NetSol Technologies, Inc. Stock

Good morning and welcome to NetSol Technologies Fourth Quarter and Full Fiscal Year ended June 30, 2026 Earnings Conference Call. On the call today are Founder and Chief Executive Officer of NetSol Technologies Inc., Najeeb Ghauri, Global Head of Sales and Group Managing Director of Europe, Asad Ghauri; Chief Financial Officer, Sardar Abubakr; and Senior Vice President and Corporate of Legal Affairs, General Counsel and Corporate Secretary, Patti McGlasson. Also available for the Q&A portion, our Chief Accounting Officer, Roger Almond, and Chief Marketing Officer, Erik Wagner.

I will now turn the call over to Patti, who will provide the necessary disclaimer regarding the forward-looking statements made during today's call. Patti, please go ahead.

Thank you. Good morning, everyone, and thank you for joining us today. After we review the company's business highlights and financial results for the fourth quarter and full fiscal year ended June 30, 2026. We will open the call for questions. .

Before we begin, I'd like to remind you that our remarks today will include forward-looking statements within the meaning of the federal securities laws, including the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements include our fiscal 2027 guidance reflect management's current expectations and are subject to risks and uncertainties, and actual results may differ materially from those expressed or implied. We encourage you to review the cautionary statements and risk factors contained in NetSol's press release issued earlier today as well as our filings with the Securities and Exchange Commission, including our most recent Form 10-K and quarterly reports on Form 10-Q.

I'd also like to note that today's discussion will include certain non-GAAP financial measures. A reconciliation of these measures to their most direct comparable GAAP figures can be found in the press release issued earlier today. A supplemental investor presentation is available through the webcast link and in the Investor Relations section of our website at irnetsoltech.com and has been furnished as an exhibit to the Form 8-K we will file with our press release issued this morning.

Lastly, please remember that this call is being recorded and will be available for replay on our website at ir.netsoltech.com and through a link included in today's press release. [Operator Instructions]

I will now hand the call over to our Founder and CEO, Najeeb Ghauri. Go ahead, Najeeb.

Thank you, Patti. Good morning, everyone, and thank you for joining our call today to review our results for the fourth quarter and full fiscal year ended June 30, 2026. Fiscal '26 was the strongest financial year in NetSol's history. Total net revenues were $74.4 million, up 12.5% year-over-year basis and over -- and our $73 million guidance.

Non-GAAP EBITDA grew almost 23% and income from operations had nearly doubled. The growth reached the bottom line this year. These results reflect the company in the middle of a deliberate transformation from a services and license business and our platform business, recurring subscription and support revenue now represents approximately half of our total revenue. Later in the call, Sardar Abu, our CFO, will walk you through remaining performance obligations and the measures we will report each quarter so you can track the durability of this base.

In June, NetSol returned to the Russell Indexes added to 6 benchmarks, including the Russell 3000 and the Russell Microcap Index. Index membership matters for a company our size. It makes NetSol eligible with the many institutional mandates that are limited to index constituents, and it puts us back in the universes where institutional investors screen. Let me talk about the business behind these numbers. Fiscal 2026 gave us the proof points across every part of our strategy. Earlier this month, we announced that has signed a contract to upgrade from our legacy platform to Transcend Finance. BMO is one of the largest banks in North America, and this agreement is clearest validation yet of our upgrade strategy.

We have customers across North America, we have run our acquired legacy soft for decades. Each of them now has a modern path forward, and BMO shows what that path looks like. Long tenured customer chosen to deepen the relationship with NetSol on our newest technology. Across the rest of the business, the platform continued to deliver. In December, we signed one of the largest Transcend Finance contract extension in our history with a Tier 1 global auto captive customer. Transcend retail became a growth engine in the U.S. and Asad Ghauri will take you through the momentum in detail.

Our Asia Pacific business continued to perform, anchored by market leadership in China and expanding alongside our customers across the region. Fiscal 2026 was also the year we build the team for the next phase. Sardar Abubakr has joined us as a Chief Financial Officer in January. At our annual meeting in June, shareholders elected a strengthened Board reelecting Ian Smith, the former CEO of BMW Group, Financial Group for the U.S.A. and Americas, and adding Richard Howard, the former President and CEO of Daimler Truck Financial Services for North America; and Aamir Ibrahim, the CEO of Jazz World, one of the world's biggest digital operators, who earlier in his career, held senior leadership roles at the Ford Motor Company and Jaguar Land Rover. The people who ran our customers' business now help govern ours. I can think of no stronger endorsement of where the company is headed.

We're also transforming how we operate. Across Transcend Finance, we are reducing the resource intensity of our development and delivery model through AI-enabled development, automation and structural efficiencies. I want to be clear about how we think about this. It is not about reducing headcount, but its own say, it is about building a more scalable organization, one that is more nimble and faster to respond to changing market requirements, where our engineering and delivery capacity and grow client impact without growing costs at the same time. As part of that, we are focusing our investment on the core transplant platform and the adjacencies where NetSol has a defensible customer and domain advantage.

Looking to fiscal 2027, our priorities are very clear. First, scale, transcend retail across the U.S. dealer market; second, embed AI across our products and our operations; third, upgrade our legacy installed base to transcend the BMO in the template as a template. And fourth, grow with our customers as they expand into new markets. You saw that model this year when a leading Chinese leasing company went live on Transcend Finance in Indonesia. When our customers enter a new country, they take desal with them. We're also introducing full year guidance with our fourth quarter results, Sardar Abu will take you through the numbers.

I will close with this. We believe the value of what we have built the customer base, the recurring revenue, the platform is not yet reflected in our market valuation. And we see that as an opportunity. Last December, we rang the bell in Times Square, New York to mark our 26th year on NASDAQ. There is no better way to honor that milestone than the strongest year in our history, and we intend to build on it.

With that, I'll hand the call over to Asad Ghauri, our Global Head of Sales and Group Managing Director of Europe to walk through the commercial and sales update. Asad?

Thank you, Najeeb, and good morning, everyone. My focus today is on what's converting to revenue for us and the pipeline behind it. But before I start, one point of context for everyone on this call is our key messaging. Our core growth is in today and going over this Transcend Finance worldwide, and Transcend retail is our big bet in our home market in the U.S., and total focus is on the execution of that.

I'll start with the go-lives this year. We've had multiple A leading Chinese leasing company launched its Indonesian operations on Transcend finance. Northridge Finance Division of the Bank of Ireland when dive on Transcend to support its growth strategy in the U.K. a Tier 1 U.S.-based auto captive went live on Transcend Finance in China, a deal valued at multiple millions leasing Thailand with the latest wholesale finance system on our Transcend platform, expanding its use of analogy. These go live convert into recurring subscription support revenue going forward exactly the visibility. So that will be quantified in the call.

We also renewed a multimillion dollar contract with a Tier 1 multinational bank in the United Kingdom, extending that relationship for more than a decade by another 10 years and deepening our president in the U.K. asset finance market. Let me go to transcend retail, our digital retail platform for OEMs and dealers. The commercial progress this year was real. It's accelerating [indiscernible] automotive, the Fortune 500 leadership group is building its branded digital retail experience on our platform. Our platform is rolling out across approximately 350 franchise dealerships of a premium global OEM in North America, one of the largest digital retail deployments in the U.S. automotive market.

The U.S. digital retail market remained large and underpenetrated and our combination of finance and leasing them fast time to go live and a modern customer experience is winning head-to-head evaluations against well-funded competitors. We're the only vendor at the table who also runs the lender side of the transaction, and that is why we will win. We expect that Transcend retail to be one of the most important growth stories in the company over the next several years.

Alongside retail, there is a second U.S. growth motion upgrades, our legacy installed base is defined set of accounts where we are the incumbent relationships that, in some cases, spend decades. BMO is a template, legacy to transfer upgrades are now an active category in our pipeline and each updates the maintenance relationship into a modern subscription relationship.

A word on AI. It's it's an area of focus for the company, and it's increasingly center to how customers engage with us commercially. During the year, we introduced various product functionalities in the AI-enabled credit decisioning areas, automating manual task, manual task accelerating decision time and the improving underwriting accuracy. And we deployed intelligent document processing systems with AI capability within the platform. All of these have amplified the efficiencies for our clients, and we expect to push forward with that. Another key aspect of our AI focus is our platform has become AI native. So while we focus on presenting products within our platforms, the enablement of our customers to be able to deploy their own AI functional pieces is as important.

