NetSol in FY24

NetSol Technologies Limited (PSX: NetSol) posted an 8 percent year-on-year growth in earnings for FY24. The company’s profitability was significantly bolstered by strong performance in the last quarter (4QFY24), despite a 39 percent year-on-year decline in earnings during the first nine months (9MFY24).

The earnings growth in FY24 was driven by increased revenues and cost optimization. Revenues grew by 21 percent year-on-year, with several existing customers subscribing to the newly launched Appex Now products. Additionally, NetSol achieved Advanced Tier Partner Status with Amazon Web Services (AWS), and its calculation engine “Flex” gained traction during the year. Despite these developments, NetSol managed to reduce its cost of sales by 5 percent in FY24 through workforce streamlining and other cost-cutting measures aligned with global structural changes. The company also saw a significant improvement in gross margins, with gross profit rising from 29 percent in FY23 to 45 percent in FY24. This growth is largely attributed to NetSol’s transition towards a hybrid license and Software-as-a-Service (SaaS) model, along with continued growth in recurring subscription and support revenues.

Selling and distribution expenses increased by 28 percent during FY24, while administrative expenses saw a modest rise of 5 percent. Other expenses jumped by 27 percent, likely due to higher R&D costs during the year. Meanwhile, other income dropped by 67 percent, as the company did not record any foreign currency translation gains due to the stability of the Pakistani rupee.

NetSol’s finance costs surged by 65 percent, reflecting the impact of higher discount rates. While the company’s overall earnings grew by 8 percent year-on-year, its net margins slightly declined from 17 percent in FY23 to 15 percent in FY24. The Board of Directors announced a final cash dividend of Rs3 per share for FY24.

NetSol has consistently performed well, contributing to the country’s IT exports. After stellar results in FY22 and FY23, FY24 also proved to be a strong year for the company. Management has indicated that it will continue to scale its SaaS business, emphasizing that the hybrid license and SaaS model have become key drivers of growth. In a press release earlier this year, NetSol revealed it had secured a large contract in Asia with a major automotive company, resulting in substantial license fees. While cost optimization has supported the company’s financial performance, the stability of the local currency has reduced other income by eliminating translation gains.