Good morning. Welcome to NETSOL Technologies Fiscal Second 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 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 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, and thank you all for joining us today. I'm really excited to be calling this time from London office, where I'm visiting with members of our U.K. team and our business affiliates and getting updates, a number of the initiatives we've been going on in this key growth region for NETSOL. We are in the midst of some exciting times at our company. Just a few weeks ago, we were fortunate enough to be invited at the NASDAQ MarketSite in New York City for their formal closing bells ceremony. While NETSOL has presided over many closing bells and opening bells in the past since we went public, this particular event held special meeting for us as it commemorated the 20th year of our official listing on NASDAQ. And while a lot has changed in these 2 decades, I'm very proud of the fact that we have been able to remain true to our founding mission all these years later, NETSOL is an organization focused on innovation and people. Through the confluence of these 2 areas, we've been able to build an adaptable, technology organization and built-to-last. And while the past 2 decades have provided their fair share of thrills, I am even more excited about what's to come. Also during the ceremony, we officially announced NETSOL's Cloud Readiness campaign, which represents our new marketing campaign focused on highlighting our expanded cloud-based offering, which now includes our flagship Ascent platform and will also apply to some of the new offerings from our Innovation Lab. NETSOL is a cloud-ready organization capable of effectively serving the digital economy and our clients' enterprise needs worldwide. We are also working on expanding our addressable market and tackling a number of other exciting projects, which I plan to detail…

Thanks, Najeeb. Turning to our fiscal second quarter 2020 financial results for the period ended December 31, our total net revenues for the second quarter were $15.7 million compared to $17 million in the prior year period. The decrease in total net revenues was primarily due to a decrease in total license fees of $4.4 million, which was offset by an increase in services revenue of $1.8 million and an increase in total maintenance fees of $1.3 million. Total license fees in Q2 were $384,000 compared to $4.8 million in the prior year period. The decrease in license fees for the quarter was primarily due to the prior year's quarter's inclusion of approximately $1.1 million in license fees related to our $12 million -- $110 million contract as well as $1.9 million in license fees related to the 5-year contract that was signed with a Tier 1 auto captive finance company to implement our NFS Ascent platform in China. And approximately $1.3 million in license fees related to the contract signed in China with a major American multinational automaker to implement our NFS Ascent retail platform, without a corresponding contribution in the current year period. Total maintenance fees in Q2 were $5 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 agreements from customers who went live with our products during the latter stages of fiscal year 2019 and into fiscal year 2020. We anticipate maintenance fees to gradually increase as we implement both our NFS legacy products and NFS Ascent across a broader, long-term customer base. Total services revenue for the quarter were $10.3 million compared to $8.5 million in the prior year period. The increase in services revenue was due…

Thank you, Roger. I'll begin my remarks, as we always do by recapping some of the major operational highlights from the period. Now starting in Asia Pacific, we -- with our previously announced 12 countries, $110 million contract with Daimler Financial Services in Germany, we continue to make considerable progress along our multiyear multi-country implementations road map. More specifically, during the period, we achieved a successful Go-Live in Hong Kong, with NFS Ascent retail platform, which consists of our Omni-Point of Sale and contract management system. Moving forward, the most near-term Go-Live events to come, which we expect to announce in the coming months will be in Singapore, Malaysia and Thailand, for again, Daimler Financial Services. We have additional deployment schedule for new territories beyond these, and we also have more Go-Live events further on the horizon for areas, we are currently partially operational, but we expect those announcements to be made in subsequent calendar years. In all, we are continuing to proceed under budget and ahead of schedule. Switching to our ongoing rollout with BMW Financials in China. As I mentioned on our previous call, in October, we announced the successful implementation and Go-Live with our NFS Ascent wholesale platform in China. It's worth noting that this implementation is the first BMW group project in last 9 years in the finance and leasing phase that has been delivered on time and within the assigned or allocated budget. Our customer has been thrilled with the rollout, and we are looking forward to delivering the next phase, our retail platform sometime later in this calendar year 2020. During the quarter, we also announced the official Go-Live with our mCollector application for a top-tier multi-finance company in Indonesia, which was part of a larger contract that will be signed in 2018. Finishing…

[Operator Instructions] We have a question from the line of Anja Soderstrom, with Sidoti.

Congratulations on a good quarter.

Thank you, Anja.

Can you hear me clearly?

Yes, yes, yes. Go ahead.

Okay, that's good. So first, I wanted to just ask you about this sequential improvement in the second half. What gives you confidence in that? And where do you see that coming from? From the services growing or from the licensing?

I think, as I mentioned in my prepared remarks, we have a very strong pipeline in North America and Europe. And a lot of markets of Asia Pacific, and there's a lot of progress made as a result of our announcement recently going on cloud or a SaaS model, which is actually creating a lot of excitement in the market that they're looking to NETSOL, different demos are going on in different markets. So I feel, given the visibility and the traction we have some deals are about to close, let's say, in the European market, some are good progress in North America and overall Asia. So I'm quite comfortable that the second half, we are cautiously optimistic to be better than H1. Naeem, you want to say something?

Yes. And we traditionally, our second half has always been better for many, many years. A lot of the deals are back-end loaded. A lot of those clients make decisions closer to the end of their fiscal year as well. So where we are positioned in a number of these opportunities, some are very close to being signed off, obviously, until they're signed off they are not signed. But from what we know, they are very close to being signed off. So essentially, they should come in, in the second half.

Okay. So then you're really seeing that the SaaS sales cycle is a lot shorter than it has been for the licensing?

