, monthly SaaS subscription and service revenue grew to just over $75,000 with 28 dealers live on the platform. And with the 38 dealerships enrollment today, monthly recurring revenue reaches approximately $100,000. One of the main catalysts for the continued adoption and buy-in from many USA and its dealership is the blended one to five lead conversion ratio that Mini Anywhere has achieved, meaning for every five opportunities we identified through the platform, one of those leads will convert to a vehicle sale. This is proof that despite recent inventory shortages, e-commerce for big ticket purchases is a necessity for the next generation of consumers. Another factor that has been a key to the platform's success is the continuous addition of new features, primarily driven by understanding dealer and customer needs through data we derive from analytics, user forums, interviews, surveys, and market research. In the most recent update, several enhancements were added, including chat capability, allowing customers and dealers to communicate directly in-app, and enhanced sales enablement tools, allowing dealers to send recommended vehicles and personalized deal structures as deep links for customers to transact on seamlessly. These features together cater to more dynamic sales interactions that blend physical and digital touchpoints and facilitates the upselling of add-on products or negotiation of deal terms. As we progress in rolling out the platform across the nation, we continue to receive multiple dealer enrollments every month. We look forward to continuing the journey with our partners at Mini USA, and we are very proud to be front and center, a technology fit for the industry's shift to digital sales models. We started Autos because we saw the beginnings of a fundamental change in consumer behavior, not only the way they purchase assets, but also in the way they use assets. Consumers seek flexibility, affordability, and convenience. And the industry responded by offering new mobility models and alternate usage options, such as car sharing, and car subscriptions, we formed a vision to provide OEMs, lenders, and retailers with the technology backbone and tools to sustainably launch and scale these new types of models. As further validation to that vision, I'm excited to share that we have signed a new agreement with a Tier 1 automotive company in the U.S. to provide our auto mobility platform, which will manage back-office operations for their vehicle subscription business. Undoubtedly, our success with MINI was a strong reference in winning this contract, and we look forward to evolving both partnerships over the coming months. Looking ahead, we are taking the next steps in our commitments to FinTech innovation and building sure place SaaS products under the umbrella of our newly formed APEX marketplace starting with our most recent launch of Flex, an API-based ready-to-use calculation engine that guarantees precise calculations at all stages of the contract life cycles through various calculation types. Flex is a one-stop solution. providing an instant cloud-based calculation engine with an out-of-the-box integration that can be implemented in an organization's products, services, and ecosystem. We have already seen early traction with European Merchant Bank becoming the first subscriber to FlexSolutions. Over the coming months, we will continue to market Flex to the global credit industry and launch more pure play SaaS products like Flex under our Apex marketplace. With two leading U.S. automotive companies trusting the Autos platform and early traction of our first pure SaaS play product Flex, We are now positioned to be a leading provider of disruptive, innovative, and digital solutions, complementing our flagship asset offerings in the US market and globally. With this overview completed, I will now get into our operational updates from this quarter. Starting in APAC. And with the previously announced 12-country $110 million contract with Mercedes-Benz Mobility, we are continuing to make considerable progress along our multi-year, multi-country implementation roadmap. I'm happy to report today that we have now successfully delivered 85% of the program. At the moment, we have ongoing implementations in Japan, Korea, Australia, and Taiwan that are expected to be concluded within 2023. Finally, our second largest flagship Ascent contract with BMW Flying Services for over $30 million. A global automotive flying services company in China continues to move forward. Based on additional implementation considerations, we are currently anticipating a 2023 go-live. With the recent execution of new SOWs with different customers, across the globe, I'm happy to report that our professional services vertical has started growing nicely. Demand for additional customization services from existing APAC clients continues to rise. As a quarterly witness, revenues earned in excess of two million dollars from these additional services alone. Existence support revenues from our APAC clients are also expected to go up in the following year on account of renegotiations underway and additional services delivered to APEC lines. Looking ahead, our pipeline of opportunities within the APEC region continues to grow. We are encouraged by the quality of opportunities we are seeing in our largest core market and believe the ongoing recovery in this region to be emblematic of a larger return to work across our global operations. Moving next to our European operations or NDE. Europe and North America remain exciting new growth areas for NAPSOLE. We are strategically marketing our cloud and SaaS-based offering specifically in these regions, which are contributing to their growing subscription and support revenues noted earlier. We have several opportunities with Europe specifically. They are making their way through the sales cycle. While we can't control when some of these deals get signed, We believe our current momentum, combined with the critical mass of potential deals, bodes well for some future wins in the coming months. During this quarter, we continue to implement NFS Ascent for a major Scandinavian bank with the plan for four countries go live by 2024. We anticipate considerable new work to be generated from the European market as we move through the process of these implementations. Finishing with our North American operations on NTA, we previously announced the first official sale for NFL Ascend in the U.S., in the U.S. market, an agreement with Motorcycle Group to deploy the cloud-based version of our flagship platform across their entire operations, including our Omni point of sale and contract management system to support retail lending and leasing. Motorcycle Group, consisting of Moto Lease and Moto Loan, presents lease and loan offers simultaneously to qualified applicants so that motorcycle and power sports dealers can maximize their sales and enables consumers to pre-qualify and select their vehicle through motorcycle advisors. Project implementation began in July and is expected to go live in February 2023. Going forward, we will be looking to leverage this breakthrough agreement to prospective clients throughout the North American market. Our current pipeline of opportunities in this region remains the greatest near-term growth opportunity for our business. In summary, we had a strong start to the year. We are seeing healthy recovery in all our operating regions and are making investments today that will support sustainable growth for the future. And with that, we can open the call for questions. Operator?
