Good morning. Welcome to NetSol Technologies' First Quarter 2020 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, and CEO, OTOZ; 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 their 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, Patti, and good morning, everyone. I am so delighted to be calling you from the NetSol, Beijing office, our biggest market in China, and I am fortunate enough to be here today because NetSol senior management has been invited to meet with one of our largest clients, BMW Financials. We are celebrating the first Go-Live event within our larger Ascent agreement as well as exploring additional opportunities for collaboration going forward. On a broader level, I’d like to say how proud I am of our team in China and our other markets for their tireless efforts in making NetSol, a leading company in our sector and for making this huge project a success so far. We began the fiscal year where we left off at the end. In the middle of a decisive transition as we work to build our business for its next phase of growth. The fiscal first quarter has historically been affected by a degree of seasonality. And in Q1 2020, this was the rule, not the exception. While our results reflected the effects of this transition phase as well as the typical seasonality we experienced during this period, we are very encouraged with the initial progress we have made to-date as well as the line of sight we have within our current pipeline and through our overall company roadmap. I have mentioned it many times before, but I believe the message wants repeating. At NetSol, we are managing our business with an eye for the long-term. This has always been our approach. In more recent years, we have experienced a great deal of success, but this success is also the result of some hard decisions we had to make at other points in the past. One of those difficult choices with our major cost…

Thanks, Najeeb. Turning to our fiscal first quarter 2020 financial results for the period ended September 30, our total net revenues for the first quarter were $13.6 million compared to $16.4 million in the prior year period. The decrease in total net revenues was primarily due to a decrease in total license fees of $3.3 million and a decrease in services revenues of $199,000, which was offset by an increase in total maintenance fees of $652,000. Total license fees in Q1 were $2.7 million compared to $6 million in the prior year period. The decrease in license fees for the quarter was primarily due to the prior year's quarters' inclusion of approximately $4.9 million in license fees related to the five-year contract that was signed with a Tier 1 auto captive finance company to implement our NFS Ascent platform in China without a corresponding contribution in the current fiscal year’s Q1. Total maintenance fees in Q1 were $4.4 million compared to $3.7 million in the prior year period. The increase in total maintenance fees for the quarter was due to the start of new maintenance agreement from customers who went live with our products during the latter stages of fiscal year 2018 and into fiscal year 2019. We anticipate maintenance fees to gradually increase as we implement both our NFS legacy product and NFS Ascent across a broader long-term customer base. Total services revenue for the quarter was $6.5 million compared to $6.7 million in the prior year period. Removing related party revenues, total services revenue for the year was essentially flat. Total cost of revenues was $7.5 million for the first quarter, a decrease of $697,000 from $8.2 million in the first quarter of fiscal 2019. The decrease in cost of revenues was predominantly driven by decreases in salaries…

Thank you, Roger. I'll now provide some brief updates related to our major ongoing implementations, across the globe before discussing our updated growth strategy. With respect to our multi-year international deployment associated with previously announced 12-country, $110 million contract with Daimler Financial Services in Germany. We are continuing to make progress with our ongoing deployments and look forward to making additional Go-Live announcements early on in the next calendar year. Next, on our development roadmap, we have Singapore, Malaysia, Hong Kong, India, and Thailand. Moving to another major implementation project with BMW Financial Services in China. As I mentioned on our previous call, we are continuing to make solid strides here. In October, we announced the successful implementation and Go-Live with our NFS Ascent Wholesale Platform with another on time delivery and a smooth rollout with 100% data migration verification, we are continuing to set a higher bar in China and the industry overall. Next on the roadmap, we expect to finish up with the retail component sometime in late calendar 2020 with BMW. Finishing up in APAC, last week we announced the official Go-Live with our mCollector application for a top tier multi-finance company in Indonesia. This mCollector Go-Live is part of a larger contract recently signed in 2018. For those of you who do not know, mCollector is built on NetSol's flagship NFS Ascent framework and uses its smart workflow engine throughout the assignments and tests to relevant collection agents, empowering collections teams to do more, with an easy-to-use interface and intelligent architecture. With our second successful mCollector Go-Live in Indonesia, our implementation team has made considerable progress, having delivered the latest application within two months. The Indonesian market continues to be a strong point for our business, and we are looking forward to build on this initial…

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Anja Soderstrom with Sidoti & Company. Please proceed with your question.

Hey gentlemen. Thank you for taking my question. So business subscription pricing model, how did that come about? And how do you see that evolving, especially as maybe transitioning from the current licensees, are you more seeing new contracts coming in with this?

Yes. Thank you, Anja for the question, and I have Naeem to jump in.

