NetSol Technologies, Inc. ($NTWK)

Good day, and welcome to the iAccess Alpha Virtual Best Ideas Spring Investment Conference 2026. Our next presenting company is NetSol Technologies, Inc. [Operator Instructions] I'd now like to turn the floor over to today's host, Faizaan Ghauri, Chief Strategy Officer with NetSol Technologies, Inc. Please go ahead.

Thank you, and I'm also joined by our Chief Marketing Officer, Erik Wagner; and our Chief Financial Officer, Sardar Abubakr. Thank you. And just to -- I'm going to -- I'm sure you've been seeing many safe harbor statements, so I won't spend too much time here. But we are NetSol Technologies. We are an AI-enabled platform, AI-first platform that powers OEMs, dealerships and financial institutions to sell, finance and lease assets. We've been in the business for a long time. In the U.S., we've been there for about 40-plus years, in Europe and the U.K. over 30 years and APAC over 25-plus years. We work with a number of Fortune 500 companies. We've done over 300-plus successful implementations, have 200-plus global clients and have worked on 100-plus automotive projects. So we're in the space of mobility and asset finance, which continues to grow. We have a very low churn rate. So when customers adopt our technology, they usually stay with us for generations. We have been proving out a recurring revenue model, and we've had some good numbers in the last year. So revenue is up. We're continuing to grow. Gross margins are improving and recurring revenue is up over -- close to 18%. But really, to bring it all together, we will show a video that really shows what NetSol basically brings together. I'm sure most of you on the call today have gone through an auto finance or auto purchasing journey. So you know what the experience is like at a dealership. What we really do is we streamline that process for the finance company, for the dealership and for the consumer. So here's a short video that shows our technology coming together. [Presentation]

So for most automotive brands today, that is not the experience you have when you go to dealership, as you know. But what makes NetSol special is because of as you learn about where we sit in the value chain and who we work with, we're actually the only company that can bring that together. By working with the consumer, working with the finance company and working with the dealership and OEM, we're able to put together this experience of a seamless handoff and really an end-to-end purchasing experience. Now a lot of the technology shown in that video are sort of forward-looking, whether that's AI agents, personal assistance and augmented reality. But we have deployed for the likes of BMW today, that technology stack that actually will eventually evolve into that form factor. So to know more about us, we have -- we're in a growing market. So we sit in the global leasing and finance market. That's over $1.5 trillion. There's 63% market growth over the last decade. In terms of the automotive retail market, it's expected to do about $16.2 million in new automotive sales, and NetSol really sits at the intersection. As I mentioned, if you look at our product set, we have a number of different products. So there's Transcend Finance, which covers the whole finance, asset finance and auto finance life cycle, whether that's originations, credit analysis, servicing of a portfolio of assets and automotive loans and leases, digital apps and commercial finance. Then there's our Transcend Retail product, which caters towards the dealership and the OEM. And that gives you end-to-end digital retailing, going back to that Tesla-like experience of being able to buy a vehicle, sitting on your couch on your mobile device. We have a Consultancy team. We're also backed by our Marketplace. Our Marketplace, like the way you buy Stripe or any fintech service provider, these are all the APIs that actually power the whole Transcend ecosystem. So developers can go directly and consume the APIs and start building even without involvement. And finally, our AI Labs team, we are really AI first. We've had an AI team for a few years now. We have a Head of AI, and that team is very much focused on R&D, and how to bring AI use cases into this whole automotive life cycle. So we worked with some of the biggest brands on earth in the automotive space. So the likes of Mercedes-Benz, Nissan, BMW, Toyota, Ford, Hyundai, Volvo, BYD, the likes of a number of banks as well. We work with BMO Bank, Chase, Northridge Financial. OEMs like BMW that we mentioned, and we work with insurance companies, the likes of AIG, Aviva and Allstate. So pretty wide mix, mostly focused on the automotive captive space. And just handing off, I'm going to have Sardar talk a little bit more about -- Sardar and Erik really to talk about the financials.

AB, do you want to take this one?

Sure, Erik. So thanks, Faizaan. So as Faizaan has mentioned, we truly have a global presence across APAC, Europe and North America. APAC contributing the majority of our revenues, but we are seeing heightened growth in North America as well as Europe. The key message from this slide that I wanted to put across is that we are in all of the markets that are driving the growth of mobility going forward that are growing at a double-digit CAGR moving forward.

Yes. I'll just add one of the highlights here is, as you mentioned, AB, global presence. Highlight is North America, specifically, we've doubled our revenue in North America. That's on the backs of some of our wins with the likes of BMW and MINI in the U.S. So we expect that growth to continue, and we are definitely investing significantly in growing the U.S. market.

