NetSol Technologies, Inc. (NTWK) Q3 2019 Earnings Report, Transcript and Summary

Good morning. Welcome to the NetSol Technologies Fiscal Third Quarter 2019 Earnings Conference Call. On the call today are Najeeb Ghauri, Chairman and Chief Executive Officer; Roger Almond, Chief Financial Officer; Naeem Ghauri, President Global Sales; Jeff Bilbrey, President, North America; and Patti McGlasson, General Counsel. I would now like to turn the call over to Patti McGlasson, who will provide the necessary cautions regarding the forward-looking statements made by management during this call. Please proceed.

Good morning, everyone, and thank you for joining us. Following a review of the company's business highlights and financial results, we will open the call for questions. Please note, that all the information discussed on today's call is covered under the Safe Harbor provisions of the Private Securities Litigation Reform Act. The company's discussion may include forward-looking statements, reflecting management's current forecast of certain aspects of the company's future, and our actual results could differ materially from those stated or implied. These forward-looking statements are qualified by the cautionary statements contained in NetSol's press releases and SEC filings, including our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. I would also like to point out that we will be discussing certain non-GAAP measures. The press release issued earlier today contains a reconciliation of these non-GAAP financial results to the most comparable GAAP measures. Finally, I would like to remind everyone that this call will be recorded and made available for replay on our website at www.netsoltech.com and via a link available in today's press release. Now, I would like to turn the call over to Najeeb. Najeeb?

Thank you, Patty, and good morning, everyone. As a primer for many of the new investors or listeners on our call today, I'd like to begin with a brief bit about who we are. NetSol Technologies is a global leading provider of asset finance and leasing software, and other business services. Our success and accomplishments to date has been the result of a number of factors, but perhaps, most importantly, thanks to the quality of our people, we employ all over the world. One area in particular where we take a lot of pride in this regard is our Center of Excellence Technology Campus in Lahore, Pakistan, that boasts the high quality and very talented IT professionals. As a country, Pakistan boasts a population of over 110 million people under the age of 30. Some of them are the great men and women who are developing solutions and supporting over 200 plus tier-one customers worldwide. These resources as well as many others are responsible for supporting over $100 billion worth of transactions through our portfolio of our global customers and partners. Now, with that overview completed, I’d like to get into the results for the quarter. The fiscal third quarter was another strong period of growth and execution for NetSol. Financially, we have now generated profitable results from operations for 6 consecutive quarters and have continued to sequentially improve our topline throughout the course of the fiscal 2019. And operationally, we recently finalized a number of key deployments and made significant progress with some of the newer deals we have recently announced. Beyond our current core business, going forward, we are continuing to position ourselves effectively for the long-term through new initiatives like our recently launched OTOZ Mobility Innovation Lab, which will allow us to expand the reach of our Ascent platform and new growth opportunities with existing and potential customers alike. Put together, NetSol remains in an increasingly strong position to date, and we are building to be in an even better position for tomorrow. Before I get in any further into specific details from the quarter, I'm going to ask Roger Almond, our CFO, who will walk us through the financial results. Roger?