And the architecture currently of Transcend Finance and retail supports that. and that has been real traction for the pipeline remains strong, supported both by expansion within our existing customer base and by new business development. The pipeline, together with the upgrades and rollouts already signed, BMO, the OEM retail deployment and the extension -- expansion of the customers are taking into new markets is what underpins the guidance Sardar will walk you through.

With that, I'll hand over the call to our CFO, Sardar to review the financial results.

Thank you, Asad, and good morning, everyone. Fiscal 2026 was an important year for the company. We delivered double-digit revenue growth, expanded gross and operating margins, nearly doubled operating income and generated strong cash flow. Just as importantly, we are putting in place the financial discipline, operating model and performance metric required to make this progress durable.

My comments will cover 5 areas: the rebound and fourth quarter exit rate, the quality of the full year results, the strength and use of our balance sheet, the actions underway to improve earnings conversion and simplify the organization, and our guidance for fiscal 2027. Before turning to the full year, I want to provide a fourth quarter perspective. Fourth quarter revenue was $20.7 million, a record quarter for us, up 12.5% year-over-year. Subscription and support revenue grew 9% to $8.9 million, while services revenue increased 21.3% to $11.7 million. Fourth quarter gross profit increased 27.3% to $13.2 million and gross margin expanded to 63.6% from 56.2%.

Operating income increased 40.2% to $4.5 million, representing an operating margin of 21.6% compared with 17.4% last year. GAAP income, net income attributable to NetSol increased 45.9% to $3.8 million or $0.32 per diluted share compared with $0.22. The exit rate is particularly important in the context of our start to the new year. In the first quarter, last year, revenue was $15 million, gross margin was 39.4%, and operating loss was $1.8 million and net add loss attributable to net sold was $2.4 million. By the third quarter, however, revenue had reached a then record $19.8 million, gross margin was 55.6% and operating income was $3 million. In Q4, revenue reached $20.7 million, gross margin was 63.6%, and operating income was $4.5 million.

From Q1 to Q4, revenue increased by approximately 38%, gross margin expanded by more than 2,400 basis points and the quarterly operating result improved by approximately $6.3 million. This demonstrates a meaningful rebound in execution while recognizing that time of agreements, implementation milestones and development capitalization can create quarter-to-quarter variability. For the full year, total net revenues increased 12.5% to a record $74.4 million, above our $73 million guidance. Subscription and support revenue increased 8.7% to $35.8 million, demonstrating continued growth in the recurring foundations of the business.

Services revenue increased 3.3% to $33.6 million as we progressed major implementation. License revenue was $5 million and included approximately $4.7 million associated with the renewal and amendment of an existing Transcend customer agreement. We want investors to distinguish absolute recurring revenue growth from revenue mix. Subscription and support represented 48.1% of revenue compared to 49.8% last year because license revenue increased this year. We will increasingly supplement disclosure with consistent measures of recurring revenue remain performance obligations and implementation activity.

We are also introducing a metric we call contracted revenue. As of June 30, 2026, contracted revenue was approximately $60 million. We define this as revenue expected under existing signed agreements plus our best estimate of change requests from those same customers and same agreements. It is not annual recurring revenue, not backlog and of course, not a guaranteed revenue floor. We will report this each quarter on a consistent basis, and our objective is to grow well above it through transcend deployments, expansion within existing customers, selected new customers and partnerships.

Turning to gross profit. Gross profit increased 20.2% to $39.1 million and gross margin expanded 330 basis points to 52.6%. Operating income increased 98.4% to $6.9 million, with operating margin increasing from 5.3% to 9.3%. These are the clearest indicators of improved execution. The results benefited from revenue mix, delivery leverage and the capitalization of qualifying software development costs. We will provide investors with clearer visibility into total product development investment so that the underlying trend remains transparent.

Non-GAAP EBITDA grew 22.8% to $8 million. Consolidated adjusted EBITDA increased 68.8% to $9.15 million compared to $5.42 million. Adjusted EBITDA attributable to net sold increased 61% to approximately $6.01 million compared with $3.73 million. The prior year comparison has been recast to exclude foreign exchange gains and losses on a consistent basis. Reconciliations of all non-GAAP measures are included in today's earnings release. Net income attributable to net sold was $2.95 million or $0.25 per diluted share consistent with the prior year. This should be considered in the context of 2 significant movements. First, fiscal 2025 included a foreign exchange gain of $1.3 million and interest and investment income of $1.87 million.

In fiscal 2026, we recorded a foreign exchange loss of $0.39 million and interest income of $1.07 million. Total other income was therefore approximately $2.27 million lower year-over-year. Second, income attributable to noncontrolling interests increased by approximately $1 million to $2.65 million. Despite those headwinds below operating income level, consolidated net income increased 22.4% to $5.6 million. We believe that this bridge demonstrates that the underlying operating business improved materially this year, even though the improvement was not yet fully reflected in earnings attributable to NetSol shareholders.

Turning to net cash. Net cash provided by operating activities was $13.9 million compared with $0.4 million last year, and cash increased 56.3% to $27.1 million. As we indicated in our third quarter call, the working capital timing that reduced cash at March 31 reversed in the fourth quarter. This is a meaningful improvement in financial capacity. Contract liabilities contributed approximately $6.5 million to operating cash flow, reflecting advanced billings and customer commitments. We do not assume that this working capital benefit will repeat, of course, at the same level year-over-year.

During the year, we invested approximately $2 million in property and equipment and $2.7 million in capitalized software development. After these investments, the business still generated approximately $9.8 million of cash. We will remain disciplined in balancing product investment, liquidity, potential strategic transactions and shareholder value. Supporting the 4 strategic priorities Najeeb outlined, our financial agenda for fiscal 2027 is quite straightforward: grow recurring revenue and its visibility, protect and improve margins. apply AI in practical and measurable ways, focus the portfolio on our highest return opportunities and strengthen the conversion of consolidated profit into value for NetSol shareholders.

We will apply AI where the outcomes of manageable, faster development and testing less implementation effort, better support resolution and automated back-office processes. That is part of a broader efficiency program that will continue through fiscal 2027. As of June 30, 2026, we employed approximately 1,370 people compared with approximately 1,460 a year earlier, while revenue grew 12.5%. We are reviewing workforce structure utilization location strategy and skills and AI embedded delivery model requires. This is not a head count reduction exercise. It is a disciplined review of how we deploy people and direct capacity towards product innovation, customer delivery and growth.

We are also reviewing our portfolio for simplification. This includes assessing products, legal entities, activities against strategic fit, growth potential, margin, cash requirements and management complexity. Capital will be directed to the core asset finance platform and close to core adjacencies where NetSol has a defensible customer and domain advantage. A further strategic priority for us is evaluating minority interest in Pakistan. The Pakistan business is a major contributor to the company, but the increasing allocation of our to noncontrolling interest does reduce how much of our consolidated performance reaches NetSol shareholders.

As we have said before, we are actively evaluating structural options to address this over time, subject to valuation funding, regulatory and tax considerations and the rights of minority shareholders. Please note that no transaction has been approved, and we cannot guarantee that our objectives will be achieved in the near long term, and we will communicate when a specific course of action is sufficiently developed. Our growth strategy combines organic execution and selective strategic partnerships, JVs and acquisitions in core and close to core adjacencies. We will apply a strict criteria, product and customer fit, recurring revenue quality, margin and cash profile, integration complexity and a clear return above our cost of capital. We will not pursue scale for its own sake.

For fiscal 2027, NetSol currently expects net revenues to grow 13% to 16% over fiscal 2026, gross margin of approximately 50% or better, consolidated adjusted EBITDA growth of 15% to 25%, corresponding to approximately $10.5 million to $11.4 million. This guidance assumes continued subscription growth execution of contracted implementations, disciplined cost management and no material acquisitions. While it's important to note that the timing of agreements, implementation milestones, foreign exchange, customer decisions and advanced billings can create variability between quarters. Our focus will be on full year execution and the quality of growth.

