NETSOL TECHNOLOGIES INC 10-K

ITEM 1 - BUSINESS GENERAL OVERVIEW NETSOL Technologies’ solutions and services enable original equipment manufacturers (OEMs), dealerships and financial institutions to sell, finance and lease assets. The company serves customers across over 30 countries. NETSOL has been at the cutting edge of technology, pioneering innovations with its asset finance solutions and leveraging advanced AI and cloud services to meet the complex needs of the global market. Renowned for its deep industry expertise, customer-centric approach and commitment to excellence, NETSOL fosters strong partnerships with its clients, ensuring their success in an ever-evolving landscape. With a rich history of innovation, ethical business practices and a focus on sustainability, NETSOL is dedicated to empowering businesses worldwide, securing its position as the trusted partner for leading firms around the globe. NETSOL’s primary sources of revenues have been licensing, subscriptions, modification, enhancement and support of its suite of financial applications to leading businesses in the global finance and leasing space as well as automotive digital retail. The Company’s clients include blue-chip organizations, Dow Jones 30 Industrials, Fortune 500 companies, global vehicle manufacturers through their captive finance companies (“auto captives”), unrelated automotive finance companies (“non-captives”), equipment finance and leasing companies, automotive and equipment OEMs, commercial lenders, dealers, brokers, banks and other financial institutions – all of which are serviced by NETSOL’s strategically located support and delivery centers across the globe. Founded in 1996, NETSOL is headquartered in Encino, California. The company follows a global strategy for sales and delivery of its portfolio of solutions and services through its offices in the following locations: ■ North America Encino, California and Austin, Texas ■ Europe London and Horsham ■ Asia Pacific Sydney, Bangkok, Beijing, Tianjin, Jakarta, Lahore and Karachi ■ Middle East Dubai 1 OUR BUSINESS Company Business Model NETSOL specializes in providing AI-powered, scalable and customizable technology solutions primarily to the global asset finance and leasing industry. The Company also empowers OEMS, dealer groups and dealerships with a digital retail platform that transforms how they sell, finance and deliver cars. Our value proposition lies in delivering innovative technologies that enhance operational efficiency and productivity. Further, NETSOL also provides a range of services that are not limited to the financial services industry. We reach our customers through a combination of direct sales efforts, strategic partnerships with associations, a robust online presence, participation in industry events and a variety of targeted marketing channels. The Company generates its core revenue from the following primary sources: (1) software licenses, (2) services, which include implementation and consulting services, and (3) subscription and support, which includes post contract support, of its enterprise technology solutions for the industry. The Company offers its solutions using the same underlying technology via two models: a traditional on-premises licensing model and a subscription model. The on-premises model involves the sale or license of software on a perpetual basis to customers who take possession of the software and install and maintain the software on their own hardware. Under the subscription delivery model, the Company provides access to its software on a hosted basis as a service and customers generally do not have the contractual right to take possession of the software or solution(s). Expertise Our expertise in enterprise technology and financial application development has positioned us as a global player in AI-powered asset finance and digital retail solutions, enabling us to establish a strong footprint across key markets in North America, Europe and Asia-Pacific. Domain Experience NETSOL is a dynamic leader and has been able to accumulate a wealth of experience in the global asset finance and leasing industry alongside the automotive digital retail space. We have built a large knowledge base which is regularly refined and updated to ensure the most up-to-date, best practices and business solutions for the benefit of our clients and partners. We have a strong presence in the captive asset-finance market. We have had continual operations for over two and a half decades in Asia Pacific and Europe and over four decades in North America. Proximity with Global and Regional Customers We have offices across the world located strategically to maintain close contact and proximity with our customers in various key markets. This has not only helped us strengthen our customer relationships but also build a deeper understanding of local market dynamics. Simultaneously, we are able to extend services and support development through a combination of onsite and offsite resources. This approach has allowed us to offer blended rates to our customers by employing a unique and cost-effective global development model. Our global operations are broken down into the following primary regions: North America, Europe, Asia Pacific and the Middle East. All of the subsidiaries are seamlessly integrated to function effectively with global delivery capabilities, cross selling to multinational asset finance companies, automotive and equipment OEMs, auto captives, commercial lenders, dealers, brokers, banks and other financial institutions, leveraging the centralized marketing and pre-sales organization, and a network of employees connected across the globe to support local and global customers and partners. OUR PRODUCTS AND SERVICES Built on cutting-edge, modern technology, NETSOL’s unified Transcend™ Platform is an AI-powered asset finance and digital retail solution for automotive and equipment OEMs, auto captives, commercial lenders, dealers, brokers and financial institutions. Our solutions are designed and developed for highly flexible settings and are capable of dealing with multinational, multi-company, multi-asset, multi-lingual, multi-distributor and multi-manufacturer environments. They empower our customers to effectively manage their complex operations, enabling them to thrive in hyper-competitive global markets. 