Yes. Hi. So we've been working very closely with our existing clients as well as gauging the market in general with our prospects as well. We've been finding that the sales cycles on our classical license model have been very slow and long. And there's been some demand from some existing clients also to offer subscription pricing for both on-prem and on-cloud deployment for Ascent. So as a result, we did a major exercise in building some financial models on how we will transition from – if you like historically, from a pure license-based pricing to gradually transition to SaaS. So as a result, we've decided to know the go-to-market with this strategy and we have already signed some interesting new clients. Some announcements will be coming forward in the foreseeable future. But we see that this is going to help us in shortening the sales cycles and also making the barrier to entry for new clients a lot lower with pricing and subscription spread over several years. And as a company, it gives us some more visibility in terms of revenues going forward because typically a subscription contract is signed for a five-year period, and then you know what will be the revenue stream over that time. Most of our peer group companies are now moving to subscription. And we find also companies not in our space, but also in other ERP solutions have already transitioned with very good results. There is this period in which – while we transition, license income will drop, but eventually there's an inflection point. At this stage, we don't know exactly when that would be, but that will then start to show growth. On the subscription side, it will track higher than what we've been doing on licensing. I hope that kind of explains.

Yes. Thank you. And are there any specific regions where there sort of demand or requests for this has been strong you see? Like, are they more prone to do this in the U.S. and Europe rather than Asia Pacific or…?

Yes, it's not regional, but type of client. Typically the very, very large clients prefer licensing, but the medium to small clients prefer subscription. So it's not so much regional, it's more on the type of client you're offering the product too.

I want to add one more thing – Anja sorry. To further repeat what I said in the prepared remarks that this option gave us and the customers who’re not large inside like Naeem just said have the ability to make rather quick decisions. They can budget their monthly payments to the vendor. And then they can acquire the system they need to acquire whether they are conversions from the existing customers or even the new, so we’re basically broadening our marketability in both sectors, both with the license, sales and also through SaaS on the monthly model. So I think – and for us, it is a win-win and a very friendly opportunity for our customers also.

I don't know if you're aware that currently are – quite a big percentage of our current revenue has a subscription component and we do have lot of recurring revenue on maintenance. So we already have 20%, 30% of revenue coming from subscription and other types of recurring revenue like maintenance. But please also note that this is a very proven model, right. This is not something groundbreaking. Subscription is a very much a proven model. SAP and Microsoft, a lot of those big players are already in this space and that's where the biggest growth is coming from. On-cloud, SaaS deployment is the fastest growing, fastest emerging segment within the ERP solution space.

Yes. Including salesforce of the…

Okay, thank you. And then can you give some color on the pipeline? How is it trending? And is there any quantification you can give us around that?

Yes. Go ahead, Naeem.

Yes. So from a pipeline perspective, we've stated in the previous quarter that it is strong, but the sales cycles are taking longer. So the deals we expected to complete in this quarter reporting have not materialized, have been deferred to the current quarter. So the pipeline remains strong. It’s a question of how much of the pipeline do we convert into actual contracts? And that first quarter traditionally has always been slow anyway, but we expected at least one or two contracts to fall into this quarter, but they've been deferred to the coming this quarter that we are in now.

Okay. And then also as a follow-up for the subscription, do you foresee that helping that pipeline further materialize quicker because it's shortening the sales cycle or how do you see that affecting the pipelines converting?

So what's happening now is that currently we have at least three very mature prospects all on SaaS. That is the first time it's ever happened. We have back-to-back SaaS deals ready to mature. Obviously, we can’t be 100% sure on the timing, but these are definitely lot shorter sales cycles than these very large license deals. So we expect once this stock to get more traction with additional marketing, we will have more frequent deal closure for each quarter.

Okay. Thank you for that additional color. And then how correlated are you to the auto industry? And what are you seeing there in terms of the slow down and how is that trending?

Yes. And that is a question which is generally for the auto industry. In our segment, whenever the auto industry hit some headwinds, they go into very creative mode in terms of financing. So on the financing side, when they come out with the products, they become more creative and they find ways to sell more cars. System investment typically is time lag. So we have found that even in difficult situations when sales are down, a lot of the finance companies start to invest in technology to scale for the time when the market gets better. So we are not so cyclical really as the general auto industry is, our pipeline remains still very active, we haven't seen any major drop.

Okay. Thank you. That was awesome. Thank you, guys.

Okay. Thank you, Anja.

[Operator Instructions] 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'd 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 our investors for their continued support, our loyal customers, and dedicated employees for their ongoing contribution. We look forward to updating you on our next call. Thank you and have a good day. Operator?

Thank you for joining us today for NetSol’s fiscal first quarter 2020 earnings call. You may now disconnect.