Yes. I think our subscription approach is different because these are normally OpEx type of decisions where they are, including the subscription as part of operational expenses, not of capital expenditure. But it is a shorter buying cycle because it is a smaller amount, which they pay recurring monthly rather than a large upfront license. And that's the -- we've announced earlier, that's the model we are going towards, which is a very proven model now for most of the companies in our space, the Software as a Service as a subscription really is the present and the future. So this is exactly the journey we're on.

Okay. And then in terms of the licensing, I mean, it's normally like larger Tier 1s wants to have the on-premise licensing service. What do you see there in terms of your pipeline and potential interest in something?

Yes, that's never going to be like 0, it will always be -- there are some clients who prefer to purchase their software on license. I think at some point, it will be down to us as a company to design that we absolutely don't do that at all. And we only do one offering, which is subscription. And if we get that disciplined, if our subscription revenue is tracking really strongly, we could probably make those calls at that time. And that actually kind of forces the client to accept subscription as the way to go. And potentially as a long term, this is where I see us going.

Okay. And then the $2 million additional in the services you booked for this quarter, what drove that? Is that additional services that you -- or functions that you've been adding recently? Or was that something that the customer decided before that they maybe didn't need it and realized now that they needed. So they've been adding that? Or...

Services, additional services, what we call change requests. They are always going to be part of our business because business realities change for clients. Sometimes it's regulatory requirements, sometimes it's a business requirement that the change will come in, and they pay a hefty premium for those changes. So those will continue, but very difficult to pick them. But as part of any project, we have never done a project where there has not been additional CR or change request, it always is the case, but you cannot really predict from quarter-to-quarter what that number would be. Yes.

Okay. And it sounds like there will be some exciting announcements, too, in terms of the Otoz Lab. And is that new customers that are looking at that? Or are you -- current customers are -- might be looking to add that on to their already service?

So our target audience is always going to be the large client base we already have. And all of our clients, maybe, I would say, less than 10% would not be but 80% to 90% of the clients that we currently have are looking to enter mobility, smart mobility, on-demand mobility, and they all need solutions. So I recently have been in an event in London, in fact, we did a keynote speech today, and we had a lot of interest from companies around Europe, around the U.S. who came to our stand to talk about mobility. So we are attracting both existing clients for which we have very much a captive audience as well as a new prospect to hear about our Otoz initiatives and they're very interested to know what exactly Otoz is. So really, at this stage, our initial business will come from existing clients because it's a faster route to signing clients. But the new prospects who are getting to know us as a company and what Otoz does. And Otoz is also sold completely on subscription. So that product will never be sold on license. So that's a very exciting part that we never have to change the business model. The business model is a subscription for Otoz. So any new clients that come in, we only present SaaS as the option. So just the short answer is, initially, it will be the existing clients who will use mobility, and that's what we have in the pipeline already. And there will be, obviously, new prospects, so we'll also look at Otoz and potentially sign up as well.

What sort of time line could we expect until something is announced for that, as on your client, like a year? Or is that a couple of months, or...

Well, we -- we got slowed -- yes, we got slowed a little bit due to the situation in China, we were very close to signing a client in China. But then we had to stop some travel going back and forth. But that's certainly a bit of an aberration, and we're hoping things come down in China soon and that the normal travel resumes. So essentially, the client that we had been hoping to sign is in China. It's a Tier 1 auto captive finance company with very big ambition to go into mobility. And they want to launch their mobility with a Otoz platform as a pilot. And then we're also looking to sign up clients in the U.S., again, another Tier 1. That is progressing well. We can't predict the date, but it should be the second half of this year. And lastly, our existing client Drivemate, which is using our platform. That company since has started using parts of our platform, their business is multiplied. They are 3 to 4x in revenue and transactions since Otoz started to work for them. And we haven't even completed the entire delivery yet, which is going to be in May. So really we are seeing Otoz in the live production environment already, parts of it. And we'll have it in full production in May, and that's going to help with references to clients that we're hoping to sign. And keeping in mind, Otoz is literally less than a year old in terms of its development cycle. So we are way ahead in our timeline, how quickly we have delivered the platform. So we're very optimistic for the next second half.

Okay. Well, that sounds exciting. And then lastly, you've been talking about M&A now for -- well, what's exactly looking for in terms of M&A?

Yes. Look, yes, Anja. I did say in my remarks that this is a work in progress. We have certain criteria, the parameters, which we believe, given the opportunities out there in various markets for us, especially North America and Europe, we see a lot of opportunities that can really complement our business and create some accretive growth in our revenue. We haven't done that for quite some time. If you look at the history, one major acquisition was back in 2006. The last one we did is VLS in 2 parts. But business has so many opportunities, and we have responsibility to definitely explore and bring a win-win deal for the company and for the shareholders. So as they develop, we'll definitely share with the market.

[Operator Instructions] At this time, this does conclude our question-and-answer session. If your questions were not addressed during the Q&A session, please contact NETSOL's Investor Relations team by e-mailing them at investors@netsoltech.com or by calling them at (949) 574-3860. I'd now like to turn the call back over to Mr. Ghauri for closing remarks.

Thank you for joining us today. I especially want to thank our investors for their continued support, our loyal customers and our most dedicated employees worldwide for their ongoing contribution. We look forward to updating you on our next call. Operator?

Ladies and gentlemen, this does conclude NETSOL's fiscal second quarter 2020 earnings call. You may now disconnect. Thank you for your participation, and have a wonderful day.