Roger
Thank you. We'll now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd 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. Our first question comes from the line of Carl Phillips with Union Street Capital. Please proceed with your question.
Carl Phillips
Hey, thanks for taking my questions. So my first question is, I know that you invested in the business a bit this quarter and had some inflation pressure, but as you think about the business over the mid to long term, how should I think about where margins could potentially go if you're able to continue to drive revenue growth? Just to be clear, I'm not looking for guidance. I just want to understand how you're thinking about this.
Gowrie
Thank you. I think historically growth margins have been very strong, like in 60% range and 30% to 40% for the operating margins in the past in the peak time, I think 2019 or so. This business, at least those margins again in the future, but on substantial sustained basis. I believe as we grow our revenue, as we sign more contracts, this will naturally impact in a positive way both margins. And of course, as you know, we have pivoted to SAS revenue model also in the last two years. That has impacted in the beginning adversely in the revenue growth, but eventually, As I said in my prepared remarks, that's revenue on the growth side, very impressively, and we can see healthy growth in this fiscal year. So I'm pretty confident that the revenue will grow, the margin will improve, and I think it will be more sustainable in the long term.
Carl Phillips
Got it. Okay. And then your recurring revenue grew a bit faster than your consolidated revenue this quarter, and I was just wondering, is this a trend that we can expect to sustain? Yeah.
Gowrie
Well, I think, look, the signs are encouraging. I mean, I've talked about openly about the challenges we have faced along with the whole world in our business space. And I'm pretty confident based on our very healthy pipeline, activities are growing in every region, North America, Europe, Asia Pacific. We believe we can see an impressive sustainable revenue and a faster CAGR overall growth. in the revenue. This is a very positive sign. I believe we know why we're investing in people and technology and leadership, simply because we see the opportunities are growing. And it is taking time, but I think these are very encouraging signs to grow our revenue on a consistent basis.
Carl Phillips
Got it. Okay. Thank you. That's it for me. Thank you.
Roger
Thank you. Our next question comes from the line of Robert Green with Lafton Partners. Please proceed with your question.
Robert Green
Hey, guys. Thanks for taking my questions as well. First off, does uncertainty concerning new cars affect your business?
Gowrie
Hello. I'm sorry. We lost you. Hello?
Robert Green
Hello? Can you hear me?
Gowrie
Yes. Yes. Please start over again. Sorry. We missed it.
Robert Green
Oh, no worries. So does uncertainty concerning new cars affect your business?
Gowrie
I think yes and no. I believe, of course, there's this shortage in supply chain worldwide. We're seeing noticeable activity in both fronts. I believe the particularly North American market is quite resilient and strong. We have more opportunities last few months than ever before. that's a sign that the U.S. market is healthy and strong, and it is still in demand for our business, our product, our solution. So I'm pretty encouraged with opportunities in the U.S. So I don't see any threat, any kind of further deterioration in this side.
Robert Green
Got it. Got it. Thank you. And then just second, it looks like North America did well this quarter. Is this a relatively new market for you? Could you expand on how North America kind of fits into your global side of it?
Gowrie
Actually, good question. This is not a new market for us. We have been, by design, focused on APAC because that's where we have really captured the majority share position, especially in China and 10, 12 other markets in the whole APAC region. We contribute heavily from that region. And the U.S. was always a a market which needed a lot more readiness in terms of product, team, and experience in the other regions. So what we're doing is, the successes we have in China, especially in the large tier one customers, we're trying to replicate the same strategy in the US market. This is a big market, this is the biggest market of all the other regions, so we're not positioning ourselves with the right team, a right strategy and new verticals as well as our core business. So I think NetSol US is the place where we'll see our biggest successes in the coming years. It's been around for many years just that by choice we decided to focus on APEC in Europe and now we believe in the last two years very active in engaging with the new customers, current customers, and bringing the right people to be able to unlock this market in a very impressive way in the coming years. So this is a really exciting time for us in the U.S., and we hope we can sign some contracts in the coming months.
Robert Green
Great, great. Thank you. That's all from me.
Gowrie
Thank you.
Roger
Thank you. Once again, as a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. 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 more questions. At this time, this concludes our question and answer session. If your question was not addressed during the Q&A session, please contact NetSol's Investor Relations team by emailing them at investors at netsoltech.com or by calling them at 949-574-9000. I'd like to turn the call back over to Mr. Gowrie for his closing remarks.
Gowrie
Thank you for joining us today. I especially want to thank our investors for their continued support, our loyal customers, and our dedicated employees for their ongoing contribution. We look forward to bidding you on our next call, operator.
Roger
Thank you for joining us today for NetSol's fiscal first quarter 2023 earnings call. You may now disconnect.
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