In summary, fiscal 2026 demonstrated that NetSol can grow while expanding margins and generating cash. The next phase is to make that performance more predictable, more transparent and more valuable to NetSol shareholders. We will do that through recurring growth, disciplined execution, practical AI adoption, portfolio simplification, thoughtful structural action and rigorous capital allocation.

With that, operator, please open the line for questions.

[Operator Instructions] Our first question is from Greg Burns with Sidoti & Company.

Just wanted to first touch on the '27 guidance for gross margins, I guess, it's implying down a little bit year-over-year. Is there going to be a shift in mix? Or what is driving that outlook for a little bit reduction in gross margin?

Thank you for the question. Abu, want to jump in?

Yes. Yes. So I'll take this. So thank you for the question. We are optimistic of our gross margin forecast. We believe that the guidance that we have given of 50% is a stable guidance. It is a guidance that wherever we go into new agreements and also review existing agreements, we do expect a more than 50% gross margin in our business. You saw in the numbers that I quoted that we closed at a higher rate. We expect no reasons why we would not be able to achieve growth in this. But the staple guidance that we like to give the market today is that we will be at least 50% or better. And as we progress quarter-over-quarter, we will continue to monitor and upgrade that guidance as needed.

Okay. And then with the transition from lease peak to Transcend with BMO that you announced. When you do a transition like that, I know you mentioned you're moving from a maintenance to a subscription revenue, but is there any like revenue uplift or margin benefit? What are the additional benefits to transitioning from that legacy platform to Transcend for you?

I mean I'll let Asad answer the question. .

Yes. Thanks, Najeeb. So I think it provides a huge uplift to our subscription revenue. Implementation again, is dependent on how we structure the upgrade with the client. But definite bump up for us overall in our subscription revenue as we move forward with them, which is our primary focus.

Okay. How big is your lease peak installed base maybe from a number of customers?

Yes, lease tax. So it's about 7 customers currently.

All U.S. based.

Okay. All right. And then the Transcend retail in the U.S., can you just give us a little bit more color on the pipeline opportunity. I know you announced 3 dealers that launched maybe earlier this quarter. But could you just talk about the pipeline and why you won there and what benefits you're bringing to the auto dealer market in the U.S.

So -- so I mean, we've got the digital retail space divided into 2 areas. The 3 dealers that you refer to are part of bigger dealer groups. So they all carry more than 15 dealerships within the group. So our primary protocol is to ensure that we get the initiation right in these 3 dealers. And with that, it opens up the other dealerships within the group. So I said we have 2 focuses. One is Tier 1 OEMs, we're doing a rollout for, which is the 350 could potentially turn out to BMO. So that's a space that we have great engagements in.

And lastly, on the DGG side, which is where we define dealership groups that we're seeing the traction and you see those 3 dealers, you'll see more coming on as we move forward in the year over the potential of adding 20 -- 15 to 20 dealers average based on the go live of that customer, if that makes sense.

Yes, that does. So when we look across the 3 geographies that you're in, where do you expect the most growth to see the most growth? Is it in the U.S. with the retail part of the business or...

So for me, I think they made momentum for us in all 3 regions right now. As we explained earlier and I presented that our core focus in the U.S. besides Transcend Finance is retail, and we would like to execute there before moving on to other regions. But Transcend Finance, on the other hand, is tracking really well, and you'll see that in the coming weeks, some of the announcements that we make.

Our next question is from Todd Felte with StoneX.

Congratulations on a great quarter. Nice to see the growth in revenues, margins and earnings. I wanted to touch on the cash position. I saw it grown to a little over $27 million. And in the past, you had talked about some M&A activity or possibly buying a full ownership of NetSol PK. Was just wondering if you can kind of update us on that as well as if any share buybacks are going on.

I think I can add a point that Asad will come in. Absolutely, we are very pleased with our cash position and company's very conscious opportunities, particularly in the U.S. market because we see a lot of opportunities, whether they're M&A or just new relationships. But I think Asad can give you some more color about that how LG is thinking about really using the cash. Well, Asad and Abu? .

I think I'll leave the cash part to our experts, Abubakr that is. But on the M&A side, I think there's definite interest. We are well positioned, and we will keep the market informed as we see traction and positivity in those increments. But they are down going. Abubakr, you want to take the cash, please?

Sure. Sure. Sure. So thank you for the question, Todd. Two aspects. One that I covered in my script. We are actively evaluating structural options when it comes to NetSol Pakistan. So that's number one. Number two, as I also mentioned in my script, we are evaluating what we call core pros to core adjacencies. U.S. is our home market, we are committed to growing the U.S. market at a significant rate, both through our flagship Transcend Finance platform, as you saw with BMO deal, but also our big bet, which is Transcend retail.

In addition, given we also operate in Europe and APAC, we are selectively evaluating potential close to core adjacencies, partnerships and potential future acquisitions. As those discussions develop, we will consistently and transparently update the market. But rest assured, the cash position that you see will be used for growing our existing core business, invest in product innovation, becoming a nimble organization, but also inorganic opportunities as we see [indiscernible] NetSol.

Okay. That's great to hear. Really appreciate the color on all that. And then finally, I just wanted to maybe get an update on Investor Relations. I know you've been doing some conferences. Is there any plans to have analyst coverage in the near future? I don't see any analyst reports out there as of now. .

Sure. So I'll take that, Najeeb and Asad. We will be updating the market soon. We fully recognize that NetSol as a stock must have more consistent analyst coverage and not even one. Ideally, we should have coverage by more than one analyst. We are -- have now finalized discussions with research -- a reputed research analyst firm and that coverage will start after this earnings call and the process of that will complete. However, we are not stopping there. We believe, as I said, that multiple analyst coverage is a way to go to get our story out there. I think I'll leave you with one thing on this furthermore Todd, and this is towards everyone who has dialed in. I encourage everyone to compare NetSol's stock performance this year versus NASDAQ, NASDAQ composite the software industry and also our peers. And I believe, as Naj stated in his opening note that this is a story that we will get out there more, and you should start to see analyst coverage in the quarters ahead.

Okay. That's very helpful. I know when I look at the enterprise value of the company, I mean, you just seem so ridiculously undervalued that I'm hoping that will change in the near future. But I appreciate you taking my questions, and congratulations again to you and your team on such a good job.

I want to add, Todd, I think for the audience, this company was in a different direction in a very exciting way. What we have seen in the last 2 years and our results delivered today is -- shows that the company sees a very big opportunity, particularly in the U.S., whether it's a retail, digital retailer, our main platform. It's a growing market for us, and we're just about to could have a few new contracts, and we mentioned about it. We were in the road show and DMO. And I think our team is very excited about getting new investors 3, 4 of them are going to New York and cover the places to meet with a lot of new potential bankers, investors, you'll see increased interest in the stroke because now we feel the company has the right trajectory to really make sure that an investor who comes in, they'll have a good ROI in the short to long term. So we're really excited about it.

And in the closing, I thank everyone for your questions. We remain focused on executing against our strategic priorities and building on the momentum across our business, and we look forward to reporting our progress against the guidance we introduced today. Before we go, I want to thank all of our colleagues around the world who was very hard to make who we are today. They delivered the strongest year in our history. And thank you for all of your time today. And you [indiscernible].

I think there will be some questions outstanding

Are there any questions outstanding?

Yes, I think there's some people waiting to ask some more questions.

Go ahead. Take it.

[Operator Instructions] Our next question is from Peter Sidoti with Sidoti.

I'm sorry, I'm still learning on the name. The release didn't include financials, and I don't think the 10-K has been filed. Can you just give me a handle on when the actual numbers will be available?

Asad, [indiscernible] not today?

Sure. So the press release should be available and the 10-K should be available later today.

There are no further questions at this time. Najeeb, would you like to continue your closing remarks?

Yes. So I think before we go, I want to thank our colleagues around the world who delivered these very strong numbers today in our history. And I thank all our shareholders we're committed long term and they look for this company at a possibility for us to really create not just the ROI, but also excitement in the company because we are very excited for our future, and we believe that we will really turn the corner. We already have turned the corner for this year. Thank you for your time today and your continued interest in NetSol. We appreciate you being a part of this journey with us. Thank you, and have a good day.

Thank you.

Thank you. This will conclude today's conference. You may disconnect at this time, and thank you for your participation.

