Item 1. Business
ITEM
1 - BUSINESS
GENERAL
OVERVIEW
NetSol
Technologies, Inc. (“NetSol” or the “Company”) is a global provider of AI-enabled solutions and services powering
OEMs, dealerships and financial institutions to sell, finance and lease assets.
The
Company is headquartered in Encino, California and operates through three reportable geographic segments: North America, Europe and Asia-Pacific,
serving customers in more than 30 countries. NetSol generates revenues primarily through software licensing, subscription fees, implementation
services and ongoing maintenance and support. The Company’s solutions and services are marketed under the Transcend™ Platform
brand.
Corporate
history
NetSol
was incorporated in 1997 and listed on the Nasdaq Stock Market in 1999, where it continues to trade under the ticker symbol NTWK. While
the Company’s incorporation dates to 1997, its asset finance and leasing domain expertise extends more than 40 years through acquired
operations.
The
Company has grown both organically and through strategic acquisitions. In 2005, NetSol acquired CQ Systems Ltd., a UK-based provider
of asset-based financial solutions, which established the Company’s presence in the UK asset finance market. In 2006, the Company
acquired McCue Systems, Inc., a California-based provider of lease and loan portfolio management software with more than 30 years of
industry experience, strengthening NetSol’s North American operations. In 2011, the Company jointly acquired Virtual Lease Services
Ltd. (“VLS”) with Investec Asset Finance Plc, expanding its end-to-end service capabilities for the asset finance market.
Over
subsequent years, NetSol transitioned from its legacy product suite to its current unified Transcend™ Platform: a cloud-deployed,
AI-enabled, API-first ecosystem that today serves as the foundation for all of the Company’s current generation product and service
offerings.
Industry
and market
The
Company serves two complementary markets: the global asset finance and leasing industry, and digital retail for vehicle sales, where
the Company’s current focus is the United States.
1
The
global finance and leasing market represented approximately $1.5 trillion in new business volume in 2024 according to the World Leasing
Yearbook 2026, having grown approximately 63% over the prior decade. The market is characterized by long-term customer relationships,
significant regulatory complexity and demand for specialized technology capable of supporting multi-entity, multi-currency and multi-jurisdiction
operations. Growth drivers include the expansion of electric vehicle financing, the migration of asset finance from ownership to subscription
and mobility-as-a-service models, and increasing demand for embedded finance across dealer, direct-to-consumer and third-party channels.
The Company’s Transcend™ Finance platform serves this market globally, with customers across more than 30 countries.
The
digital retail market reflects the ongoing shift in how consumers purchase vehicles, spanning both online and in-store transaction environments.
According to the National Automobile Dealers Association (NADA), U.S. new light-vehicle sales totaled 16.2 million units in 2025, an
increase of 2.4% year over year. According to Cox Automotive’s 2025 Digitization of Car Buying Study, 65% of car buyers now perform
some or all of the purchase process online, while most transactions continue to be completed in the dealership, driving demand for technology
that connects the two environments. The Company’s Transcend™ Retail platform serves this market with a current commercial
focus on the United States, where its customers include automotive OEM programs, franchised dealer groups and recreational vehicle retailers.
Business
and growth strategy
NetSol’s
strategy centers on the continued transformation of its business model. Historically, the Company generated the majority of its revenues
from software implementation and related services. Through the development of the Transcend™ Platform and the transition of its
commercial model toward cloud-deployed, subscription-based arrangements, the Company is building a growing base of recurring revenue.
Recurring subscription and support revenues have grown consistently across recent fiscal periods, and the Company expects this mix shift
to continue as new customers adopt subscription arrangements and existing customers migrate to the Transcend™ Platform. The Company
believes this transition supports greater revenue durability and visibility, improved margins over time, and a business profile increasingly
consistent with enterprise software platform companies.
Against
that backdrop, the Company’s strategy is organized around the following priorities:
Support
global OEM expansion. A growing number of OEMs, particularly Chinese OEMs and their captive finance operations, are expanding into
new international markets. The Company provides the finance and leasing technology these customers require to launch and scale operations
in new jurisdictions and has supported market entries across Asia-Pacific and other regions. The Company believes its multi-country delivery
experience and configurable, multi-jurisdiction platform position it well to serve this expansion cycle.
Extend
leadership in originations and wholesale finance. The Company continues to invest in its originations and wholesale finance capabilities,
where it believes its platform compares favorably to legacy competitor systems. As financial institutions and captives replace aging
technology, the Company is positioned to compete for displacement opportunities across its global markets.
Migrate
the installed base to Transcend ™ and grow recurring revenue. The Company is transitioning customers from its legacy
product suite onto the Transcend™ Platform. These migrations modernize the customer’s technology foundation, deepen multi-product
relationships, and convert legacy arrangements to recurring subscription-based commercial models.
Embed
artificial intelligence across products and operations. The Company is integrating AI capabilities into its platform, including AI-enabled
credit decisioning within Transcend™ Finance, to improve customer outcomes in financing and retail operations. Internally, the
Company is applying AI to its own development, delivery, and go-to-market processes to improve productivity and operating margins.
