NetSol Technologies, Inc. Q2 FY2026 earnings call

• Strong Q2 revenue growth with total net revenues up 21% YOY.
• Launched loan origination platform Check, an AI-enabled credit decisioning engine.
• Secured a $50 million 4-year contract extension with a Tier 1 global auto captive.
• Transcend Retail gained traction in the U.S. with new dealer groups and franchised dealerships.
• Appointed Sardar Abubakr as Chief Financial Officer and Roger Almond as Chief Accounting Officer to strengthen leadership.

In the second quarter of fiscal 2026, total net revenues increased 21% year-over-year to $18.5 million. Services revenue grew 41%, driven by new implementations from major customers. Subscription and support revenues increased approximately 5.1% to $9.1 million. For the 6 months ended December 31, 2025, total net revenues were $33.8 million. Recurring subscription and support revenues increased 7.2% to $18 million, and services revenues grew 17.9% to $15.6 million. Gross profit for Q2 2026 was $9 million (48% of net revenues), and for the 6 months it was $14.9 million (44.2% of net revenues).

• Increased full year fiscal 2026 revenue growth guidance to nearly $73 million.
• Continue investing in product portfolio, including AI-enabled capabilities across the Transcend platform.
• Expand global footprint and enhance solutions to meet evolving client needs.

Q: Congratulations on a great quarter. I think the $18.8 million may be an all-time record for quarterly revenue. I wanted to ask about your margins. I know you had some recent hires and 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?

A: Thank you, Todd. Absolutely, we are anticipating improving margins in the coming quarters and the next fiscal year. As we are continuously investing in our growth strategy, including travel and new employees, we expect gross margin to improve. We will continue to invest in the right areas that will propel our future growth, and margin improvement at both gross and net levels is important for our profitability story.

Q: 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.

A: Sure. We follow the standard definitions applied in GAAP for noncontrolling interest. The Pakistani subsidiary is owned majority, but there is a 30% minority interest. We consolidate all revenues and costs of the subsidiary, and any earnings are split on a 70-30 basis between the parent and minority interests.

Q: 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?

A: We did that a couple of years ago, and we're always open to the same approach. But as soon we can decide between the Board, then we'll get back to you accordingly. We would definitely like to see the stock perform well, and thank you for your long-term view.