2 PRODUCTS AND SERVICES: TRANSCEND™ PLATFORM The Transcend™ Platform, powered by NETSOL, is an AI-driven unified ecosystem that revolutionizes how assets are sold, financed and leased. Designed to automate and optimize every step - from sales, to originations, to servicing, Transcend™ leverages AI and ML to drive predictive insights and smarter decision-making. Transcend™ Retail We revolutionize auto and equipment retail with a fully digital, integrated platform that simplifies the entire customer journey. From online purchasing to finance approval, Transcend™ Retail offers advanced retail and mobility solutions that keep dealerships and OEMs at the cutting edge of consumer expectations. Transcend™ Finance We streamline finance and leasing operations with a comprehensive solution for originations, servicing and wholesale finance. Transcend™ Finance empowers automotive and equipment OEMs, auto captives, commercial lenders, dealers, brokers and financial institutions with end-to-end visibility and control, ensuring seamless workflows and accelerated business outcomes. Originations We streamline the entire origination process, from submission to approval, with advanced features such as real-time, AI-powered credit decisioning, automated deal flows and more. Servicing We enable financial institutions to attain real-time insights into portfolio performance, delinquencies and losses, enabling proactive portfolio management and strategic decision-making. Wholesale finance Our wholesale finance solution empowers customers to gain a competitive edge by automating their wholesale finance and floor planning operations effortlessly. Transcend™ Marketplace Transcend™ Marketplace offers a suite of flexible, component-based solutions that integrate seamlessly with the customer’s existing infrastructure. Transcend™ Marketplace contains modular, API-first solutions that address every aspect of finance and leasing using tools for calculations, document generation, loan origination and lending configurations. Flex™ Flex is an application program interface (API)-first, ready-to-use calculation and quotation engine. It is a one-stop solution that guarantees precise calculations at all stages of the contract lifecycle through various calculation types. All the calculations are parameter-driven, which helps perform simple, multi-dimensional or complex calculations based on the needs of a business. Flex™ has a lightning-fast onboarding process, which can take place in mere minutes. Hubex™ Hubex™ is an API library that enables companies to standardize all their API integration procedures across multiple API services through a single integration. In addition to traditional lending companies, Hubex™ can also streamline the operations of dealerships, vendors and consultants. With a ready-to-use service, Hubex™ makes it easy for businesses to seamlessly connect with multiple APIs and achieve their desired outcomes. Pre-integrated services in the Hubex™ library include, but are not limited to, payment processing, bank account authentication, finance and insurance products, fraud check, know your customer (KYC) service, driver license verification, address validation, vehicle valuation and notification service. 3 Index™ Index™ is a cloud-based parameter storage that smoothly runs all of a company’s core lending operations. It is an accumulation of all the master setups, including asset catalog and inventory, programs, rates and profiles for lenders, dealers and multiple partners, in one centralized location for all business types. Index TM can enhance delivery efficiency and program management for easy integration into all systems. Dock™ Dock™ is an advanced document generation tool that lets a company create accurate and professional-looking documents in just seconds. With Dock TM ’s template-based configuration, a company can set up placeholders for data, essentially simplifying the document creation process and reducing the chance of human error. Its API-first architecture ensures scalability, making it capable of handling any document generation task, from single documents to millions, with ease. Lane™ Lane™ offers a feature-rich, end-to-end order management system for asset leasing and loans as well as credit companies. Our platform covers all aspects, from conducting end-to-end sales to performing dealer and partner-related tasks and marketing-related activities. The system offers a variety of dashboards that provide vital information for dealers and partners while enabling quick order management and providing a way for users to record and submit a complete credit application for their clients. Link™ Link is a purpose-built platform designed for brokers, lenders, dealers and borrowers to work seamlessly together. With tailored solutions that simplify applications and automate key processes, Link TM is designed to enhance customer relationships whilst making compliance effortless. This results in faster approvals, enriched customer experiences and stronger loyalty via elevated customer satisfaction. Intermediary portals: Broker portals Efficiency and effectiveness are paramount for any broker. Managing disparate systems and processes can be cumbersome and time-consuming, often leading to inefficiencies and missed opportunities. NETSOL offers a solution to these challenges by consolidating disparate processes into a single unified interface, revolutionizing the way a brokerage operates. Lender portals NETSOL’s lender-specific portals are designed to transform the lending process by enhancing risk management and driving