NetLinkz reports business as usual despite COVID-19, finalises acquisition of Chinese software firm

NetLinkz ASX NET COVID-19 Chinese firm AOFA Software Engineering
NetLinkz reiterated its previous revenue guidance of $15.3 million for 2020.

Cloud-based technology business NetLinkz (ASX: NET) has confirmed its China-based operations have not been impacted by COVID-19, with staff beginning to return to the company’s Internet of Things laboratory in Beijing.

The company is also continuing its commercialisation strategy in Australia, China and Japan, underpinned by $3 million in cash and equivalents.

As China eases its lockdown restrictions, NetLinkz engineering, technology and administration teams who were previously working remotely have moved back to site with full redeployment expected by month end.

Given current economic uncertainties, cost-cutting initiatives including a 50% salary reduction for directors and executives will remain in place for the next six months.

NetLinkz banked more than $2 million in sales revenue during the first quarter of 2020 and expects to meet or exceed revenue guidance of $15.3 million for the calendar year.

AOFA acquisition

Last week, NetLinkz announced it had completed the acquisition of China-based AOFA Software Engineering Co Ltd.

AOFA is registered in Shanghai as a wholly foreign-owned entity (WFOE).

Chinese regulations require foreign companies to establish and register a WFOE to allow investment into China and for profits or dividends to be paid to foreign owners outside of China.

NetLinkz’s previous sales and distributions into China were conducted through a Hong Kong reseller and its China-based agent JAST Limited, which was contracted in 2018 to work with NetLinkz on a pilot program with China Telecom Wuxi.

Since March, JAST has licenced NetLinkz’s product for sales in China through AOFA.

NetLinkz moved away from using its Hong Kong reseller in preference of sale and distributions in China being managed through a joint venture formed in December with iSoftStone Information and Technology (Group) Co Limited, known as Beijing iLinkAll Technology Co Ltd.

NetLinkz will own 80% of the joint venture through its wholly-owned subsidiary Netlinkz Technology Hong Kong Limited, with the remaining 20% owned by an entity nominated by iSoftStone.

Virtual secure network

Beijing iLinkAll Technology will market, distribute and sell the virtual secure network (VSN) product developed by NetLinkz at its Beijing IoT lab.

Branded as a ground-breaking secure networking product, VSN is a fully optimised aggregation platform which enhances and allows customers to integrate secure cloud and networks seamlessly into their operations no matter where they are located.

Version 1.0 of the VSN was completed in December ahead of schedule and reducing projected development costs by 30%.

The product is currently undergoing on-premise testing and integration within the Chinese market.