Good morning, and welcome to the NetSol Technologies Third Quarter and 9 Months Ended March 31, 2026 Earnings Conference Call. On the call today are Founder and Chief Executive Officer of NetSol Technologies, Najeeb Ghauri; Chief Financial Officer, Sardar Abubakr; and Senior Vice President, Legal and Corporate Affairs, General Counsel and Corporate Secretary, Patti McGlasson. Also available for the Q&A portion are Chief Accounting Officer, Roger Almond; and Chief Marketing Officer, Erik Wagner.

I will now hand the call over to Patti, who will provide the necessary disclaimers regarding the forward-looking statements made during today's call. Patti, please go ahead.

Thank you. Good morning, everyone, and thank you for joining us today. After we review the company's business highlights and financial results for the third quarter and 9 months ended March 31, 2026, we will open the call for questions.

Before we begin, I'd like to remind you that our remarks today may include forward-looking statements within the meaning of the federal securities laws, including the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements reflect management's current expectations and are subject to risks and uncertainties, and actual results may differ materially from those expressed or implied. We encourage you to review the cautionary statements and risk factors contained in NetSol's press release issued earlier today as well as in our filings with the Securities and Exchange Commission, including our most recent Form 10-K and quarterly reports on Form 10-Q.

I'd also like to note that today's discussion will include certain non-GAAP financial measures. A reconciliation of these measures to their most directly comparable GAAP figures can be found in the press release issued earlier today.

Lastly, please remember that this call is being recorded and will be available for replay on our website at netsoltech.com and through a link included in today's press release. [Operator Instructions]

I will now hand the call over to our Founder and CEO, Najeeb Ghauri. Najeeb?

Thank you, Patti. Good morning, everyone, and thank you for joining NetSol Technologies call to review our results for the third quarter and 9 months ended March 31, 2026. The third quarter was a record quarter for NetSol.

Total net revenues were $19.8 million, the highest quarterly revenue in the history of the company. Recurring subscription and support revenue grew approximately 11.7% year-over-year. Income from operations was $3 million, up from $1.6 million in the prior year period, and non-GAAP adjusted EBITDA was $3.4 million compared with $2.3 million in the prior year period. For the 9 months ended March 31, 2026, total net revenues were $53.7 million, an increase of approximately 12.5% over the period -- prior year period. This is further evidence that the strategy we have been executing, unifying our products under the Transcend platform, deepening our customer relationships and embedding AI throughout our origination workflows is delivering.

I would like to walk through 3 areas that define the quarter. First, I'd like to talk about customer momentum, followed by the continued ramp of Transcend Retail, and then I'll discuss our progress on artificial intelligence.

First, on customer momentum. As we discussed on our last quarter's call, in December, we executed a $50 million 4-year contract extension with one of the longest tenured Mercedes-Benz, a Tier 1 global auto captive customer, a relationship that we cherished since 1997.

During the third quarter, we recognized the onetime license investment associated with that renewal, which contributed approximately $4.7 million in license revenue. This extension reinforces the recurring nature of our most important customer relationships and provides multiyear revenue visibility into our subscription, support and services pipeline.

The renewal also brought a significant annual maintenance billing event in January, which our CFO, Abubakr, will discuss in more detail in the financial review as it is the principal driver of the working capital movements you will notice in the balance sheet this quarter.

We also achieved meaningful customer milestones across our Transcend finance footprint during the quarter. In late January, we went live with Northridge Finance, a division of Bank of Ireland, U.K. On Transcend Finance in March, a Tier 1 global auto captive that is Ford China went live on Transcend Finance in China. Both go-live reflect Transcend Finance ability to scale across geographies and product lines and both convert into recurring subscription, support and services revenue going forward.

Additionally, we renewed a multimillion dollar agreement with a long-standing partner, Investec Bank, for the continued use of our finance and leasing platform. They are a premium Tier 1 multinational bank in the United Kingdom with whom we have had a relationship for over 15 years.

Second, on Transcend Retail. In the U.S., we have continued to see strong demand for our digital retail solution for BMW dealerships and OEMs, and it is becoming a meaningful contributor to our recurring revenue. We have opportunity to go live in all U.S.-based BMW dealership or almost 350 locations in 2-year time frame.

Pipeline activity is robust, and we continue to close new dealerships across -- group across customers in the U.S. We have continued to expand the presence in the U.S. dealer market through the third quarter. The combination of fast time to go-live, modern user experience and integration into the broader Transcend platform is resonating with the dealer groups, and we believe this is a market segment with substantial runway over the next several years.

In U.S.A., subscription and support continue to perform well with double-digit recurring revenue growth supported by go-lives and contract expansion across our customer base. Services revenue moderated this quarter compared with the prior year period, which had benefited from a onetime pickup associated with a customer contract amendment and from elevated implementation activity that has since transitioned into recurring revenue.

Underlying services and products demand remains healthy across the globe, and our pipeline of implementation work supports continued progress through the remainder of fiscal 2026 and into fiscal 2027.

I'd like to now discuss the progress in artificial intelligence or AI that continues to be essential to how we differentiate. Our approach is to generally embed AI directly into the workflows our customers run into the Transcend platform rather than build stand-alone AI features. The clearest example of this is our AI-enabled credit decisioning engine within Transcend Finance, which we introduced earlier this fiscal year. It operates as an architecture layer that sits inside our lease and loan origination solution and uses deep reasoning and agenting workflows to accelerate the pace of credit decisions with consistency and human oversight built in.

Customers running originations on Transcend Finance can activate our credit decisioning engine to compress decision, turnaround time and improve underwriting throughput. This is the model we will generally continue to follow as we extend AI across the platform, deeper integration into existing customer workflows tied to measurable outcomes.

We also introduced our AI native intelligent document processing solution for asset and financial commercial finance. It combines optical character recognition, for short OCR, with large language model capabilities to extract and structure information from financial documents, enabling faster credit and compliance workflows while reducing manual effort and improving operational efficiency.

Looking ahead, we are partnering with our clients on the next wave of AI initiatives, embedding intelligence deeper into the decisions and interactions that drive long-term value for our customers and their consumers.

I'd now like to turn the call over to our very dynamic new CFO, Sardar Abubakr to review the financial results in detail.

Thank you so much, Najeeb, and good morning, everyone. I will begin with our financial results for the third quarter of fiscal year 2026, followed by results for the 9 months ended March 31, 2026.

For the third quarter of fiscal 2026, total net revenues were $19.8 million, a record for the company, compared with $17.5 million in the prior year period, an increase of approximately 13%. The increase was driven primarily by higher license fees associated with the renewal of our $50 million 4-year Tier 1 auto captive contract, together with continued growth in recurring subscription and support revenues. Overall, we continue to build on the double-digit growth momentum from Q2. On a constant currency basis, total net revenues were $19.6 million.

Subscription and support revenues increased approximately 11.7% to $8.8 million compared with $7.9 million in the prior year period. On a constant currency basis, subscription and support revenues were $8.8 million.

License fees for the third quarter were $4.7 million compared with just over $1,000 in the prior year period. Services revenues were $6.3 million compared with $9.7 million in the prior year period. The decrease primarily reflects the timing and composition of current implementation projects as well as a onetime pickup of approximately $2.4 million in the prior year period. On a constant currency basis, services revenues were $6.1 million.

Gross profit for the third quarter was $11 million or 55.6% of net revenues compared with $8.7 million or 49.8% of net revenues in the prior year period. On a constant currency basis, gross profit was $10.9 million or 55.5% of net revenues.

During the quarter, we also recorded a onetime impact related to Pakistan super tax regime. This relates to a retrospective adjudication of the tax for prior periods following recent court developments. As a result, we recognized a charge of approximately $0.4 million, which impacted net income in the period. This is a onetime nonoperational item relevant to multiple sectors and not NetSol alone and does not reflect our underlying core operating trends.

Non-GAAP EBITDA was $3.4 million in the quarter, an increase of approximately 47.8% compared with $2.3 million in the prior year period. Non-GAAP EBITDA margin expanded to 17.2% compared with 13.1% in the prior year period. Foreign currency movements resulted in a loss of approximately $0.1 million in the quarter compared with a gain of $0.3 million in the prior year period.