I think a key part of our story is around sustained growth in our revenues and also our margins. In the last quarter, we had one of the highest revenue quarters that we've had for a few years, but that has driven margin improvement. Gross margin is at 49.3%, which is up from 47.7% in the preceding year. At the same time, we've seen an improvement in earnings per share from modest returns a year ago. At the heart of this is our recurring revenue stream. So rather than one-off, our clientele and our relationship is based on strong SaaS recurring revenue, which is [ up % ] year-over-year. Moving on, Erik, if you could [Audio Gap] this growth trajectory that I'm speaking about is based on a balance sheet that has very little debt and a strong focus on cash and cash equivalents. Some key points here, which are not truly evident from the slide, but just to talk you through them. Right now, our debt-to-equity ratio is almost 1:5. We have equity of over USD 40 million with a debt of almost $8 million. All of that debt is almost current. So very little long-term debt with strong cash and cash equivalents and current assets, almost 2.5x our current liabilities, which provides us with the fuel we need to grow in the U.S., invest in digital and at the same time, be on the lookout for strong inorganic growth. Moving on. I think I won't delve on this slide. I think the key message is that we are growing double digit. We are in a B2B business. And while quarterly earnings and quarterly profitability continue to be important for us, it is important to look at our business over a year-over-year perspective and over a period of 2 to 3 years, given that our contracts are mostly multiyear contracts with confirmed revenues and very low churn, so 5% churn in our core business. Moving on [Audio Gap] Again, gone are the days of NetSol depending on license or one-off fees. We are a business that believes in recurring subscription and support revenue, and that is the majority of our revenue base. It is steadily growing, and we expect that trend to continue going forward. [Audio Gap] Do you want to -- Faizaan, do you want to wrap it up?

Yes. Just we'll close on this slide and then take questions. But just to summarize, we continue to expect growth in key markets with the Transcend platform. We are continuing to extend our leadership position. As we've primarily been focused on the Tier 1, as the product has matured, we are in a position now to really go after the higher volume Tier 2 and Tier 3 players. We are continuing to invest in AI. You will continuously see new announcements, new product set, new capabilities around artificial intelligence, whether that's agentic use cases in the platform or how our team is internally using AI to improve productivity. So what you can expect to continue seeing is a higher quality revenue mix. So we'll continue that path to growing our SaaS and recurring revenue, improved operating leverage as the platform expands and continued focus on really taking massive market share gain against players in the space, both in the finance world and the digital retail world. So with that, I will open up to any questions. It looks like we have...

I'll ask just to kind of keep it focused here. But can you discuss what is driving the shift towards higher recurring SaaS revenue and how investors should think about the long-term revenue mix?

Sure. So I can weigh in, and then AB, if you want to come in. But in terms of the shift, so I think, first of all, it's customer appetite really. So now most of our Tier 1 auto captives or OEMs we work with, they are highly used to consuming SaaS products and paying for SaaS products. So we think that the adoption, everyone has moved away. There's a lot more -- whereas, let's say, 10 years ago, there was a lot less adoption of the cloud. There's a lot of nervousness around the cloud. We would say most of our customers today are now cloud-based or cloud native. So adopting SaaS has been a lot easier for them, and they've modeled their budgets accordingly. So we think that trend is not going away. It's continuing. The old trend of license and maintenance continues to become a smaller and smaller part of our business, and we continue to see SaaS as the way forward. Anything you want to add to that Sardar?

Yes. Sure, sure. Just to add to that from an investor perspective, I think what you can expect is stability and predictability in cash flows as a result of this strategy. Given the fact that we are focusing on we will continue to see steady cash flows coming into the business over a predictive life cycle. Our average contracts are usually multiyear. And you will continue to see subscription and recurring revenue, along with implementation revenue, being the largest part of our revenue component. Licensing will continue to fall as we go forward.

Awesome. Faizaan, I'll direct this one to you as well. What industries or geographies currently represent the largest growth opportunity for NetSol?

Yes. So if you look at us historically, APAC has been our strongest market. China, we've had over 75% market share in China. However, the focus for NetSol, first of all, NetSol is U.S. headquartered. Erik and I are both in our Austin, Texas office as we speak, our focus is on the U.S. market from a growth standpoint. The U.S. market is the biggest market by leasing volume. It's the biggest market still by automotive sales volume. And we think that we are just really getting started in terms of what kind of market penetration we can make in the U.S. We have a very unique proposition. Our proposition, if you look at us from a Transcend Finance standpoint, we compete with a few competitors there. And on the Transcend Retail side, we compete with a whole different set of competitors. So again, back to our market positioning, we're very unique in offering both the finance aspect and also the digital retail aspect. And that continues to be a differentiator that is getting us further in RFPs and putting a lot of opportunities in our pipeline today.