Thanks, Najeeb. Turning to our fiscal third quarter 2019 financial results for the quarter ended March 31, our total net revenues for the third quarter were $17.1 million, compared to $17 million for the prior year period. Slight increase in total net revenues was due to an increase in total services revenue of $256,000, which was offset by a decrease in total license fees of $113,000 and total maintenance fees of $61,000. Total license fees in Q3 were $2.5 million compared to $2.6 million in the current year period. The license fees for both periods primarily comes from the license revenue recognized from the previously announced 12-country NFS Ascent contract. Maintenance fees begin once a customer has gone live with our product. Total maintenance fees in Q3 were $3.7 million compared to $3.8 million in the prior-year period. We anticipate maintenance fees to gradually increase as we implement both our NFS legacy product and NFS Ascent across our broader long-term customer base. Services revenues are derived from services provided to both current customers as well as services provided to new customers as part of the implementation process. Total services revenue for the quarter were $10.9 million compared to $10.6 million in the prior-year period. Increase in services revenue was primarily due to new NFS Ascent implementations. Total cost of revenues were $8.6 million for the third quarter, compared to $7.9 million in the third quarter of 2018. The increase in cost of revenues for the quarter was predominantly driven by increases in travel and other expenses associated with increased implementation need for the significant new wins reported in previous quarters, which are offset by decreases in salaries and consultant costs as well as decreases in depreciation and amortization costs. Gross profit for the third quarter of fiscal 2019 was $8.6 million or 50% of net revenues compared to $9.2 million or 53.9% of net revenues in the third quarter of fiscal 2018. The decrease in gross profit as a percentage of net revenues was due to an increase in cost of revenues of $719,000, which was offset by an increase in total net revenues of $83,000. Operating expenses for the third quarter increased slightly to $6.5 million or 37.7% of net revenues compared to $6.4 million or 37.8% of net revenues in the same period last year. The increase in operating expenses was primarily due to increases in research and development expenses, which was offset by decreases in selling and marketing expenses, salaries and wages, professional services, and G&A expenses. Moving forward, we plan on continuing to judiciously allocate additional resources to our R&D budget as we focus increasingly on our innovation-related initiatives. Other income for the third quarter included $47,000 of foreign currency exchange gain compared to $2.6 million of foreign currency exchange gain in the prior year quarter. During both periods, the currency exchange gain was due to the decrease of the Pakistan rupee compared to the U.S. dollar and the euro. Turning to our profitability metrics, our net income from operations was $2.1 million for the third quarter, a decrease from a net income from operations of $2.8 million in Q3 last year. Our GAAP net income attributable to NetSolfor the third quarter fiscal 2019 totaled $1.3 million or $0.11 per diluted share. This compares with GAAP net income of $2.9 million or $0.26 per diluted share in the third quarter last year. The decrease in net income was primarily due to a decrease in foreign currency exchange transactions, as mentioned above. Moving to our non-GAAP metrics, non-GAAP adjusted EBITDA for the third quarter of fiscal 2019 totaled $2.2 million or $0.19 per diluted share compared with non-GAAP adjusted EBITDA of $4.3 million or $0.39 per diluted share in the third quarter of last year. As we have previously disclosed in our earnings releases, our calculation of adjusted EBITDA excludes a portion of adjusted EBITDA that is attributable to the non-controlling interest in our subsidiaries. We believe this supplemental disclosure provides additional insights into the true operational performance of our business. Please see the reconciliation schedules contained in our earnings release for our revised calculations of adjusted EBITDA for the fiscal third quarter ended March 31, 2019. Turning to our balance sheet; at quarter end, we had cash and cash equivalents of approximately $17 million or approximately $1.45 per diluted common share, which is up from $12.7 million or approximately $1.13 per diluted common share at March 31, 2018. That concludes my prepared remarks. I'll now turn the call back over to Najeeb. Najeeb?