GAAP net income attributable to NetSol was $1.3 million or $0.11 per diluted share compared with $1.4 million or $0.12 per diluted share in the prior year period.

Now coming to our results for the 9 months ended March 31, 2026. Total net revenues for the 9 months ended March 31, 2026, were $53.7 million compared with $47.7 million in the prior year period, an increase of 12.5%. On a constant currency basis, total net revenues were $52.9 million.

Recurring subscription and support revenues for the 9 months were $26.9 million, an increase of 8.6% compared with $24.7 million in the prior year period. On a constant currency basis, recurring subscription and support revenues were $26.5 million.

License fees for the 9 months were $4.9 million compared with $75,000 in the prior year period, reflecting the renewal recognition I described earlier. Services revenues for the 9 months were $21.9 million compared with $22.9 million in the prior year period. Annualized recurring revenue is forecasted to be approximately $35 million exiting the third quarter compared with approximately $32.9 million in the prior year period, an increase of 7%.

Gross profit for the 9 months was $26 million or 48.4% of net revenues compared with $22.2 million or 46.6% of net revenues in the prior year period. On a constant currency basis, gross profit was $25.3 million or 47.9% of net revenues.

Non-GAAP EBITDA was $3.5 million, an increase of approximately 84.2% compared with $1.9 million in the prior year period. Non-GAAP EBITDA margin expanded to 6.6% compared with 4% in the prior year period.

Turning to the balance sheet. Cash and cash equivalents were $14.7 million at March 31, 2026, compared with $17.4 million at June 30, 2025. The decrease in cash flow from operations during the period was primarily attributable to changes in working capital, including the timing of customer billings and collections associated with certain large customer arrangements.

Accounts receivable increased during the period due to the timing of collections on invoices issued under these arrangements. These receivable balances have since converted to cash in the normal course of business.

Overall, the third quarter reflects a continuation of our focus on double-digit top line growth year-over-year, underlined by consistent improvement in margins and EBITDA, a healthy balance sheet and strong cash flow situation.

I will now hand the call back to Najeeb.

Thank you, Abubakr. Looking ahead, we are reaffirming our full year fiscal 2026 revenue guidance of approximately $73 million to $74 million. We are pleased with our 9-month performance and the underlying momentum we are seeing across the Transcend platform. Our core products, Transcend Finance remains strong, while our loyal and long-term partners could not be more pleased with their ROI on the full solutions.

Our focus heading into the fourth quarter and into fiscal 2026 is unchanged, extend the depth of our largest customer responsibilities, relationships continue to expand the unified Transcend platform with embedded AI capabilities like AI-driven credit decisioning engine and accelerate growth of Transcend Retail in the U.S. dealer market.

While macroeconomic and currency dynamics remain a consideration, our diversified business model, our long-term customer relationships and the underlying strength of our recurring revenue base provides a solid foundation for the remainder of fiscal 2026 and beyond.

With that, operator, please open the line for questions.

[Operator Instructions] Our first question comes from the line of Todd Felte with StoneX.

Congratulations to you and your team on a great quarter. It was really nice to see the revenue and margin improvement. My first question just deals with, is this type of revenue and margin growth can be continued? Or is this mainly the result of the onetime license fee that you collected in the quarter?

Thank you, Todd, for this question. I appreciate your long-term relationship. I think we see a long-term vision. We believe this pattern will continue. And I think because the pipeline is strong, very healthy and getting a lot of interest from our new customers and, of course, the existing customers.

Okay. And also I wanted to follow up. It looked like your Pakistani subsidiary had a really strong quarter. And I know -- I think you own 69% or 70% of them, and you will always take a noncontrolling interest loss based on that percentage you own. Has there been any further discussions about fully acquiring them? I know your earnings would have probably been around $0.20 a share if you had had full control of them.

Absolutely, very right observation, and I think we talked about it before a couple of times, Todd. We have this initiative in our mind as a top priority. We just need to manage our financing so we can completely buy out the remaining 30%. Of course, it would make NetSol parent company much stronger in the both top line and bottom line. But this is the one key initiative we're still working on.

[Operator Instructions] Our next question comes from the line of Michael Kupinski with NOBLE Capital Markets.

And I'm a little new to the story, but I have a couple of questions here. I was just wondering in terms of, obviously, a lot of geopolitical events going on, how exposed is the business to the China auto finance weakness and our broader global auto sales trends? I was just wondering if you can just give us some color there.

Well, thank you for this question. I think it is obviously a macro level. There's all kinds of things happening in this new world order. We're not that exposed. I think we have a pretty solid customer base. They're highly dependent on this products and services. We have an excellent team in Beijing and Tianjin. Our customers are supported by the people over there and the back office in Lahore, Pakistan.

So I think we're not concerned. Of course, we watch, follow conditions very closely. But I think our product is amazing. Our technology is amazing. Our people are amazing and the customers are dependent not just to China, but all across 3 global regions. So I feel comfortable about the situation. Of course, I wish that things were a bit better.

In terms of Pakistan, it's one of the safest country to do business with. People are traveling comfortably. Our people are enjoying. Our customers are visiting us back and forth. So I think overall, we're in a pretty good condition.

And are there verticals outside of automotive that could materially move the needle for you over the next several years?

I think so. I believe so.

Can you identify what those might be?

Well, I think we are looking into pretty impressive, quite frankly, double-digit organic growth in the coming years. We have some other ideas, which obviously I can share right now in a positive way, how we can further really expand our footprint in the U.S. market, particularly. Of course, we've done very well accretive revenue. We're also open to looking into M&A opportunities eventually, given the right opportunities to really grow the U.S. business especially.

So I think there's lots happening in the macro level, in the micro level. The company is very vigilant, alert on the opportunities in front of us. Of course, so many years of this experience in this company in all 3 regions, we have enough, I think, understanding of different environment and how to manage the situation. So our team has really fired up every location and really doing well for the company and the shareholders.

We have no further questions at this time. Mr. Ghauri, I'd like to turn the floor back over to you for closing comments.

Thank you very much. My friend, my dear shareholders, we remain focused on executing against our strategic priorities and building on the momentum across our business. And we look forward to updating you on our continued progress as we close out fiscal 2026.

I want to personally thank all of our shareholders, our global clients in the U.S., Canada, Europe, China, Australia, Thailand, Indonesia and Pakistan and all of our most dedicated NetSolians worldwide.

As a reminder, we will hold our AGM Shareholders' Meeting on June 18, 2026, at our Encino headquarters, where shareholders will be entitled to participate and vote on the resolution presented either in person or by proxy. We encourage all shareholders to vote upon receipt of their proxy materials with the Board's recommendation. Thank you for joining us today and for your continued interest in NetSol. Have a good day.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.

Thank you, Christina. Have a good day, too.

You too as well.

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.

Good morning, and welcome to the NetSol Technologies Second Quarter and 6 Months Ended December 31, 2025, Earnings Conference Call.

On the call today are Founder and Chief Executive Officer of NetSol Technologies, Inc., Najeeb Ghauri, Co-Founder and President, Naeem Ghauri, Chief Financial Officer, Sardar Abubakr; and Senior Vice President, Legal and Corporate Affairs, General Counsel and Corporate Secretary, Patti McGlasson.

I will now hand the call over to Patti, who will provide the necessary disclaimers regarding forward-looking statements made during today's call. Patti, please go ahead.

Good morning, everyone, and thank you for joining us today. After we review the company's business highlights and financial results for the second quarter and 6 months ending December 31, 2025. We will open the call for questions.

Before we begin, I'd like to remind you that our remarks today may include forward-looking statements within the meaning of the federal securities laws, including the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements reflect management's current expectations and are subject to risks and uncertainties, and actual results may differ materially from those expressed or implied.

We encourage you to review the cautionary statements and risk factors contained in NetSol's press release issued earlier today as well as in our filings with the Securities and Exchange Commission, including our most recent Form 10-K and quarterly reports on Form 10-Q.

I'd also like to note that today's discussion will include certain non-GAAP financial measures. A reconciliation of these measures to their most direct comparable GAAP figures can be found in the press release issued earlier today. Lastly, please remember that this call is being recorded and will be available for replay on our website at netsoltech.com, and through the link included in today's press release. Following their prepared remarks, we will open the call for a Q&A session.