profitability. Our advanced tools not only streamline loan origination but also facilitate seamless communication and collaboration with the lending ecosystem. We empower a company’s lending process with intuitive and efficient lender portals designed for a seamless user experience. Dealer portals In the competitive automotive industry, dealers need efficient and comprehensive solutions to manage their operations effectively. NETSOL’s intermediary portals serve as digital command centers, providing dealers with a wide array of tools, resources and services to optimize every aspect of their business, from inventory management to sales and marketing. Transcend™ Consultancy Empowering businesses with Transcend™ Consulting Services, we offer expert guidance across critical areas like information security, data engineering and cloud services. Our team partners with businesses to create tailored solutions that drive innovation, efficiency and growth. 4 Transcend™ AI Labs We are leading AI-driven innovation with our Transcend™ AI Labs, integrating advanced AI services into our product suite to solve the unique challenges of BFSI, equipment and auto OEMs and dealerships. Our tailored solutions drive industry-specific advancements, helping companies stay ahead in a competitive market. IMPLEMENTATION PROCESS The implementation process of our technology can span up to fifteen months depending upon the methodology, complexity and scope. The implementation process may also include related software services such as configuration, data migration, training, gaps development and any other additional third-party interfaces. Even after implementation, customers regularly seek enhancements and additions to improve their business processes and have changing requirements addressed at mutually agreed rates. Post implementation, our consultants may remain at the client site to assist the customer with smooth operations. After this phase, the regular maintenance and support services phase for the implemented technology begins in exchange for agreed subscriptions or support fees. In addition to the daily rate paid by the customer for each consultant engaged, the customer also pays for all visa and transportation-related expenses, boarding of the consultants and a living allowance. Our involvement in all the above steps is suitably priced to bring value to our customers and increase our profitability. Cloud-enabled solutions are offered via seamless and rapid deployments. The swift speed of implementation for our cloud-ready products enables businesses to be more responsive and attain a competitive advantage. For example, certain API-first, SaaS products of ours via Transcend TM Marketplace can be integrated into a customer’s ecosystem within mere minutes. PRICING AND REVENUE STREAMS Our revenue streams are the outcome of the following four main areas: ■ Product licensing ■ Subscription-based pricing ■ Implementation and customization-related services ■ Post implementation, support-related services License fees can range up to a multi-million-dollar fee for single or multiple module implementations. License revenue is realized with traditional, non-SaaS-based agreements, whereas SaaS-based agreements do not contain license fees and are offered via flexible, value-driven, subscription-based pricing. There are various attributes which determine the level of pricing complexity, a few of which are: number of contracts, size of the portfolio, IT budgets, business strategy of the customer, internal business processes followed by the customer, number of business users, amount of customization required, the complexity of data migration and branch network of the customer. We recognize revenue from license contracts when the software has been delivered to the customer. Implementation-related services, including customization, configuration, data migration, training and third-party interfaces are recognized as the services are performed. Post-implementation support services are then provided on a continued basis. The annual support fee, typically an agreed upon percentage of overall monetary value of the license, then becomes an ongoing revenue stream realized yearly. Revenue from software services includes fixed price and time, and materials-based contracts and is recognized as the services are performed. In order to avoid lumpiness in our revenues and to ensure a predictable revenue base over coming years, the business has shifted to a pricing strategy whereby the business offers its cloud-ready products at SaaS/subscription-based pricing models. Rapid deployments coupled with affordable prices/payment schedules is expected to lead the business towards volume-based selling. Moreover, this value-driven pricing plan is intended to decrease the initial buy-in cost for new customers by eliminating heavy license fees, reducing the sales cycles and providing an alternative to current customers seeking lower software usage and maintenance costs. 5 MARKETING AND SELLING Our global marketing activities aim to establish and maintain a strong preference and loyalty for NETSOL and its offerings. Marketing activities are conducted both at the global and regional levels. The Global Marketing department oversees all communication, advertising, public relations and manages all digital platforms, including the Company’s website, social media channels and partnerships within the industry. As part of our lead-generation activities, our regional representatives represent NETSOL as the Company sponsors, exhibits at, and attends annual industry-leading conferences, conventions, seminars, summits and other events. The company maintains its presence at these events to demonstrate our product and service offerings and for important networking purposes. NETSOL also takes part in webinars, podcasts and holds private briefings with associations and individual companies. GROWTH PROSPECTS We are eyeing key international markets for growth in sales