Thank you, Roger. As I mentioned in my opening remarks, Q3 was an overall great quarter for NetSol. We continue to execute in all areas of our core business, enabling us to achieve certain major company milestones that positively impacted our financial results and operational performance. Looking ahead, we feel that fiscal 2019 has represented an inflection point as we transition into our next stage of future growth. The state of our business is very strong and our results have been reflecting this truth for some time now. But what's also important to consider in looking at our results is what we would commonly call our core operations. That is, basically, what you expect to be NetSol'S main business, compensation received for auto and asset finance and leasing software and services. For context, NetSol, for a number of years, was able to effectively monetize and leverage its superior international engineering team for other non-core work with outside third-party vendors or partners, which contributed nicely to our overall results, acted as an additional diversified revenue stream and enabled us to more dynamically distribute human resources on as-on-need basis. Now that said, more recently, our relationship with Innovation Group, or IG, our joint venture partner for several years, ended as a result of a change of ownership. As a part of that relationship, NetSol has enjoyed a healthy revenue stream that led to over $8 million in the 2015 fiscal year. With the ending of our relationship with IG, the impact was two-fold. First, we leveraged this situation as a positive and an opportunity to reallocate our existing human resources to areas that were only high impact that is our flagship Ascent solution, which was a major factor in our ability to reduce cost over the past year-plus period. Second, our related party top-line results were obviously impacted to a degree by the loss of this consistent result of revenue, which was historically recognized in related party services revenues. However, as we continue to move forward into subsequent fiscal years, we will be able to get past the year-over-year comparisons that include vestiges of the legacy business, which will give us a truer presentation or representation of the great growth potential of our core business. Again, NetSol has obviously been doing quite well irrespective of this point, but we also think it's worth pointing out in order to paint a more accurate picture of our growing operation in the most meaningful way. Moving to the rest of my remarks, I will start, as we typically do, with updates on our major implementations and highlights on our new business, we were able to generate during the quarter. First, I'd like to begin with our ongoing multiyear international deployment associated with the previously announced 12-country $110 million contract with a major German multinational auto manufacturer. During the quarter, we issued a few press releases that provided updates on some of our implementations. Most recently, we announced in April that we have successfully gone live in Japan after implementing the NFS Ascent Wholesale Finance System and the Dealer & Auditor Access System or DAS. Japan marks the seventh country in which we have deployed some portion of our services on this contract, so we are continuing to make formidable progress. Each new deployment in every location has so far been a success, and we are even being able to outpace our recently anticipated time line for completion. The speed at which we continue to execute has been driven by our ability to avoid any major setbacks, which for others can be a huge issue when it comes to a large-scale tier-one implementations. We expect to be perfect or near-perfect every time. This expectation, this belief is a testament to both the adaptability of our technology and dependability of our team. Next, on the development road map, we have Singapore, Malaysia, Hong Kong, India and Thailand. As of today's call, we have made significant progress in each of these regions, and we're looking forward to providing more meaningful updates when these respective implementations go live. Finally, I'd like to discuss China. In March, we announced the successful completion of the implementation process for this same contract, which included the complete NFS Ascent suite, both retail and wholesale. While on the surface, going live in one country seems as meaningful as any other, in China, this is not the case. Our successful Go Live in China represented the greatest single deployment of our Ascent platform in the largest leasing market in the APAC region, making it one of the most significant events in the history of our company. China, in particular, has proven to be incredibly difficult to tackle for many of our competitors. Beyond the need for the highly technical and domain-specific skill set, accomplishing an undertaking of this size and scope also require a significant amount of dedication and sacrifice from countless members of our team worldwide. In total, more than 400 key personnel from both organizations devoted nearly a year's worth of work and testing to get the job done to achieve total fidelity in the data migration and accounting reconciliation as well as compliance with the China Banking Regulatory Commission or CBRC, and the People's Bank of China, which is PBOC, is an outstanding achievement for