I will now hand the call over to our Founder and CEO, Najeeb Ghauri. Najeeb?

Thank you, Patti. Good morning, everyone. And thank you for joining NetSol Technologies call to review our results for the second quarter and 6 months ended December 31, 2025.

We delivered a strong second quarter of fiscal 2026. Total net revenues increased 21% year-over-year to $18.5 million driven by higher services revenues and growth in our recurring subscription and support revenues. Services revenue grew 41%, primarily from new implementations from major customers. As these implementations move through go-live and expansion phases, we believe they can support recurring subscription and support revenues over time. I'm pleased with the strong balance sheet.

Our current ratio of 2.3 reflects strong liquidity, giving us substantial flexibility for growth initiatives. I'd like to highlight the strategic progress we made during the quarter across product innovation, customer momentum and leadership. Firstly, on product and innovation, we launched our loan origination platform or Check, our AI-enabled credit decisioning engine. Check is designed to modernize credit underwriting by combining deep reasoning, intelligent automation and agentic workloads to support faster, smarter and more consistent credit decisions. It is an important extension of our Transcend platform and reflects our focus on building high-margin products that expand long-term revenue opportunities.

Second, on customer momentum, we strengthened a key relationship with a $50 million 4-year contract extension with a Tier 1 global auto captive and long-standing partner -- this extension reinforces customer trust provides meaningful revenue visibility and validates the scalability of our platform.

In addition, Transcend Retail continued to gain traction in the U.S. and the U.S. market with new dealer groups and franchised dealerships standing on during the quarter. Demand for digital automotive retail solutions remains strong, and these wins support our strategy to expand recurring revenue while increasing our footprint in a high potential growth market.

Finally, we continue to strengthen our leadership team to support our next phase of growth. During the quarter, we appointed Sardar Abubakr as Chief Financial Officer with Roger Almond, transitioning to serve as a Chief Accounting Officer, together they bring deep financial expertise and will help maintain strong governance, discipline and transparency as we continue to scale globally.

Overall, these milestones reflect solid execution across innovation, customer expansion and leadership. We remain focused on sustainable growth, deepening customer partnerships and advancing our position as a trusted technology partner helping OEM dealerships and financial institutions, sell, finance, lease and manage assets end-to-end.

Looking ahead, our pipeline multiyear contract and recurring revenue base provides visibility into near long-term performance. We remain focused on disciplined execution and continued progress on growth and profitability.

And now I'd like to turn the call over to our President, Naeem Ghauri, who will share an update on NetSol journey and latest development with AI and how we are leveraging this transformative technology in both of our products and across our operations. Naeem?

Thank you, Najeeb, and good morning, everyone. I'd like to share a brief update on our AI strategy and progress.

Over the past year, our focus has been to embed AI across the Transcend platform and our internal operations horizontally. Not as a stand-alone feature but as workflow capabilities that drive measurable outcomes for our customers. We have built a shared AI layer with reusable components and governance built in, so we can deploy AI consistently across products while maintaining reliability, auditability and human oversight. Our teams work closely with customers to integrate AI into real-world workflows. So we can adapt general models into domain-specific capabilities tied to ROI and operational impact.

AI at NetSol is now integrated into our product development life cycle, supported by dedicated teams, shared tuning and an integrated road map that helps us scale AI in a repeatable way with evaluation and monitoring designed in from the start. A good example, as Najeeb mentioned, is Check. Our AI-enabled credit decisioning capability within our loan origination product. It combines reasoning, automation, and genetic workflows to help underwriting teams move faster with greater precision while keeping humans in the loop. In parallel, we are applying AI internally presently to streamline delivery and improve productivity, and we are also exploring value-based pricing approaches for select AI-enabled capabilities.

Overall, we believe this strengthens differentiation, supports operating leverage and positions us to scale AI value responsibility across our business.

With that, I'll turn the call over to our CFO, Sardar Abubakr to review the financial results. Abu?

Thank you, Naeem, and good morning, everyone. I will begin with our financial results for the second quarter of fiscal year 2026, followed by results for the 6 months ended December 31, 2025.

For the second quarter of fiscal 2026, total net revenues increased 21.1% to $18.8 million compared with $15.5 million in the prior year period, driven primarily by higher services revenues and higher subscription and support revenues. On a constant currency basis, total net revenues were also $18.8 million.

Subscription and support revenues increased approximately 5.1% to $9.1 million compared with $8.6 million in the prior year period. On a constant currency basis, subscription and support revenues were $9.2 million. Service revenues increased 40.9% to $9.6 million compared with $6.8 million in the prior year period. Total service revenues on a constant currency basis were $9.6 million.

Gross profit was $9 million or 48% of net revenues, on a constant currency basis, gross profit was $9 million or 47.8% of net revenues. Cost of sales was $9.8 million or 52% of net revenues compared with $8.6 million or 55.5% of net revenues in the second quarter of fiscal 2025. On a constant currency basis, cost of sales was $9.8 million or 52.2% of net revenues. The increase primarily reflected increased salaries and travel costs even though the margin has improved.

Income from operations was $1.3 million compared with a loss from operations of $0.5 million in the second quarter of fiscal 2025. On a constant currency basis, income from operations was $1.3 million. Foreign currency movements contributed a gain of $0.05 million in the quarter, compared with $0.7 million loss for the prior year period.

Moving to non-GAAP EBITDA for the quarter was $1.7 million compared with a loss of $0.8 million in the second quarter of fiscal 2025. Overall, the quarter reflected strong top line growth driven by implementation activity along with continued subscription and support performance. We also delivered meaningful profitability improvement versus the prior year, supported by gross margin expansion and improved operating leverage.

Turning now to the 6 months ended December 31, 2025, total net revenues were $33.8 million compared with $30.1 million in the prior year period. On a constant currency basis, total net revenues were $33.5 million. Recurring subscription and support revenues increased 7.2% to $18 million compared with $16.8 million in the prior year period. On a constant currency basis, recurring subscription and support revenues were $17.9 million.

Service revenues increased 17.9% to $15.6 million compared with $13.2 million in the prior year period. On a constant currency basis, services revenues were $15.5 million. Gross profit was $14.9 million or 44.2% of net revenues compared with $13.5 million or 44.8% of net revenues in the prior year period. On a constant currency basis, gross profit was $14.6 million or 43.5% of net revenues.

Cost of sales was $18.9 million or 55.8% of net revenues compared with $16.7 million or 55.3% of net revenues in the prior year period. On a constant currency basis, cost of sales was $18.9 million or 56.5% of net revenues.

GAAP net loss attributable to NetSol for the 6 months totaled $2.1 million or $0.18 per diluted share compared with a GAAP net loss of $1.1 million or $0.09 per diluted share in the prior year period. On a constant currency basis, GAAP net loss attributable to NetSol was $2.5 million or $0.21 per diluted share.

Non-GAAP EBITDA for the 6 months ended December 31, 2025, was a loss of $0.1 million compared with a non-GAAP EBITDA loss of $0.5 million for the prior year period.

Turning to the balance sheet. Cash and cash equivalents were $18.1 million at December 31, 2025, compared with $17.4 million at June 30, 2025. Working capital was $26.4 million compared with $26.6 million and net sold stockholders' equity was $35.9 million or $3.04 per share. For the first half of fiscal 2026, we delivered continued revenue growth across both recurring and services businesses while maintaining a solid balance sheet and liquidity position.

I'll now hand over the call back to Najeeb.

Thank you, Abubakr. Looking ahead, we remain confident in our ability to capitalize on opportunities across our markets. We will continue investing in our product portfolio including AI-enabled capabilities across the Transcend platform, while expanding our global footprint and enhancing our solutions to meet evolving client needs.

Our focus on long-term customer relationships, supported by a strong pipeline of recurring and services engagements position us well for continued progress. With that context, we have increased our full year fiscal 2026 revenue growth guidance to nearly $73 million or better, supported by our current pipeline and continued investment in go-to-market initiatives and our unified AI-enabled Transcend platform.

While macroeconomic and currency dynamics remain in consideration our diversified business model, execution discipline and resilient customer base provide a solid foundation for the remainder of the fiscal year. Overall, our first half performance reinforces our view that NetSol is well positioned to achieve our full year objective and continue creating value for our customers and shareholders.