And maybe just to kind of build on this because there's another question very similar. But why has the U.S. market been a historically smaller part of the business compared to Asia? You kind of explained that a bit? And how do you expect the future to look a years?

Well, I think if we look at our early history, it's a function of capacity where early on, we started getting traction with the likes of Mercedes-Benz, and working with their Asia arms specifically. So I think as the product was in its infancy, we had to be very intentional about where we put our resources towards from a product development capacity. But what's really happened over the last few years is the product has matured significantly. The delivery of that product is a lot less resource intensive than it was 10 years ago. And because of it, it opens us up to be able to scale and sell a lot more effectively in the U.S. So towards that, we are putting more of an investment into sales and marketing in the U.S. because really the product is absolutely ready for the U.S. market, which I would say 10 years ago is a different story.

Good. I got another one here. What about typical implementation cycle? Like how long does it typically take from contract signing to meaningful revenue recognition?

Yes. Well, the revenue recognition usually happens upon contract signing. So what you will see is -- in an implementation phase, implementations can run anywhere from, let's call it, 6 to 24 months, depending on the scope and scale. Some of our competitors have implementations that are running in 4, 5 years kind of time cycle. But typically, what happens from a revenue recognition standpoint is that we start recognizing revenue based on milestones that happen in the implementation, with contract signing starting as that first milestone. And now the way we've structured a lot of our sales agreements is we actually start seeing subscription revenue coming in while the implementation is still going on.

Yes. And that one, I think you'll notice when you look at our K or Q, you'll see services revenue. And occasionally, that's more lumpy when we're doing a big implementation, but it generally leads to more recurring revenue in the future. Great. How about pricing and margins? Can you talk a little bit about the differences there between, say, for instance, like trends in retail, trends in finance, the product suite?

Yes. I think we should look at any of our customers really on both Transcend Retail and Transcend Finance. These are long-term relationships in nature. So as we mentioned upfront, there's a very high switching cost. And typically, finance companies or OEMs, they don't really switch out their provider once they've implemented. It happens once in someone's career that they put in usually a CMS system as an example. So what that means is when we have a new relationship in, we are looking at conservatively we usually do a total cost of ownership that looks at the relationship over a 5-year time span. But in reality, that relationship, like Mercedes being a great example, first customer, still our customer. So you're looking at a total cost of ownership on their side or customer lifetime value that extends over 30-plus years now. So that's kind of the way you can even look at -- when we look at our stock pricing, we're looking at, okay, what are we generating not just in year 1, but what do we generate on a discounted cash flow basis looking out to years 5, 6, 7 and 8 as well. But AB, Sardar, is there anything you want to add to that?

Sure, sure. So I think I'll just add one perspective. For Transcend Finance and Transcend Retail, given the fact that as the product matures, the additional incremental development costs for a new clientele are very low. So this inevitably turns out to be a higher-margin business. Of course, there could be certain customizations that are required. But there, we do try and use the API layers as established to do this seamlessly and more efficiently. And hence, the cost structure of NetSol is then able to focus on investing in new deals, the travel costs, the costs associated with new deals as opposed to large implementation fees. And I believe that's going to be a strategic advantage for us, as we broaden our platform ecosystem play. And I think this is important to mention again, we are an ecosystem player actually fulfilling and solving problems in various parts of the asset finance value chain.

Great. I was going to also ask, Faizaan, we've got a question here. To what extent are AI capabilities embedded into the platform commercially available versus still developmental?

Yes. So we announced Check AI, which is effectively our loan originations platform, a number of customers use our loan originations today. And what that does is essentially various AI agents go out and do research like a super intern or super analyst for the credit analysts to basically -- make a more informed credit decision in their manual credit decisioning processes. So these are live examples now actually out in the market and actually being adopted. So very much -- we are -- we have a lot more on the pipeline, and we focus really on what can actually be tangibly be used by customers.

Great. I think we have time for 1 or 2 more questions. We had a question around our business in China and the volume of business, as well as any perceived risk there. So I wanted to open that up to you guys as well.