NetSol. I'm so proud and grateful for the tireless efforts of all these involved and who made this goal a reality. Staying in China, but moving to recently acquired customer, BMW Financial. We have continued to make solid strides in both our retail and wholesale implementations. At this point, we're optimistically looking to a Go Live date for the commercial a wholesale system in this calendar year with a retail component finishing sometime in 2020. We still have a number of key road map items to cross out before the project is final, but we will continue to keep you updated as we get closer to the launch. And a final check update, China update as it relates to our previously announced deal with an American multinational auto manufacturer to implement our Ascent retail platform, we are making great progress here too, and expect to finalize the full implementation around end of our fiscal year or shortly thereafter. In our European region, we began the LeaseSoft implementation process for a UK-based commercial and individual financing provider and are making solid progress along the deployment road map. In our American region, we recently signed an agreement with SEI for five years with a multimillion dollar total contract value. The leaseback implementation is in process with an estimated completion by the end of this calendar year, which is 2019. Before finishing with an outlook for the remainder of our fiscal year, and then turning it over to questions, I'd like to spend some additional time focusing on our innovation map, which as I mentioned in my opening remarks, will now be referred to as OTOZ, which is O-T-O-Z. But first, I'll take a step back. We have spent time in previous calls discussing the major transformational shift for both our business and for the greater leasing and financing landscape. Put another way, from a unique industry vantage point, we are able to more closely follow trends that others might miss. One of those trends, which we think is really a long-term evolution, is the rise in the potentially massive global subscription economy. While OTOZ, in its future, will aim to address a number of yet unknown opportunities, the underlying technology of the platform was conceptualized and will be built based on advances that are expected to have a material impact on auto and fintech industries specifically. And this does not have to come at the expense of our existing business. We envision a future, where the OTOZ can actually enhance the reach of our Ascent platform, beginning first with car-share opportunity for new and existing auto captive finance customers. What's more with the rapid evolution and new types of vehicle and asset ownership models, we're also witnessing massive growth in digital and mobile solutions being desired and even required by our existing and new partners alike. To address this demand, we formed a strategic partnership with a company called Drivemate. Drivemate is the top car-sharing peer-to-peer car rental service in Thailand and a perfect build in customer for us to be able to test our new technology in a low financial risk environment. We also have additional opportunity to leverage the expertise of a well-established company in the car sharing and peer-to-peer rental market, which we believe has great growth potential. Further, to the last point, we are actively developing several new products under our doors to ensure that our global customer base will be ready and able to adopt these fast evolving business models. We are especially interested in fully enabling our clients to launch more flexible auto ownership plans as well as car sharing and fractional leasing alternative, all of which should grow secularly in the coming years. At the same time, our Innovation Lab has been focused on continuing to build out our capabilities in intelligent technologies, such as artificial intelligence, machine learning, blockchain, IoT and cloud native architectures to help future-proof our core business to innovate around new opportunities. While these areas are obviously nascent in our development - in their development, they have great long-term potential. And we are even making progress in securing partnerships with two of the top enterprise software companies in the world to augment our OTOZ business model going forward. We look forward to sharing more details on that soon. The point is change is happening right now in front of us and with such comes new opportunities, but those companies that have the resolve to adapt, hard it may be, and the vision to innovate ahead of the pack. Our vision for NetSol is to be one of the most innovative companies for the future in our space, and that is why we are acting. As our industry continues to evolve, we will alongside, too. No company in the asset leasing and finance space is more well equipped than NetSol to take advantage of the disruptive technologies that have the power to transform ownership model as we know with the best delivery and development capabilities in our industry and domain. In closing, with numerous deployments now underway, under our belt for our flagship solution as well as the prospective business we have in our near-term line of sight, we remain comfortably on track to achieve our previously stated goal of double-digit revenue growth for the year. And with that, I'd like to open the call up for questions. Operator?