With that, operator, please open the line for questions-and-answers.

[Operator Instructions] Our first question comes from the line of Todd Felte with Stonex Group.

Congratulations on a great quarter. I think the $18.8 million maybe an all-time record for quarterly revenue. So that's great to see. I wanted to ask about your margins. I know you had some recent hires from some travel expenses. But as those new hires get up to speed, do you expect continued margin improvement and where do you think your margins will kind of stabilize out at?

Thank you, Todd. Absolutely. We are anticipating improving margins in the coming quarters and the next fiscal year. as you said rightly, we are continuously investing in our growth strategy. It means travel, new employees, building a new platform, so forth. So I think the gross margin will improve. Absolutely. And I think I can have you Naeem and [indiscernible] jump in to add further.

Yes, I'll just add a little bit more color. So essentially, the new hirings are primarily in the AI teams at that. And we see that continuing for a period -- we're also incurring some extent on cross training. So what we have a very aggressive plan to cross train our existing workforce across horizontally in every department from HR to software engineering and testing, accounting, admin.

So literally, we are touching every single business segment. So internally, we are very, very confident that within the next 6 months, we will have a major transformation Phase 1 completed and we'll go on to more advanced training as we go forward in the rest of the calendar year.

Does that help? Like to just share that.

Yes. while I got you, I was wanting also to ask about the noncontrolling interest and how that is computed. I know that took a big chunk out of our earnings per share this quarter.

You want to answer Abu just talking about the Pakistan subsidiary, right?

Minority, yes.

Sure. So if I could, Todd, just go back to your previous question first, and then we'll come back to this one just to add some color.

So -- to take on what Naj and Naeem said, we will continue to invest in the right areas that will propel our future growth. but margin improvement both at a gross and at a net level is going to be important for our profitability story in our journey going forward. You probably will see just very quickly that our GP percentage of revenues this quarter versus the preceding quarter was up 48% as compared to 44.5%. Cost of sales was down. Similarly, this quarter is 55.5% compared to the equivalent quarter of 52%.

And then EBITDA, which is an important metric, of course, clocked at about a 9% margin compared to a loss in the equivalent quarter last period. I think what gives me confidence, Todd, in addition to that, is that our liquidity position is solid. The current ratio, but also our debt to equity it gives us an opportunity to continue to invest in exciting growth markets. And I think we're at the intersection of both software, financial services and mobility.

Now coming to your second question on minority interest controlling. If I understood that question, you were saying that how is that computed if you could just mentioned that again.

Yes. Just how is it computed? I know that there was a nice profit for the Pakistani subsidiary, and I showed you took a $715,000 loss on that noncontrolling interest.

Yes. We follow the standard definitions applied in GAAP for noncontrolling interest. So the Pakistani subsidiary is owned majority, but there is 30% minority interest, and we follow the standard definitions as per calculation for GAAP. Roger, if you want to add to that, you can feel free to add if I missed anything.

No. I think you have that correct. So Todd, if you look at our Pakistani entity there, we own almost 70%, 30% is held by noncontrolling interest. So they have recorded a very nice profit for the quarter or for the 6 months, then the 30% of their profit would then get allocated to the noncontrolling interest piece.

Based on the consolidation, all of their revenues would be included up in our revenues and costs -- into our costs, et cetera. And the noncontrolling interest is then calculated down at 1 number in the bottom. So that's -- we follow the GAAP process as Abu had mentioned.

Okay. That's helpful. So basically, the better that the subsidiary does will add to your revenues. But if it's really profitable, 1/3 of that will have to be written off in the noncontrolling interest.?

Correct.

So Todd, yes, so as a subsidiary and not an affiliate, we will consolidate all revenues and costs. But from the profit share, you're right. any earnings are split on a 70-30 basis between the parent and minority interests?

Okay. That's helpful. And then finally, to allude to your comments about the strong financial position the company is in. As a shareholder, we see the stock still trading just barely above book value. Have you thought about allocating some of that $18 million in cash, a small amount to either a stock buyback or maybe a small dividend?

Thank you for asking a question. We did that a couple of years ago, and we always open to same approach. But I assume we can decide between -- in the Board, then we'll get back to you accordingly. Yes. I mean we definitely a -- but Todd, I want to -- thank you especially for taking time to visit us a few months ago. It shows your commitment and believe in our coming. So thank you so much for your long-term view.

It was great to visit you and I'll jump back in the queue.

[Operator Instructions] [Audio Gap] We have no further questions at this time. Mr. Ghauri, I'd like to turn the floor back over to you for closing comments.

Thank you for joining today's call. Sorry. Todd, do you want to come back?

Yes, I thought Todd to come back. He's going back in the queue.

Is he in the queue operator.

Todd, if you want to hit star 1 again?

I think is okay in. Okay. Yes.

8 I think we're going to -- No, I'm sorry, he did jump back in.

Okay.

Okay. I'm good with that. Again, congratulations on a great quarter, and I look forward to future success.

And we'll come back again to Casino California and talk. Thank you for joining us today for your ongoing interest in NetSol. We look forward to updating you on our continued progress in the coming quarters. Have a nice day.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.

Thank you, operator.

Good morning, and welcome to the NetSol Technologies First Quarter of Fiscal 2026 Earnings Conference Call. On the call today are Founder and Chief Executive Officer of NetSol Technologies Inc., Najeeb Ghauri; Chief Financial Officer, Roger Almond; Senior Vice President, Legal and Corporate Affairs, General Counsel and Corporate Secretary, Patti McGlasson; and Chief Marketing Officer, Erik Wagner.

I'd like to now turn the call over to Patti, who will provide the necessary disclaimers regarding the forward-looking statements made during today's call. Patti, please go ahead.

Thank you. Good morning, everyone, and thank you for joining us today. After we review the company's business highlights and financial results for the first quarter of fiscal year 2026, we will open the call for questions.

Before we begin, I'd like to provide the customary caution regarding forward-looking statements that may be made during today's discussion. Please note that all information presented on this call is subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Our remarks may include forward-looking statements that reflect management's current expectations regarding future events and operating performance. These statements are subject to risks and uncertainties, and actual results may differ materially from those projected.

We encourage you to review the cautionary statements and risk factors contained in NetSol's press release issued earlier today, as well as in our filings with the Securities and Exchange Commission, including our most recent Form 10-K and quarterly reports on Form 10-Q.

I'd also like to note that today's discussion will include certain non-GAAP financial measures. A reconciliation of these measures to their most direct comparable GAAP figures can be found in the press release issued earlier today.

Lastly, please remember that this call is being recorded and will be available for replay on our website at netsoltech.com, as well as through a link included in today's press release.

I'd like to reiterate that at this time, all participants are in listen-only mode. Following the prepared remarks, we will open the call for Q&A session.

I will now hand the call over to our Founder and Chief Executive Officer, Najeeb Ghauri. Najeeb?

Thank you, Patti. Good morning, everyone, and thank you for joining NetSol Technologies Earnings Call to review our results for the first quarter ended September 30, 2025. For the first quarter, we delivered year-over-year revenue, revenue growth of 2.8%, driven by a 9.4% increase in subscription and support revenue as we continue to expand our base of recovering revenue. Our bottom line, however, reflected the impact of intentional investments and a more challenging operating environment. I'll spend a few minutes on key strategic developments and the drivers behind our results. And then I will turn it over to Roger for more details on the financials before we open the call for questions.

First, on strategic progress, we continue to strengthen our position as a trusted partner, a digital automotive retail for leading dealership groups in the U.S. During the quarter, NetSol was selected by Sonic Automotive, a Fortune 500 automotive dealership group, to lead a discovery engagement focused on defining the requirements and road map for an omnichannel digital retail solution powered by our Transcend Retail platform. The engagement will help Sonic Automotive further enhance the customer experience and streamline dealer operations across its EchoPark Automotive network. This new partnership reflects our increasing momentum in the U.S. market and highlights the trust major industry players play in our technology and expertise.

Second, our ongoing investments in artificial intelligence reflect our commitment to shaping the future of intelligent automation and asset finance and automotive retail. We recently announced the launch of Check AI, our AI-powered credit decisioning engine designed to improve the speed and consistency of the credit underwriting process. Check AI automates key workflows, accelerates decision-making and support more accurate underwriting by leveraging data-driven intelligence. The platform combines intelligent automation with human in the loop oversight to help ensure fairness, transparency and regulatory compliance. By integrating AI into our Transcend platform, we're not only enhancing decision-making and efficiency, but also creating new opportunities for innovation and long-term growth.