Yes. I mean, look, maybe you can answer the repatriation question, AB, but I'll just take overall, I'm sure many of you are following the headlines, the Chinese EV market is probably the single most dominant force in the automotive industry today. You even talked to the U.S. automakers, the likes of the Ford CEO. We talked about his experience in China. And he said specifically that Farley was driving in China, I think it was a Xiaomi, he wanted to bring it back to the U.S. So China is not going anywhere when it comes to EVs. They are effectively ahead of us -- ahead of the U.S. when it comes to EVs. We are very lucky that we work with most of those players. Most of them are now expanding. So they're moving into Europe very aggressively. So that's actually opening up a big market for us there. They're moving into South America aggressively. And there is even rumors that the U.S. OEMs are looking at joint venturing with the Chinese auto manufacturers in the U.S. So I think it's a huge tailwind for us, quite honestly, to have that support from China. When we talk to U.S. automakers and U.S. auto captives, they're actually asking us questions about like what are the lessons that we've learned from China that they can apply there. And you're talking about significant contract growth. So anything you want to add, Erik?

I'll add just one point. We also announced -- I don't think it's about 3 months ago, we took an active auto captive live in Indonesia. This is a Chinese auto captive that we helped expand our business into Indonesia, one of the fastest-growing economies in the world and fastest-growing population in the world.

Brilliant. And just to sort of cap this off, what is also interesting is that while we will continuously be a growth company focusing on new customers and new deals over multiyears, at the same time, the appetite to grow based on existing customers is also immense. So Faizaan mentioning China, mentioning U.S., we're very excited about where the industry is going in terms of core adjacent services, both in marketplace, in retail, in fleet management, in telematics, in insurance, overall in asset finance. And we're right at the center of that with multiyear relationships. So we're in the markets that are driving growth, but we're not just in those markets. We're in those markets now with a strong track record and with the balance sheet to fuel growth on our own, but also through partnerships. And that's why I think I'm quite excited over the next 1 to 3 years phase of our growth journey.

Great. And I know we're just running up on time, right? Or do we have 1 minute?

We might have minute. Okay.

We'll see, [indiscernible].

Just for those who didn't get their questions answered, we will -- we do see the questions here. We'll make sure to reply via e-mail, worst case if we're not able to answer them here. Any others there Erik you want to take?

Yes. Well, we can -- I wasn't totally sure how to read this one, but I do want to try and answer it, but what are the second-tier players using now? So I'm assuming that's talking about our competition?

Yes, yes. So yes. So when you look at the tier -- okay, so the way you can think about the market when it comes to asset financing is Tier 1s tend to be auto captives or equipment financiers that have over usually about like $10 billion plus in portfolio assets. Now when you get below the $10 billion mark, you're putting in a much wider range of companies that -- and they tend to be a lot more on the equipment side rather than the auto captive side. The market there tends to be pretty diverse, right? So there are a lot of different players. These companies can't afford the multimillion dollar type solutions that we provide our Tier 1s. So they're looking at maybe price points that look like all in a few hundred thousand dollars a year at best. So the product has matured to be able to be delivered a lot quicker. We do have a couple of actually legacy customers on our legacy platform that we're right now moving in there. But yes, I would just say it's very diverse. There's a lot of small players out there. You tend to see the folks that we compete with on the Tier 1 auto captives. They also aren't really in that space as much because they focus on the bigger players, which, of course, come with longer sales cycles as well.

[ Christian ], do we still have some time here? I guess there's a couple of additional ones, but let's say we're a few minutes over. All right. I'll continue. How about what operational leverage should be expected as recurring revenue becomes a larger percentage of the business?

Sardar, anything you want to add to that?

Sorry, can you -- I missed the question. Could you say that again?

Yes. What operational leverage should be expected as recurring revenue becomes a larger percentage of the business?

Sure. I think in terms of forward-looking guidance, I would say a couple of points. Number one, I do believe that you should see as investors going forward an improvement in our margins. This is a deliberate and conscious measure that we would like to grow with economies of scale. We will continue to invest in AI-based solutions. We will continue to invest in the U.S. market. We've been listed on NASDAQ now for a quarter of a century. We're excited about the growth opportunities, but we're going to do this responsibly. So what you saw in Q2 with an improvement in gross margin and also net operating margin, you should continue to see that improving. In terms of our financial leverage or our debt portfolio, I believe we are very prudent, but have some headroom in terms of growth financing opportunities. As I mentioned earlier on, our debt to equity is a very low number right now. Our current assets to current liability is really, really good, ahead of benchmarks. And I think that gives us exciting leverage to look at inorganic opportunities, both from a JV standpoint, from an M&A standpoint and also fueling growth in the markets and in the products that we believe will drive the future.

Awesome. Thank you so much. I guess with that, [ Christian ] says that we should try to wrap here, so everyone can join the next presentation. Thank you so much.

Thank you.

Thank you, everybody.

That concludes NetSol Technologies, Inc.'s presentation. You may now disconnect. Please consult the conference agenda for the next presenting company.