for NETSOL’s Transcend™ Platform. Our sales strategy not only focuses on expansion into new geographic markets, but within existing markets into new verticals with targeting of Tier 2 and Tier 3 prospects as well. Growth in North America and Europe is expected to come from the potential market for replacement of legacy systems as well as acquisition of new customers. Our finance and leasing platform Transcend™ Finance is aimed at providing a highly flexible and robust solution based on the latest technology and advanced architecture for North American and European customers looking to replace their legacy systems. We believe that the product can provide substantial competitive disruption to the market’s lagging technology provided by incumbent vendors. The existing customer base may also represent latent demand for increased service and support revenues by offering business process optimization, customization and upgrade services. With a market-ready product with successful implementations, the prospects for Transcend™ Finance in the regions are positive. Further traction in North America and Europe will come from Transcend™ Finance deployed on the cloud, which will continue to allow catering to not only larger organizations, but also small and medium sized companies. Currently, in the United Kingdom, a number of banks and other financial institutions are utilizing our Transcend™ Marketplace solutions offered via subscription-based pricing and swift deployments. Our product strategy has grown significantly in recent years, which includes the recent launch of our broker and lender portals, which marks a key step forward in delivering more value to our partners. Growth in our traditionally strong base in Asia Pacific is expected through diversification across market segments to include new customers in related banking and commercial lending areas. At the same time, the existing customer base is tapped for increased service and support revenues by offering enhanced features and new solutions to emerging customer needs. In addition, there is also potential for Transcend™ Finance in Asia Pacific in the form of existing customers who are looking for replacement of their current system. In China, we are a leader in the auto finance enterprise solution domain. We will continue strengthening our position within existing multinational auto manufacturers, as well as local Chinese captive finance and leasing companies. It is pertinent to mention that these Chinese automakers and finance companies are growing rapidly outside of the country and that our solutions assist them in this growth. Our sales strategy focuses on supporting Chinese manufacturers in expanding their presence in the EU and other regions of APAC. We believe our digital retail platform presents significant growth opportunities in the evolving digital marketplace. Transcend™ Retail is currently used by major customers in the United States, including some of the largest and most recognized dealership networks. We foresee further adoption of the platform in the region. Our digital retail solution transforms how OEMs, dealer groups and dealerships sell, finance and deliver cars, enabling them to provide personalized, fast and transparent car-buying experiences across all digital and in-store touchpoints. Beyond our products, we also anticipate demand for our services that empower our clients to excel in the competitive global economy. Through Transcend™ Consultancy, we offer expertise across critical areas such as information security, data engineering and cloud services, helping businesses design tailored solutions for innovation and growth. 6 THE MARKETS We deliver our comprehensive suite of technology solutions and services across major markets worldwide, positioning ourselves as a leading provider in the financial services, and particularly, the global asset finance and leasing sector. Leveraging our extensive global footprint, we offer scalable and innovative solutions tailored to meet the unique needs of clients in diverse geographic regions. Our strategic presence in key markets enables us to effectively address local regulations and market dynamics, thereby enhancing customer satisfaction and fostering long-term partnerships. PEOPLE AND CULTURE We believe that our growth and success are attributable in large part to the high caliber of our global team and our commitment to maintain the values on which our success has been based. We support gender diversity on a global basis. We are an equal opportunity employer with a large workforce of approximately 1460 employees, promoting a culture of diversity and inclusion. NETSOL stands as a beacon of innovation, excellence and dedication to customer success. We value transparency and integrity, ensuring that honesty guides our interactions. We are renowned for innovation, expertise and a customer-centric approach. We believe we should give back to the community and our employees as much as possible. Certain subsidiaries are located in regions where basic services are not readily available. Where possible, we act to not only improve the quality of life of our employees, but also the standard of living in these regions. Examples of such programs are as follows: Literacy program: Launched to educate children of our support staff, the main objective of this program is to enable them to acquire basic reading, writing and arithmetic skills. Higher education and science and research institutions: In order to support higher education in Pakistan, we have contributed endowments to NUST, Forman Christian College and a few other universities who are focused on science and engineering. Noble cause fund: A noble cause fund has been established to meet medical and education expenses of the children of our support staff. Our employees voluntarily contribute a fixed amount every month to the fund and NETSOL matches the employee subscriptions with an equivalent contribution amount. A portion of this