Third, in the Asia Pacific region, we achieved important milestones that demonstrates both our market reach and our deep understanding of [indiscernible] customer needs. NetSol China participated in the Shanghai Cooperation Organization, Summit in Tianjin, where we signed a strategic cooperation agreement with Tianjin Binhai, Smart Group and the Dongjiang Free Trade Port Zone Government. This partnership focuses on integrated financial services for the automotive industry and cross-border data services, service areas that align closely with China's growing emphasis on digital transformation and global expansion.

We have plan to maintain a sizable market share in the Chinese auto finance market. We also become the partner of choice with Chinese OEMs and asset finance companies who are looking to expand abroad. We are one of the few vendors operating in the Chinese market who have a strong global resume. This is highlighted by a recent go-live in Indonesia where a major Chinese leasing company deployed our Transcend Finance platform as part of a greenfield implementations to launch its operations in that market. This deployment showcases NetSol's ability to support Chinese companies expanding internationally while highlighting our localized expertise and readiness to deliver solutions that meet regional regulatory and operational standards. Our long-standing presence in APAC region combined with our cultural fluency and [indiscernible] technology continues to make NetSol a partner of choice with global OEMs and asset finance companies.

Now subsequent to quarter end, we hosted a summit in Beijing that brought together leading Indonesian and Chinese asset finance executives, reinforcing our role as a bridge between China and the broader international asset finance ecosystem. These important developments during the first quarter reflect solid strategic and operational momentum as we continue to strengthen our position in key global markets. As we move forward, we remain committed to executing our strategy with discipline, balancing investment and innovation with a continued emphasis on operational efficiency and long-term profitability.

Despite these significant developments, I want to recognize that the first quarter has been a challenging one for NetSol. While our total net revenue were up 2.8% year-over-year, our bottom line results reflect the impact of several strategic investments and external macroeconomic headwinds. On the expense side, we saw a 36% increase in selling and marketing costs, driven primarily by our decision to expand and strengthen our global sales organization. We made key hires at the senior levels leadership, building the foundation needed to support future growth across our product portfolio. The timing of this decision reflects both the stronger demand environment we are seeing and our intention to invest ahead of that demand in a disciplined way. We are seeing a meaningful increase in qualified leads and business opportunities and we expect this expanded sales capacity to support higher bookings and revenue over time.

Our reported revenue in Q1 is seasonally lower due to summer holidays combined with macroeconomic uncertainty, including credit tightening and rising auto loan delinquencies, tariff impacts and restructuring challenges among European automakers. The operating environment has been difficult. However, these dynamics also create opportunities where NetSol's offering can help clients to drive efficiencies. It is also important to note that we do not always have full control over when revenue is recognized as it depends on the timing of customer milestone and implementation schedules.

In addition, we continue to transition from a license heavy model to a predominantly SaaS-based model. This shift improves the quality and visibility of our revenue over time but it also changes the timing of how revenue is recognized and can make quarterly growth pattern less linear, especially in the near term.

As this mix shift continues, we expect a higher proportion of recurring revenue and greater long-term predictability even if individual quarters can be uneven. For these reasons, we view the losses we experienced in the first quarter as primarily the result of front-loaded growth investments, seasonal patterns and foreign exchange volatility rather than a change in the fundamental earnings power of the business.

Despite these short-term challenges, I want to emphasize that our business fundamentals remain solid. Our sales pipeline is stronger than it has ever been, reflecting growing global demand for our solutions that are part of our unified AI-powered Transcend platform. Compared to the same quarter last year, we are noticing stronger momentum and more qualified opportunities. We expect to achieve new milestones. And despite a slow start, we are targeting full year [ revenue ] guidance of 5% to 7%, which is above last year's level, supported by a growing pipeline and the investments we made in our go-to-market and AI-enabled platform.

NetSol has navigated many cycles of change in the past. We are executing a clear strategy for growth, innovation and customer success, and I remain confident in our ability to deliver sustainable long-term value to our shareholders.

Thank you. I will now ask Roger Almond to discuss the financial results in more detail.

Thanks, Najeeb, and good morning, everyone. Let me share the results for the first quarter of fiscal year 2026. Total net revenues for the first quarter of fiscal 2026 increased 2.8% to $15 million compared with $14.6 million in the prior year period. This was driven by a 9.4% increase in subscription and support revenues. On a constant currency basis, total net revenues were $15.1 million. Total subscription, SaaS and cloud and support revenues increased 9.4% to $9 million compared with $8.2 million in the prior year period. Total subscription and support revenues on a constant currency basis were $9.1 million.

Total services revenue were $6 million compared with $6.4 million in the prior year period. Total services revenues on a constant currency basis were $5.9 million. Gross profit for the first quarter of fiscal 2026 was $5.9 million or 39.4% of net revenues compared to $6.6 million or 45% of net revenues in the first quarter of fiscal 2025. On a constant currency basis, gross profit was $5.9 million or 39.1% of net revenues as measured on a constant currency basis.

Operating expenses for the first quarter of fiscal 2026 were $7.8 million or 51.6% of sales compared to $7.3 million or 50.2% of sales for the first quarter of fiscal 2025. On a constant currency basis, operating expenses were $7.8 million or 51.5% of net revenues as measured on a constant currency basis.

Loss from operations for the quarter was $1.8 million compared to a loss from operations of $760,000 in the first quarter of fiscal 2025. GAAP net loss attributable to NetSol for the quarter totaled $2.4 million or $0.20 per diluted share compared with GAAP net income of $71,000 or $0.006 per diluted share in the prior year period.

It's important to point out that included in our net loss for this quarter was a loss on foreign currency exchange transactions to $287,000 and compared to a gain of approximately $543,000 in the prior year period. Because we operate in several geographical regions, a significant portion of our business is conducted in currencies other than the U.S. dollar. A decrease in the value of the U.S. dollar compared to foreign currency exchange rates generally has the effect of increasing our revenues, but it also increases our expenses denominated in currencies other than the U.S. dollar. Similarly, as the U.S. 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.

Moving to our non-GAAP metrics. Non-GAAP EBITDA for the first quarter of fiscal 2026 was a loss of $1.8 million or $0.15 per diluted share compared with non-GAAP EBITDA of $301,000 or $0.03 per diluted share in the prior year period.

Turning to our balance sheet. Our cash and cash equivalents were $22.7 million as of September 30, 2025, compared with $17.4 million as of June 30, 2025. Working capital was $24.9 million as of September 30, 2025, compared with $26.6 million as of June 30, 2025. Total net stockholders' equity at September 30, 2025, was $35.8 million or $3.03 per share. While the first quarter reflects a higher operating expense ratio and a temporary compression in gross margins, we remain committed to balancing strategic investment with cost discipline. Our cash position of $22.7 million provides ample liquidity to support ongoing growth initiatives and we continue to prioritize investments that enhance recurring revenue streams and scalable digital solutions. The progress in subscription and support revenues underscores the resilience of our business model and we are taking proactive steps to optimize operational efficiency as we navigate short-term headwinds, keep our focus quarterly on long-term profitability and shareholder value creation.

I'd like to now hand the call back over to Najeeb.

Thank you, Roger. Although this quarter brought some challenges, our vision and priorities remain very clear. We are continuing to expand our global footprint via our unified AI-powered Transcend platform that is built to simplify and optimize every stage of the asset, retail and commercial life cycle. We are committed to improving operational efficiency and remaining focused on our customers' needs in the quarters ahead. We believe these efforts will drive stronger performance and long-term value creation. We remain deeply appreciative of our shareholders' continued trust and support as we execute our long-term strategy.

Operator?

[Operator Instructions] As there are no questions in the queue -- go ahead, sir.

Yes. No, it's fine. So we sincerely appreciate your participation in today's call and your continued interest in NetSol. We look forward to keeping you informed of our progress in the quarter ahead. Wishing you good health and all the best.

Ladies and gentlemen, the conference of NetSol Technologies has now concluded. Thank you for your participation. You may now disconnect your lines.