In a reversal from its FY21 financial performance, a leading IT exporter continues its growth momentum in the ongoing fiscal. As per the latest financials posted to the bourse for the nine-month period ended March 31, 2022, NetSol Technologies Limited (PSX: NetSol) increased its top line by 26 percent year-on-year to Rs4.57 billion. That factor, along with handsome non-core, exchange-related gains under ‘other income,’ helped the Lahore-based firm to boost its profitability 11 times over 9MFY21 to Rs0.87 billion!
NetSol, which derives majority of its sales from overseas clients in Asia-Pacific, North America and Europe, has three main revenue segments: licenses, services, and subscription & support. The main products are NetSol Financial Suite (NFS) Ascent, NFS Digital, and NFS Ascent on Cloud. The firm’s IT human resources are mostly based in Pakistan and they provide the services to global and local clients.
During 9MFY22, the firm’s topline growing by more than a quarter owes mainly to the license revenues and subscription & support sales growing at a phenomenal rate of around 50 percent year-on-year to reach Rs0.76 billion and Rs2.46 billion, respectively.As per the management, license revenues recorded strong growth due to factors including implementation of NFS Ascent product at two different customers based in South Africa and Taiwan.
The subscription & support revenues showed significant increase due to annual maintenance rate revisions and post-implementation maintenance being provided to different customers, as per the management.Meanwhile, services revenues were lower year-on-year to Rs1.34 billion – this segment, however, picked up healthy growth in the third quarter of the fiscal.
Some of the topline gains were consumed by the fact that NetSol’s ‘cost of revenue’ grew by 30 percent year-on-year to reach Rs2.89 billion. This growth was out-of-step with topline growth during 9MFY22 – hence, cost of revenues equated 63 percent of net revenues (9MFY21: 61%).Management has attributed higher spending to meet rising cost of retaining IT resources, fresh hiring of resources, and resumption of staff traveling to client locations for on-site provision of support and implementation services.
Relatively controlled growth in administrative expenses and selling & promotion expenses helped NetSol to post operating profits of Rs0.55 billion, showing growth of 18 percent year-on-year. Down the line, it was the 466 percent growth in ‘other income’ to Rs0.68 billion that really catapulted pre-tax profits close to the billion-rupee mark. This was mainly due to the PKR depreciation in the analysis period, which provided the firm with a foreign exchange gain of Rs503.6 million in 9MFY22 (Rs269mn loss in 9MFY21).
In the end, the favorable combination of strong topline growth, controlled administrative and marketing spending, PKR-related gains, and proportionally-lower booking of income tax helped NetSol to close the nine-month period with impressive net profit tally of Rs0.87 billion, reflecting growth of 1042 percent year-on-year. The net margin in 9MFY22 stood at 19 percent, compared to just 2 percent in the same period of the last fiscal. Let’s see what the final quarter has in store for the prominent IT exporter.
Comments
Comments are closed.