Scale
Transcend ™ Retail across the U.S. dealer market. The Company is pursuing digital retail growth through three coordinated
channels: direct engagement with dealer groups, where a single commercial relationship can enable deployment across a large number of
rooftops; OEM certification programs, which streamline the Company’s ability to sell to franchised dealerships within certified
brand networks; and OEM-level programs, in which the Company’s platform is deployed across an OEM’s dealer network. The Company
also intends to extend Transcend™ Retail into adjacent dealer-based vehicle categories, including recreational vehicles, powersports
and marine.
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Expand
through partnerships. The Company uses strategic partnerships with regional advisory and technology firms to extend its market reach,
add local market knowledge, and accelerate customer acquisition in markets where it does not maintain a large direct sales presence,
particularly in Europe. The Company expects partner-led channels to remain a meaningful component of its go-to-market strategy.
Strengthen
operating discipline. The Company is focused on improving margins through disciplined budgeting, pricing and deal governance, and
incentive structures aligned with profitable growth.
Strategic
Transactions. In addition to organic initiatives, the Company may from time to time evaluate selective acquisitions and other strategic
opportunities that complement its platform capabilities or accelerate its market position.
Operations
and geographic presence
The
Company maintains offices in the following locations:
■ North
America: Encino, California and Austin, Texas
■ Europe:
London Metropolitan Area, Horsham and Flintshire
■ Asia-Pacific:
Sydney, Bangkok, Beijing, Shanghai, Tianjin, Jakarta, Dubai, Lahore and Karachi
Through
a combination of organic growth and acquisitions, the Company’s operating history extends more than 40 years in North America,
more than 30 years in Europe and more than 25 years in Asia-Pacific.
The
Company employs a global delivery model that combines onsite and offshore resources, designed to support customers across multiple geographies,
currencies, languages and regulatory environments.
Products
and services
NetSol
delivers its solutions through the Transcend™ Platform, a unified, API-first technology platform for the asset finance, leasing
and automotive retail markets. The platform is designed for deployment in the cloud or in customer-managed environments, to integrate
with existing customer and third-party systems through open APIs and to operate under the regulatory, audit and data-residency requirements
applicable to financial institutions. Artificial intelligence is embedded within the platform and is applied in capabilities such as
credit decisioning, document processing, portfolio analytics, collection intelligence and lifecycle servicing. The platform also enables
customers to develop and deploy these agents that operate on their own data within their own environments, subject to the same access,
audit and data-residency controls that apply across the platform.
The
Company’s principal offerings are as follows:
Transcend™
Retail
Transcend™
Retail is a digital retail platform for vehicle sales. It gives the buyer a single continuous purchase experience, from configuring a
vehicle and valuing a trade-in to reviewing transparent payment and finance options and completing the transaction, whether that takes
place online, in the showroom or across both. The buyer and the dealership work on the same deal in parallel rather than in separate
systems, and either side can pick up where the other left off. The platform is configured to the brand standards of the manufacturer
or dealer group and provides visibility and administrative control across the retail network. It is used by automotive manufacturers
and dealer groups.
Transcend™
Finance
Transcend™
Finance is the Company’s platform for lenders and lessors. It comprises three core solutions: Originations, Servicing and Wholesale
Finance. Together these span the finance and leasing lifecycle from application through end of contract, and support auto, equipment,
fleet and receivables portfolios across both retail and commercial products. The platform operates multiple legal entities, currencies
and jurisdictions on a single system, and is configured to each customer’s products, pricing and credit policy rather than custom-built.
Partner-facing portals extend origination and servicing to the intermediaries in a customer’s distribution network.
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Revenue
model
The
Company generates revenues through the following primary streams:
■ Subscription
and support - recurring fees for an access license to and use of the Company’s
technology solutions under its Transcend™ Platform through cloud-based subscription
arrangements, along with ongoing fees for maintenance, updates and technical support provided
to customers post-deployment
■ License
fees - non-recurring fees for perpetual license agreements granting customers the right
to use the Company’s technology solutions on-premise
■ Services
- fees for implementation, configuration, customization, training and other services
provided in connection with the deployment of the Company’s solutions
The
Company is transitioning its commercial model toward a higher proportion of recurring subscription-based arrangements, as described under
“Business and growth strategy.” The mix of recurring and non-recurring revenues may vary from period to period depending
on the nature and timing of new customer engagements, contract renewals and the recognition of license fees.
Sales,
marketing and customer concentration
The
Company’s customers include multinational automotive OEMs, auto and equipment captive finance companies, dealer groups, dealerships,
commercial banks, brokers and financial institutions. NetSol serves a diverse customer base across more than 30 countries. However, a
limited number of large customers have historically accounted for a significant portion of the Company’s revenues. The loss of
one or more of these customers, or a material reduction in the scope of their engagement with the Company, could have a material adverse
effect on the Company’s revenues and operating results. The Company monitors customer concentration as part of its ongoing risk
management processes.
