Good morning. Welcome to NetSol Technologies Third Quarter 2023 Earnings Conference Call. On the call today are Najeeb Ghauri, Chairman and Chief Executive Officer; Roger Almond, Chief Financial Officer; and Patti McGlasson, General Counsel. Please be advised that there is a slide presentation accompanying today's call that is available as part of the webcast and also available separately on the company's website. I would now like to turn the conference over to Patti McGlasson, who will provide the necessary cautions regarding the forward-looking statements made by management during this call. Please proceed.

Good morning, everyone, and thank you for joining us. Following a review of the company's business highlights and financial results, we will open the call for questions. I'll now provide the necessary cautions regarding the forward-looking statements made by management during this call. Please note that all the information discussed on today's call is covered under the safe harbor provisions of the Private Securities Litigation Reform Act. The company's discussion including any accompanying slides may include forward-looking statements reflecting management's current forecast of certain aspects of the company's future, and our actual results may differ materially from those stated or implied. These forward-looking statements are qualified by the cautionary statements contained in NetSol's press releases and SEC filings including our annual report on Form 10-K and quarterly reports on Form 10-Q. I would also like to point out that we will be discussing certain non-GAAP measures. The press release issued earlier today contains a reconciliation of these non-GAAP financial results to their most comparable GAAP measures. Finally, I would like to remind everyone that this call will be recorded and made available for replay at www.netsoltech.com and via link available in today's press release. Now I'd like to turn the call over to Najeeb. Najeeb?

Thank you, Patti, and good morning, everyone. It was a busy quarter here at NetSol, one in which we made a lot of progress, driving key new initiatives. First, we are expanding our customer base with a focus on SaaS. Second, we're expanding in North America, which is a key new market focus for us that offers considerable opportunity to leverage our success in Asia and Europe. And third, we are driving efficiencies in the business. In the third quarter, we expanded our already robust customer base that includes some of the most recognizable names in the global leasing and finance industry, and we continue to strategically partner with entities that help us to better support our customers and accelerate our organic growth. We signed a multi-million-dollar agreement with Kubota, a Japanese company relating to its operation in Australia. Third agreement, we will deploy our NFS Ascent retail platform, which consists of the Ascent Omni point-of-sale and Ascent contract management system, as well as selected NFS digital touch points, including self point-of-sale, mobile point-of-sale and mobile account. Also in the third quarter, we went live with Flex, our API first and cloud-based calculation engine for Haydock Finance, a business finance provider in the United States. We are especially excited about this agreement as Flex is the first product that we've launched as a part of NetSol's new Epix Now marketplace, specifically targeting the global credit, finance in this industry, so we are encouraged to see this product gaining some early traction. On the partnership side, we extended our partnership with Amazon Web Services, or AWS, and became an API gateway delivery partner, allowing us to provide more robust and reliable solutions to our clients by enabling us to build, secure and scale APIs like Flex. We also signed a teaming…

Thank you, Najeeb. Our total net revenues for the third quarter of fiscal 2023 were $13.5 million compared with $14.8 million in the prior year period. On a constant currency basis, net revenues were $14.1 million. License fees were $2 million compared with $1.6 million in the prior year period and were $2.1 million on a constant currency basis. Recurring revenue or subscription and support revenues were $6.7 million, compared with $6.6 million in the prior year period. On a constant currency basis, recurring revenues were $6.8 million. Total services revenue were $4.9 million compared with $6.6 million in the prior year period. The decrease in services revenue is related to an overall decrease in services provided for ongoing implementations and additional change requests. On a constant currency basis, total services revenue were $5.2 million. Services revenue is derived from services provided to both current customers as well as services provided to new customers as part of the implementation process. Total cost of revenues was $8.8 million for the third quarter compared to $8.9 million in the third quarter of fiscal year 2022. On a constant currency basis, total cost of revenues was $11.7 million. Gross profit for the third quarter of fiscal 2023 was $4.7 million or 34.8% of net revenues, compared to $5.8 million or 39.4% of net revenues in the third quarter of fiscal 2022. On a constant currency basis, gross profit was $2.4 million. Operating expenses for the third quarter were $5.6 million or 41.7% of sales compared to $6.4 million or 43% of sales in the same period last year. On a constant currency basis, operating expense for the third quarter were $6.9 million or 48.7% of sales. Turning to our profitability metrics. Our GAAP net income attributable to NetSol for the third quarter fiscal…

Thank you, Roger. In summary, we have a lot to be excited about for this business. We are expanding into perhaps the most vibrant and untapped market in the world in North America and specifically in the United States. We're also evolving towards a pure SaaS model that allows us to generate higher margin recurring revenues with less manpower and more support and customization for our customers. And we are strategically reducing our costs so that we can allocate capital to the parts of our business that make all of our -- these opportunities possible. I'm very encouraged of what we are seeing on the horizon for NetSol, and I look forward to keeping you apprised as we continue to drive growth and value for our shareholders. With that, I'd like to now open the call for questions. Operator?

Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question comes from the line of Todd Felte from AGES Financial Services. Please go ahead.

Well, hi, Najeeb, Roger, great to see the progress on the quarter. Nice to see the improvements there. Just had a couple of questions. I know in the last two years, we've announced contracts with Yamaha North America, BMW, Mini Cooper, AutoNation, IKEA and a lot of these other household names we haven't really gotten, kind of, a ballpark revenue range on these contracts. Are these contracts with these household names, do they produce over $1 million in revenue for us each year? Or is it smaller? Or can you kind of give us some color to what these contracts provide revenue-wise?

