NetSol Technologies CEO: FY08 revenue to be in range of $38M to $41M

NetSol Technologies Inc. (Nasdaq: NTWK) CEO Najeeb Ghauri said the company expects fiscal 2008 revenue growth in the range of 30% to 40%, or between $38 million and $41 million, from $29.3 million in fiscal 2007 ended June 30. The IT consulting company’s chief executive made the comments during a midday conference call.

The revenue growth will come organically, he said, but the company will continue to pursue partnerships, joint ventures and acquisition targets.

“We believe the 30% to 40% annual growth is an appropriate target range as we are quickly approaching the end of our fiscal first quarter of 2008 [ending September 30],” Ghauri said. He said the fourth quarter is the company’s strongest and the first quarter is traditionally NetSol’s weakest. The firm will update guidance during its first quarter conference call, which takes place in early November, he said.

He said NetSol is “one of the leading candidates” for a major e-government project that will be realized in 2008. The company also signed seven new contracts for its LeaseSoft financial software during the fourth quarter. The chief executive noted during the call that no one NetSol customer accounts for more than 10% of revenue.

NetSol is the leading IT company in Pakistan, Ghauri said, and the company expects to see continued strong growth. Responding to an investor’s concerns about Pakistan’s volatile political situation, Ghauri said Pakistani revenues from the fourth quarter were the highest ever and occurred during a turbulent presidential election.

“At the end of the day, we deliver and customers keep coming to us despite of what happens geopolitically,” Ghauri said. “It was a record quarter in the midst of the worst timing in Pakistan. We have basically beaten the condition there.”

Business expenditures in Pakistan have weighed down gross margins, CFO Tina Gilger said.

“This investment in our business units has been a factor in our lower gross margins,” she said. “Going forward, we would expect gross margins in the high-50% to 60% range.”

The company’s third-quarter gross margin was 48% and 62% during the fourth quarter.

The CEO said the company is also in the middle of re-branding its operating units under a continent-distinct NetSol brand.

A new version of the company’s sales software, LeasePak, is scheduled for release in October, Ghauri said. The new version will include extended asset tracking functions.

Before the opening, NetSol reported record fourth-quarter revenue of $8.6 million, above analyst expectations of $8.3 million and an 84% increase from $4.7 million a year earlier. The firm’s net income increased 176% to $1.3 million, or $0.07 a share, for the three months ended June 30, above Wall Street expectations of flat earnings and compared with a loss of $1.7 million, or $0.11 a share, during the same period of 2006.

While net income and revenue increased substantially, NetSol’s operating expenses increased only 13% to $3.4 million, from $3 million in the year-ago period. The Calabasas, Calif.-based company’s selling and marketing expenses during the fourth quarter increased around 33% to $0.8 million, from $0.6 million a year earlier.

A list of the company’s main competitors and a breakdown of revenue by geography and segment will be available in NetSol’s annual report, which Ghauri said will soon be filed with regulators.

In midday trading, NTWK shares are soaring near a year high—up 41.42%, or $0.70, at $2.39. Over the last 52 weeks, NetSol shares have ranged from $1.27 to $2.95.

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