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Evan Greenberg with Legend Capital. Please proceed with your question.

A couple of questions. Number one, should I look at the services line as recurring SaaS revenue and the license and maintenance as more traditional revenue? Is that the best way to look at it?

Yes, absolutely. Our SaaS revenue is gradually but surely growing. And I think I have experts here, both from the U.S. and APAC, and even Jeff can add their feedback. You want to jump in, guys? Well, Jeff, you want to comment on the U.S.?

Yeah, yeah, sure. Hey, Evan. Good to talk to you again from the conference we met at in December. Yeah, so, this is a great question and thank you for asking, because we do get asked that a lot. We talk about order book a lot, and how much revenue can we rely on every year. And, of course, the license and - or sorry, the maintenance and other SaaS revenue is very easy to predict and does recur annually. But as we've talked about that, services line is not just implementation services that then dies off, we have some very long-term relationships with our customers. They come back to us year-after-year asking for additional services to continue to evolve their product-set and their - because their business is evolving. And so, we do see that that services does recur in some degree year after year. And that's why you see continued high services every year and every quarter when we do our report.

Yeah, because now it's well north of - it's well north of 50% of your overall revenue I believe for this quarter. So I was impressed with that. And I just want to get an idea of - you'll never be 100% SaaS, that's just - or cloud. That's just not the way the company's built.

Correct.

But you could be getting - you could get to the 60% to 70% level, and that's exciting. Number two, had to do with shifting of expenses. There was a big currency adjustment last year that accounted for a lot of the earnings. And if one were to factor out the currency adjustment, then the earnings would have been much higher than the last year's number. Is that a proper way of looking at it, is that the currency adjustment was a one-time factor that aided last year's number on an apples-to-apples basis, earnings were actually up?

Well, I think - let me answer it from a Pakistan perspective. I think what it is, the rupee has devaluated a lot to almost PKR 141 or PKR 142 per dollar right now. And I believe this has kind of maxed out, and we want to see it come back again and regain its strength. So I think, yes, we booked extra income of the currency gain last year, but this year, it's been kind of steady. Particularly in this quarter, in the Q3 we had $47,000 [ph]. And I'm happy that now, we're showing the profit, income from the operation, which is pretty solid and quite stable.

Okay. And one - well, actually, two more quick questions, I don't want to flip to other people, because they're probably upset with me at this point. Number one, the sales expenses were lower, but the travel expenses are significantly higher. Is that due to development of Asia Pacific and there has been a refocusing because of that; more has to be spent on travel because of that; and less necessity on the SG&A front, but just significant upfront expenses on travel?

Yeah, I think, again, good question there. Roger can also come in, but I can say one thing that is to do - most to do with a lot of implementations happening in whole APAC region, including for the biggest contract with the Daimler and BMW, lot of activities. And most of them, these expenses are anyway reimbursable by the customers. So you want to add some more color, Roger?

So that will lead to more sales in the future. You should look at that as a positive.

Yeah, yeah, yeah, absolutely, absolutely. Sales team is very busy all over to work on the new deals.

It seems like there was a lot of revenue you didn't recognize this quarter, that's bottled up for the next few quarters. So that also looks pretty good. The other thing that I had a question on is, when you're talking about your growth, your double-digit growth, are you talking about calendar 2019 or are you talking about fiscal 2020?

No, 2019 fiscal, which will end in June 30, and it's last quarter to go, and we have guided double-digit growth. And I think if you look at the nine-month, it's almost 12%, 13% growth from the nine - same period last year. So we're pretty confident we'll achieve close to what we've been saying or maybe better than that. So time will tell. But we're in a good track record now.

That's great. That's really good to hear, and it really - company sounds like it's in a very good place. Are you buying - you have a buyback in place right now. Or if not, are you going to add to your buyback?

Not at this stage. But always, we're obviously always thinking, considering. And right now, this is at the consideration stage. So if something comes up, we'll let you know through a press release.

Thank you.

[Operator Instructions] Our next question comes from the line of William Gibson with Roth Capital Partners. Please proceed with your question.

Thank you. Najeeb, could you give us a little more color on the car-sharing application? And what do you think the potential is there? And how you are going to approach the market?

Yes. Thank you for asking the question, Bill. Let me turn the call over to Naeem Ghauri, who is the CEO also of the OTOZ, the newly created entity within the NetSol world. But he has the latest on that to swing at that. Naeem, go ahead, please.

Yeah. Yeah. So OTOZ essentially is a platform that would enable car share and also more flexible leasing as a Software-as-a-Service subscription model and so on. And essentially, every single line that we have globally is a potential customer of OTOZ, because of the large inventory they carry of cars that come off lease. And those cars, instead of being sold off, can go on the OTOZ platform and can be then on a subscription or car share. So like from up here a lot of B2C to the general consumer. It can also be a B2B. So these can be large fleets or can be individual rentals. So essentially, this just is a complete paradigm shift for us in terms of offering a new financial product to our clients, who actually in the past have relied just basically on high purchase and just normal traditional lease. So essentially, OTOZ will be kind of a game-changer for these very large auto finance companies, who have struggled with inventories, which sometimes sit on their parking lots for months just waiting to be sold. So they can actually put all of their stock, whether it's used cars or off lease vehicles, onto the OTOZ platform and they will be earning income straightaway. A lot of the rideshare companies also use the car share platforms, as is the trend in the U.S. is growing fastest than anywhere else. We've been approached by a number of our existing clients. You should look at how they can optimize their inventories, where some of the rideshare companies can also pick cars from their inventory and use them for their own rideshare services.