Yes. Thank you, Todd. You're right. These contracts, including AutoNation, Yamaha, they're at least $1 million trajectory revenue each year. And of course, these are on, as you know, very prominent name -- household names. We believe there's a bigger opportunity to grow with them as our history with some previous names or bigger names in the auto sector. We've done so well similar. But I believe in the U.S., these names are perfect for our pivot in the SaaS and cloud and mobility. So I'm pretty confident that the relationships will improve and grow as we continue to deliver the first phases of our contracts.

Okay. And also in the past, you would always give kind of a range of the backlog. I think we are up to over $200 million, maybe even $250 million in backlog that you had announced on the last quarterly call. Can you give us a ballpark range of our backlog now?

The reason, Todd, we chose not to give a specific number is because this industry has changed a lot in last -- even recently a few months, I won't talk about years, but in the last few months, I have been different. The world has changed a lot in many, many ways, given all the macro challenges and the customers or potential new customers tend to take much longer time to make a decision. So, we chose to focus on the strategy, which is the areas we are now entering, particularly our aim to become a much stronger player in the U.S. market. So I think what is important is each quarter, what we deliver, what we report and it creates more anxiety for the management if we give them backlog number, and then we can close them in the respective quarter, it creates more pressure, I think, unnecessary. So I believe it is still a healthy backlog. We have lots of deals in the play in China and U.S. and Europe. I believe you know we don't wait one minute when we have announce and [Indiscernible] new contract. But more importantly, the company is really transforming, becoming a fintech and really focused on SaaS, cloud, mobility, and I believe the U.S. is the market for these new direction for the company, I think I'm pretty confident, I'm very excited and optimistic about our future, especially in the U.S., because that's where we are very low in our market penetration. So compared to our presence in APAC or China or Europe. The U.S. is a very big field for us, wide open to grab a bigger market share in the coming years.

Okay, that's great to hear. And I know that you had talked about during the last quarterly call via a lot of these headcount reductions and cost savings really taking effect into the latter part of this year to where we might turn profitable from an operating standpoint. I know we had a large currency gain, which is great to see. Is there any update on if we can achieve the operating profitability in the latter half of this year?

Yes, Todd. This transformation to SaaS and cloud and mobility has really given us some new light end of the tunnel. And that is, don't rely too much on the license transaction, which obviously takes a lot of support in the back office. Yes, we make money while they're very long-term decision-making cycles with the customer, but also it takes a lot of manpower to support them. So we have come to a conclusion, a resolution rather to cut down the headcount by at least 25% in totality. So we started with 10% in this current quarter. We believe in at least the next couple or three months, we must have achieved 25% total headcount. That would bring a substantial reduction of overhead, because now we're focusing on quick play at a SaaS model solution, which is ready to go. It won't require too much of the back office personnel engineers, but these flex products and the new solution or mobility, for example, you can see we are up to 53 dealership in Mini anywhere. And what kind of starts to get into BMW in the U.S. They have 400 dealerships. So those kind of verticals and the new areas will keep the cost much lower than what we've been doing, because we've been supporting large implementation all these years, Daimler and BMW, as you know all the names. But we have pivoted and that where we will have a leaner organization, much lower expenses, operating expenses and of course, improve our operating profit and net income and of course, cash flow.

Okay. That's great to hear. And then my final question, I can hop back in the queue, is just it was nice to see the revenues even before the currency adjustment. They were the highest since June of last year. It looks like the subscription model is kicking in. Do we expect to see a continued smooth curve up with revenues increasing every quarter? Or is it going to be lumpy with ups and downs?

I think this is the whole idea, Todd, is to award lumpiness in our quarter sales by getting into size and mobility and solution, which is really easy to implement and predictable. So I'm very confident that we can show quarterly growth from quarter-to-quarter and sequentially, as well as the year-to-year. So I'm pretty positive that there's so much happening here and all the new things we talked about in our prepared remarks that I think the direction is clear. So we have to -- I mean, we did very well with the license model. We need to continue to get the RFPs working on the license deal. But the focus really is the U.S. market, organic growth, some partnership relationships, lots going on now than until the six months ago. So I'm optimistic about the continuous growth sequentially and year-over-year.

Okay. Well, congratulations on a good quarter. I look forward to future announcements and to showcase the success of your company and thank you very much for taking my questions.

Thank you, Todd.

The next question comes from the line of Karl Brookes with Pine Creek Capital. Please go ahead.

Yes, thanks for taking my question. Just have a quick one here. Can you provide a bit more color around your market share in Asia and Europe?

Yes. Asia, if I focus just in China, which is our biggest market in terms of revenue, we are by far, the majority leader in terms of market share in China, because we boast the maximum number of customers in our space. Competitors are few, but they have a Chinese share compared to us, so we could be 70%, 80% in this space, leading the finance base in China. Overall, APAC is still a leader, because our dominance is in China, Japan, Australia, New Zealand, Thailand, almost 12 countries. So we believe we have a again, overall effect, so market share is the majority. Europe, we do quite well, started to see some traction in the recent months and quarters. There are a few companies, handful companies in our business, which is, as you know, very niche business. In Europe, we're doing quite stable. But in the U.S., we have the biggest opportunity to grow bigger share in the coming years.

Got it, great. Thanks, guys.

Thank you.

[Operator Instructions] At this time, this concludes our question-and-answer session. If your question was not addressed during the Q&A session, please contact NetSol Investor Relations team by emailing them at netsol@imsinvestorrelations.com or by calling them at 949-574-3860. I would now like to turn the conference back over to Mr. Ghauri for his closing remarks. Please go ahead.

Thank you for joining us today. I especially like to thank our investors for their continued support, our loyal customers and our dedicated employees worldwide for their ongoing contributions. We look forward to updating you on our next call. Thank you.

Thank you for joining us today for NetSol's fiscal third quarter 2023 earnings call. You may now disconnect. Goodbye.