fund is also utilized to support social needs of certain institutions and individuals outside of NETSOL. Preventative health care program: In addition to the comprehensive outpatient and in-patient medical benefits, preventive health care has also been introduced. This phased program focuses on vaccination of our employees against such diseases as Hepatitis – A/B, Tetanus, Typhoid, Flu and COVID-19 on a routine basis. There is significant competition for employees with the skills required to perform the services we offer. We run an elaborate training program for different cadres of employees to cover technical skills and business domain knowledge alongside communication, management and leadership skills. We believe we have been successful in our efforts to attract and retain the highest level of talent available, partly because of our emphasis on core values, training and professional growth. We intend to continue to recruit, hire and promote employees who share our vision. COMPETITION A number of companies offer products and services that overlap and are competitive with those offered by us. Some of NETSOL’s main competitors for its finance and leasing technology include Alfa, Constellation Financial Software, FIS Global, LTI Technology Solutions, Odessa, Solifi, Soft4 and Sopra Banking Software. The Company’s competitors for digital retail include Tekion and CDK Global. Most of our major competitors are based in North America and Europe, with a smaller presence in APAC and the Middle East. 7 CUSTOMERS NETSOL’s solutions and services cater to a broad spectrum of finance and leasing businesses, from automotive captive finance companies to equipment finance and leasing companies to large regional banks, as well as its customers for digital retail, including OEMs, dealer groups and dealerships. A number of NETSOL’s customers include world renowned auto manufacturers through their finance arms. NETSOL is a strategic business partner for Daimler and BMW (which consists of a group of many companies in different countries), which accounts for approximately 19.1% and 16.1%, respectively, of our revenue for our fiscal year ended June 30, 2025. Other globally renowned auto captives that are customers of the company include Toyota, Nissan, Ford and FIAT. Other customers include equipment finance and leasing companies, banks and other financial institutions worldwide. Some of these clients include MINI Financial Services, BMO, Bank of Hawaii, First Hawaiian Leasing, Genpact, SCI Lease Corp, Aldermore, Investec, Close Brothers, Haydock Finance, Charles and Dean, Maple Commercial Finance, among many others. Information regarding financial data by geographic areas is set forth in Item 7 and Item 8 of this Annual Report on form 10-K. See note 17 of Notes to Consolidated Financial Statements under Item 8. INTELLECTUAL PROPERTY NETSOL relies upon a combination of non-disclosure and other contractual arrangements, as well as common law trade secret, copyright and trademark laws to protect its proprietary rights. NETSOL enters into confidentiality agreements with its employees, generally requires its consultants and clients to enter into these agreements, and limits access to and distribution of its proprietary information. The NETSOL “N” logo and name has been copyrighted and trademark registered in Pakistan. The NETSOL “N” logo has been registered with the U.S. Patent and Trademark Office. NFS Ascent® has been registered with the U.S. Patent and Trademark Office. OTOZ ® was registered with the U.S. Patent and Trademark Office. The Company intends to trademark and copyright its intellectual property as necessary and in the appropriate jurisdictions. GOVERNMENTAL APPROVAL AND REGULATION Current Company operations do not require specific governmental approvals. Like all companies, including those with multinational subsidiaries, we are subject to the laws of the countries in which we maintain subsidiaries and conduct operations. Governments in which our subsidiaries are located, including our largest subsidiary in Pakistan, may require approval for the repatriation of investments. AVAILABLE INFORMATION Our website is located at https://netsoltech.com/ and our investor relations website is located at https://ir.netsoltech.com . The following filings are available through our investor relations website after we file with the SEC: Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and our Proxy Statements for our annual meetings of stockholders. These filings are also available for download free of charge on our investor relations website. We also provide a link to the section of the SEC’s website at www.sec.gov that has all of our public filings, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, all amendments to those reports, our Proxy Statements and other ownership related filings. Further, a copy of this Annual Report on Form 10-K is located at the SEC’s Public Reference Room at 100 F Street, NE, Washington D.C. 20549. Information on the operation of the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330. We webcast our earnings calls and certain events we participate in or host with members of the investment community on our investor relations website. Additionally, we provide notifications of news or announcements regarding our financial performance, including SEC filings, investor events, press and earnings releases, and blogs as part of our investor relations website. Investors and others can receive notifications of new information posted on our investor relations website by signing up for e-mail alerts. Further corporate governance information, including our committee charters and code of conduct, is also available on our investor relations website at https://netsoltech.com/about-us/csr. The content of our websites is not intended to be incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC and any references to our websites are intended to be inactive textual references only. 8