Does that helpful?

Good. Thank you. That's helpful.

Okay.

[Operator Instructions] Our next question comes from the line of Mike Vermut with Newland Capital. Please proceed with your question.

Hey, guys. How are you doing?

Great, Mike. Good to hear from you.

Nice job there. Quick one for you. I had to hop off, you might have answered this already. When we look at the pipeline on the large deals that are out there, I know they take a while. What does the funnel look? And then when do you - how many would you say you're looking at per year? I know, we have a few more years to go on, on both of the larger deals we have, but to start filling that pipeline out, how does that look? And then, geographically, where is it?

Yeah. I think, again, it's a very valid question, and we can answer that. One thing, I want to say before Naeem gives a bit more detailed color, is that the sales cycle is shorter than the one we did with BMW and the Daimler event from last few years. But it's still taking time, and because these are serious potential partners of our customers with a lot of investment at stake here. So it's very exciting times for the company with the back of the name can give you breakdown of the backload can, where the deals are. Naeem, go ahead, please?

Yeah, Mike. Look, Asia Pacific continues to be our biggest market that hook and chain. But what we are seeing now, the next biggest growth is coming from Europe. We have a very slow sales pipeline there. We recently signed a contract for Ascent with a European client, which I think we announced already. There are a number of other contracts or agreements in the pipeline kind of at a mature level. U.S. is lagging a little bit behind. In terms of size, I'd say we are backfilling almost as much of the revenue we are generating in terms of overall backlog. So for example, the large deal that we signed in Asia Pacific on the $110 million, so of that, whatever revenue we have booked so far, I believe, I have as much of that in the pipeline to be able to backflow what we are already recognizing. So that just gives you a good picture of - in terms of the coming deals are of significant size, probably not the size of the $110 million, but we have more of those deals which are in the $35 million, $40 million range, as we have multiple of those. So that kind of more than compensates for one large one. As such we prefer, these deals in terms of size, because their sales cycles are shorter, and also be able to distribute our resources in a much more efficient way.

How are you seeing the competitive landscape there? Like on the bidding process, how is it looking?

Well, competition is essentially coming from Europe. And one company in New Zealand, they're our biggest competitors. However, we should - there's 12 market leaders by far. In fact, if I can give you the context. For every 10 deals we sign we probably lose one. So that's the comparison. So the - yeah, competition is healthy. It gives us a good comparable, too, in terms of pricing, because unless there's some competitor, we cannot justify some of the prices we charge. But if a competitor is charging X, we can charge X plus one. Then it starts to look like, okay we are competitive or X minus one. So actually, it's good to have European competitors, because they're normally priced higher than us. So we come normally more price-optimized than some of our competition. Plus, we're way ahead in terms of our product cycle, and where our next-gen product is Ascent. There's a lot of catching up to do, but hopefully, by the time they catch up, we are further ahead. And as we introduced OTOZ, we believe we are actually at least ahead of the competition, because we don't know anyone who's announced a car share platform, blockchain and cloud native and so on. So that's really exciting for us as well.

Did you say for every 10 deals that you sign, you'll lose one?

Well, that's right, between the…

Roughly, that's - roughly, that's the way it goes there? So our win percentage is pretty high?