Competition
The
market for asset finance and leasing software is competitive and fragmented across regions. The Company’s principal competitors
include specialized asset finance software providers such as Alfa Financial Software, Sofico, Solifi and Odessa; large enterprise software
and financial technology vendors, including FIS, that offer asset finance capabilities within broader product portfolios; regional providers
in individual markets; and in certain cases, in-house systems developed and maintained by financial institutions and captive finance
companies. The principal competitive factors in this market include depth of domain expertise, breadth and functionality of product offerings,
the ability to support multi-entity, multi-currency and multi-jurisdiction operations, implementation capability and track record, total
cost of ownership and quality of ongoing support.
The
market for digital retail technology is also competitive. The Company competes with dedicated digital retailing providers such as AutoFi
and CarNow; dealer management system and automotive retail technology vendors, including Cox Automotive, CDK Global and Tekion, that
offer digital retail capabilities within broader product portfolios; and, in certain cases, proprietary solutions developed by OEMs and
large dealer groups. The principal competitive factors in this market include omnichannel capability, integration with existing dealer
management and financing systems, speed of deployment and the ability to support a seamless customer journey across online and in-store
retail environments.
The
Company believes it competes favorably on the basis of its more than four decades of asset finance domain expertise, its operating and
delivery presence across more than 30 countries, its long-tenured relationships with tier-one automotive OEMs and captive finance companies,
and the unified, API-first architecture of its Transcend™ Platform, which supports both financing and retail operations on a common
foundation. Some of the Company’s competitors have greater financial resources, larger sales organizations or broader name recognition,
which may affect the Company’s ability to compete in certain markets or segments.
Intellectual
property
NetSol’s
offerings, including the Transcend™ Platform and its component solutions and services, are proprietary. The Company relies on a
combination of copyright, trademark and trade secret protections, as well as contractual arrangements, to protect its intellectual property
rights. The Transcend™ brand and related marks are registered trademarks of NetSol.
4
The
Company enters into license agreements with customers that restrict the use, reproduction and distribution of its technology solutions.
Employees, contractors and business partners with access to proprietary technology and confidential information are required to enter
into confidentiality and non-disclosure agreements.
The
Company does not believe its business is materially dependent on any single patent, trademark, license or other intellectual property
right.
Human
capital resources
As
of June 30, 2026, the Company employed approximately 1,370 full-time employees globally. The workforce is distributed across its three
operating segments, with the majority of its technical and development personnel located in its Asia-Pacific operations. Sales, client
management and senior leadership functions are concentrated in North America and Europe.
NetSol
considers the attraction, development and retention of skilled technology and domain professionals to be a key operational priority.
The Company invests in employee training and professional development programs and seeks to maintain competitive compensation structures
across its operating regions.
Regulatory
environment
NetSol’s
operations and its customers’ use of its products and services are subject to a range of regulatory requirements across the jurisdictions
in which they operate.
Data
privacy and protection
The
Company and its customers are subject to data privacy and protection regulations, including the General Data Protection Regulation (GDPR)
in the European Union and United Kingdom, the California Consumer Privacy Act (CCPA), and equivalent frameworks in other jurisdictions
in which the Company or its customers operate.
Financial
services regulations
The
Company’s customers are subject to a range of financial services regulatory obligations, including consumer finance disclosure
requirements, anti-money laundering (AML) and know-your-customer (KYC) requirements, Basel III capital and liquidity standards applicable
to banking customers, the Payment Services Directive 2 (PSD2) in the European Union, and the Digital Operational Resilience Act (DORA)
governing operational resilience for financial institutions in the European Union.
Information
security and cybersecurity; Artificial Intelligence
The
Company’s products and operations are subject to applicable cybersecurity frameworks across its key markets. The Company holds
ISO 27001, ISO 22301 and ISO 20000 certifications, and has completed SOC 2 Type 2 examinations under the Trust Services Criteria established
by the American Institute of Certified Public Accountants, and applies these standards across its operations.
The
Company’s solutions are designed to support customers in meeting their regulatory compliance obligations in the markets in which
they operate. The Company monitors regulatory developments across its key markets and incorporates relevant compliance requirements into
its product development and operational processes. Changes in applicable laws and regulations may require the Company to modify its products
or operations, which could result in additional costs or otherwise affect the Company’s business.
The
Company has an internal use of Artificial Intelligence (AI) Platforms and Protection of Customer and Company Confidential Information
standards for the responsible use of AI to safeguard customer data, information and proprietary information.
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Available
information
The
Company files annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and other information with the
U.S. Securities and Exchange Commission (SEC). These filings are available free of charge on the Company’s investor relations website
at ir.netsoltech.com and on the SEC’s website at www.sec.gov . The Company’s principal executive offices are located
at 16000 Ventura Boulevard, Suite 770, Encino, California 91436, and the Company’s main telephone number is +1 (818) 222-9195.
Information
contained on or accessible through the Company’s website is not incorporated by reference into this Annual Report on Form 10-K.