Very, very high, yeah. In China, for example, we have an 85% market share against our competitors. And I think in the last six, five years, we have lost just one deal to a competitor, just one. So either what happens is these RFPs come up. If we don't win them, we normally lose them if they drop the project altogether. Then they - obviously, we don't have - they don't buy a system. But if they buy a system, invariably, they end up working with us.

Great. Now when we - if you say that you're replacing the projects that you've implemented, how do we look at growth over the next few years? Is there enough in the pipeline to get the 15%, 20% growth going or just replace the whole constant on the revenue line?

No, no, no, what I mean is that, our backlog is still there, right? We have a huge backlog of what we have to deliver. So that remains and that's part of our revenue, which is underpinned by the signed backlog. But, if we sign additional contracts, then that goes on top. So I'd say, I don't know, Roger and Najeeb, whether you are able to give more guidance on this, but we are growing double digits every year last couple of years. So I believe we just continue at that pace for now, at least, if not, better.

Okay.

I want to add a couple of points, Mike, if you want to show. But the thing to note, I mean, for the analysts and the investors is really two things. One is our ability to stabilize the operation overall and improve the scale and efficiency actually with a lot less people, which is a very big achievement for the company because as we grow towards automation and new technologies and we realize that we have to be very competitive in terms of our ability to generate more revenue from less. And secondly, I think we also see that our model in the company is now a hyper-growth model. Because last 2, 3 years we've been very focused in building the market for Ascent, and we've done that effectively. And I think we can say with confidence, Mike, that all the deals we've signed was 6, 7 of them since we announced the launch of Ascent about 4 years ago, they're valued above $200 million in terms of contracted revenue just from 6, 7 customers, including 2 biggest, of course, Daimler and BMW. So it shows the one flagship product has a lot of strength and traction, and it's gaining lot of excitement worldwide. But we believe that the company is now positioned to go after hyper-growth. Now, it could be double-digit. It could be whatever percentage it could be. But internally, we believe we are stabilized in every category for fundamentals, but we can go after hyper-growth in the coming years.

Got it. Excellent. And then, one last thing, is there going to be any consolidation in the industry or it doesn't really make sense?

I don't know. Our industry is a bit of a unique industry because car ownerships may be steady or static. But in terms of used cars, I mean, all over the world, people are calling used car leasing and driving a year old, 2-year-old cars. So there's a big market out there for the used cars. And our business is pretty, I think, steady. We have not seen any consolidation. Yes, we have to be actively aggressive in the new technologies and disruptors and exactly what Naeem explained in my prepared remarks. We are one of the few or maybe the only company who is very active, we developed workshop in, especially in Bangkok, OTOZ. And it's really attractive, getting a lot of attention from our customers. A lot of current customers are looking into the new opportunities where…

I don't know. Najeeb, I think Mike might have meant that consolidation in our industry…

Yeah, and I meant in your industry, yeah. I mean, you have these other competitors. Does it make sense ever to look at them? Or are we too far ahead of them and it kind of would be a dilutive process to do anything?

It drew - yeah.

Well, honestly speaking, there are some very large companies, software companies that are missing this particular niche. And as the industry itself starts to change, more of the software is now basically cloud native and most of the market is now starting to go through our SaaS and our new subscription model, which is starting to really track well. And OTOZ is completely SaaS and cloud native. So I think as that happens, these bigger companies will start to look at this space and see that they are missing at something really exciting. And hopefully, that starts to create some consolidation and some M&A. Yeah.

Excellent. Okay, well, keep it up, guys. Great job you're doing.

Yeah. Thank you.

Thank you.

At this time, this concludes our question-and-answer session. If your question was not addressed during the Q&A session, please contact NetSol's investor relations team by e-mailing them at ntwk@gatewayir.com or by calling them at 949-574-3860. I now, like to turn the call back over to Mr. Ghauri for his closing remarks.

Thank you for joining us today. I especially want to thank you, our investors, for their continued support, our loyal customers worldwide, and our dedicated employees for their ongoing contribution. We will see you in the next earnings call. Thank you and have a good day.

This does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time. And have a wonderful day.